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Thursday , August 26 , 2010
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Business test for passed bill

New Delhi, Aug. 25: Neither proponents nor critics appear happy with the nuclear liability bill passed by the Lok Sabha this evening after some key amendments but the business opportunities in India may help override some of the concerns of potential suppliers.

The bill, which sets down rules for liability claims and payments in the event of a nuclear accident, has tripled the compensation cap from the originally proposed Rs 500 crore to Rs 1,500 crore with liability on the operator of the nuclear installation.

An amendment to Section 17(b) of the bill seems to make it easier for an operator of a nuclear installation to seek recourse from suppliers of equipment and materials used in nuclear reactors.

The original bill had said the operator would have the right to recourse when the nuclear incident has resulted “from the wilful act or gross negligence on the part of the supplier of the material, equipment, services, or employee”.

An intermediate version had substituted the word “intent” in place of “wilful act”. Critics had objected to these words, arguing that they represented a sop for suppliers, since an operator would have to establish that an incident had resulted from malicious intent.

The amended version passed today says: “The operator of a nuclear installation, after paying the compensation for nuclear damage... shall have a right to recourse where... the nuclear incident has resulted as a consequence of an act of supplier or his employee which includes supply of equipment or material with patent or latent defects or substandard services”.

“If they’ve deleted the words ‘intent’ or ‘wilful act’, it is unlikely that we’re going to get suppliers to sell us equipment,” said an expert. “We can’t be certain it’s not going to happen — but all countries with such liability rules have ‘wilful act’ in their texts. Will suppliers make an exception and agree to provide equipment to India? We can’t be sure. We’re taking a chance,” the expert said.

However, some believe India’s large nuclear power market and the extreme low probability of a nuclear accident (nuclear installations are built with multiple redundancies and safety systems) may yet be attractive enough to draw suppliers.

The cost of imported nuclear reactors will depend on how much equipment will be sourced from within India. But nuclear power officials have indicated that imports of reactors for 10,000MW would be worth around Rs 120,000 crore to Rs 150,000 crore.

Imported reactors are likely to make up a crucial chunk of the planned 20,000MW of nuclear power capacity India hopes to have by 2020. The current installed nuclear capacity is a little over 4,000MW.

An analysis of the nuclear liability rules in 10 countries suggests that India and South Korea are the only two countries that provide right to recourse against the supplier. The analysis by the Confederation of Indian Industry says the current Indian bill may “leave ample scope to channel liabilities to the suppliers”.

The current nuclear liability laws in China, Canada, France, Germany, Japan, Russia, the UK and the US channel liability exclusively to operators and do not provide a right to resource against suppliers. The right to recourse can be excluded through contract in South Korea.

Environmental activists opposing the bill have welcomed deletion of the word “intent” but have said even the tripled cap of Rs 1,500 crore is less than the compensation given to the victims of the Bhopal gas tragedy.

“Even this amended bill does not give victims of nuclear accidents the right to take suppliers to court and claim compensation,” said Karuna Raina, a nuclear campaigner with Greenpeace International, an environmental group.

Section 17[b] specifies that the operator would have a right to recourse when such a right is expressed in a contract (between an operator and a supplier). “Only the operator has the right to recourse,” Raina said.

However, sources associated with the nuclear power sector have pointed out that the objective of the bill is to ensure speedy compensation for victims and allow operators to independently pursue compensation from suppliers for damages.

How an operator seeks compensation would be determined through the language of the contract between the operator and the supplier.

According to government sources, with the right language incorporated in such a contract, an operator could seek damages from the supplier after establishing that there were patent or latent defects in equipment or that substandard services had been delivered, which led to the incident.

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