Decoding The Shanti Act: Navigating India's Nuclear Framework For Private Investors

For the past several decades, the nuclear energy regime in India has been predominantly State-dominated, with the private sector participating in a limited manner in EPC contracts and component supply under the supervision of the Nuclear Power Corporation of India Limited. The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India Act, 2025 (the "SHANTI Act") represents a paradigm shift in India's nuclear energy policy by enabling structured private participation in ownership and operation in the nuclear energy sector.

This change in legislation aims to enable greater utilisation of nuclear energy as one of the energy resources to meet India's growing clean energy needs and strengthen its overall energy mix. The new policy aligns with India's Nuclear Energy Mission for Viksit Bharat, where India has set a target to achieve 100 GW of nuclear capacity by 2047 to enable sustainable development in terms of baseload power for decarbonisation and to ensure sustainable growth in the Indian economy. However, the private sector's involvement is paved with stringent obligations and complex risks, requiring the development of deep institutional capabilities and a careful navigation of the new legal and economic landscape.

Institutional Capabilities: A High Barrier to Entry

The SHANTI Act imposes substantial direct and indirect obligations on operators, thereby mandating them to develop a high level of institutional capacity across technical, financial, organisational and governance areas.

At the outset, Section 7(1) prescribes that a licence shall be granted only after the applicant has demonstrated sufficient financial, technical, managerial and organisational capability covering the entire life cycle of the nuclear facility, from design and construction to operation, maintenance, life management, and decommissioning. The requirement to maintain and establish such capabilities, including technical expertise, over the facility's lifecycle, which may span over 60 years, effectively precludes financial investors and mandates serious, long-horizon strategic participation.

The SHANTI Act imposes ongoing obligations on a continuous basis. Section 10(3)(a) requires compliance with quality assurance standards and maintenance of design support throughout the life cycle of the facility. This reflects Parliament's intent to regulate nuclear assets on an ongoing basis, requiring operators to build and maintain in-house engineering depth, safety systems, record management protocols and regulatory engagement mechanisms capable of withstanding decades of scrutiny.

In this context, financial soundness is also a key consideration. Under Section 10(3)(e), licensees must demonstrate adequate financial security to provide for the safe disposal of radioactive materials, decommissioning and compensation claims. Section 8(2)(b) permits the suspension or revocation of a licence if the financial position of the licensee deteriorates to the point where it affects safe operation. In this case, financial soundness is connected to safety. Licensees/operators must therefore maintain conservative capital structures, and visibility of long-term funding, as well as reserves that can absorb potential liability risks.

The SHANTI Act also encourages research and innovation. The preamble highlights establishment of a strong institutional base for research and next-generation technologies. Section 9 permits research and development and innovation in nuclear energy for peaceful purposes. Private engagement is thus expected to do more than simply replicate existing state capacity, rather, it is expected to augment it, particularly in the areas of small modular reactors and thorium use.

Cumulatively, these policies create a high barrier to entry, which ensures that only those with significant institutional capacity and a long-term commitment are likely to operate nuclear facilities.

Assessing Private Sector Interest and Structural Constraints

The success of the SHANTI Act would depend on the risk appetite of Indian corporates for investment with a horizon exceeding 60-years, their ability to meet capital requirements, and their capacity to manage evolving liability structures.

For diversified infrastructure and energy conglomerates, nuclear power could strategically enhance energy security and long-term national positioning. The sector, owing to its nature, is expected to attract only a few major players who have the financial muscle and experience in managing complex regulatory requirements. In the Pre-SHANTI period, bidders such as Adani Power, JSW Energy, Jindal Steel & Power, Reliance Industries, Tata Power and Hindalco had expressed interest in a tender floated by Nuclear Power Corporation of India Limited.

Notably, private sector players will have to be prepared to remain dependent on the Central Government, which, in a vibrant democracy such as India, may have its own set of challenges. The government will retain ownership of nuclear materials. Section 3(5) specifies that the enrichment, production of heavy water and spent fuel management are exclusively reserved for the Government. This results in operational interdependence. The viability of the private sector will thus depend heavily on the clarity of contractual arrangements for fuel supply, back-end services and coordination arrangements.

The financial viability of a nuclear power project would largely depend on the manner in which the electricity price (tariff) is determined. Under Section 37, the Central Government has been given the power to set the tariff for nuclear power. A cost-efficient tariff structure that provides for the recovery of capital and financing costs, along with assured offtake, would be critical to infuse confidence in the private sector. However, if the tariff structure is unclear or unpredictable, the investors may be hesitant to invest capital due to the unpredictability of the revenue stream.

Balancing Safety Regulation with Commercial Viability

Private players would also have to adhere to the nuclear safety standards as well as the commercial realities of the power sector. Their preparedness would largely depend on regulatory clarity, especially in the form of detailed rules implementing the SHANTI Act.

From the perspective of governance, the transition from conventional power production to nuclear production would demand greater and more specialised regulation. The boards of private companies would need to comprise of directors who have prior experience in the nuclear industry or other high-risk sectors. They would also need to set up dedicated safety committees that function independently of the commercial functions of the board. The appointment of a Chief Nuclear Officer who would be answerable to the CEO but also have direct access to the board would be in line with international best practices and would indicate the non-delegable duty of the operator for safety under Section 10.

In addition to the above, operators would also need to set up independent internal safety review and audit mechanisms that could effectively interact with the regulatory bodies such as the Atomic Energy Regulatory Board. Ongoing compliance, accurate record-keeping and proactive regulatory engagement will be critical.

Structuring Private Participation: Models that Balance Investment with Sovereign Control

While the SHANTI Act allows government companies, private entities, and joint ventures to hold licences, it preserves the sovereignty of the State over nuclear materials and ensures that the most critical fuel cycle activities remain within the domain of the State. It would be necessary to carefully structure contractual arrangements in a manner that attracts private investment while ensuring that the sovereignty of the State over nuclear materials, safety and strategic issues is maintained.

A traditional Build-Own-Operate-Transfer arrangement, wherein, a private company builds the project, owns and operates it for a fixed term of concession, and then transfers it back to the Government, may not be easily feasible in its pure form given that the SHANTI Act preserves State ownership of nuclear materials and reserves critical fuel cycle activities to the Government.

A joint venture or special purpose vehicle in which a government entity retains a decisive or "golden" share could be an option. In such a structure, the private partner would typically contribute capital, would need to have project execution capabilities and access to potentially advanced technology, while the State would maintain ultimate control on critical aspects such as national security and safety matters.

International experience also supports such a calibrated approach. The Barakah project in the UAE is owned and licensed by a government entity, and foreign partners are involved only as engineering and operational experts. Similarly, Taishan project in China is also owned and operated by a joint venture with majority ownership held by domestic entities and minority participation by foreign partners. Such arrangements demonstrate that private and foreign expertise can be harnessed without undermining the sovereignty of the State, which approach is closely aligned with the SHANTI Act.

Structured Liability: Capped Exposure, Uncapped Consequences

While the SHANTI Act represents a significant and positive reform, its effectiveness will depend on the detailed rules and regulations that operationalise it, the true test will lie in the implementation. For private companies, the key issue that will remain is risk allocation.

One of the defining features of the SHANTI Act is its calibrated liability framework. The liability of the operator is capped at up to INR 30 billion for large reactors, with Section 14 stipulating that the Central Government shall cover any damages exceeding this limit through the Nuclear Liability Fund. In addition, Section 15(1) provides that operators must maintain adequate insurance or other financial security. This approach aims to achieve a balance between liability and investor confidence, although its credibility will ultimately depend on the implementation of the backstop mechanism.

However, the SHANTI Act framework carries significant implications. Section 72 imposes personal criminal liability on directors and officers for offences arising from their neglect, requiring them to demonstrate due diligence. While the liability cap increases investor confidence, a major accident could still result in substantial financial and reputational harm. Private operators would need to have enforceable access to the Government's backstop and be assured that the Nuclear Liability Fund is adequately funded and accessible.

In addition to the regulatory framework, the key issue that would determine participation would be bankable safeguards, which would include long-term power purchase agreements with guaranteed offtake and predictable tariffs, protection against adverse change in law, defined force majeure provisions, fair compensation in case of governmental takeover, and guaranteed fuel supply and back-end services. Operators will also have to ensure that their contractors are financially sound, insurance capacity is adequate, and clear contractual recourse for attributable fault is available.

Private sector participation would be unviable if the revenue stream is uncertain, sovereign commitments are non-enforceable, financial backstop lacks depth or regulatory and political support is inconsistent. In a capital-intensive industry with long-term horizons, clarity and credibility ultimately determine viability.

Government Policy Support and Budgetary Push

The Union Budget for 2026-2027 provides a robust financial support system to accelerate the development of nuclear capacity and maintain the momentum of project implementation. The budget allocates approximately INR 241,230 million/USD 2.66 billion to the Department of Atomic Energy. In a further effort to reduce capital expenditures and make the financial viability of new nuclear power projects more attractive, the finance minister announced the extension of basic customs duty exemptions on import of goods required for nuclear power projects until 2035.

The exemptions of basic customs duties apply to all goods used in nuclear power generation (tariff item 8401 30 00) and critical components such as control rods and protector absorber rods (tariff item 8401 40 00), thereby reducing the tariff rate from 7.5% to nil. This is intended to facilitate the acquisition of specialised equipment and reduce the initial costs of new nuclear projects.

Conclusion

In conclusion, while the SHANTI Act is a significant, vital entry point for private participation in India's nuclear sector, the legislation itself is only a starting point. Its success will ultimately depend on the rules, regulations and guidelines that operationalise it. For any private company, the decision to invest will hinge on whether the immense financial and operational risks are balanced by clear, contractually enforceable safeguards.

Ultimately, the success of the project will depend not merely on the SHANTI Act but on how it is implemented, particularly the liability scheme that has the backing of the government, a reasonable tariff structure with assured offtake, and strong support for the nuclear fuel cycle, so as to create a stable and bankable environment in which these high risks can be transformed into viable opportunities.

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