Liability-wary Russia to raise reactor price - India seeks to limit extra payments after accepting revision demand

New Delhi, Sept. 9: Russia is hiking the price of four Rs 41,600-crore nuclear reactors it is selling India under a landmark 2008 pact, worried about the liability regime Parliament approved in 2010 that Moscow fears could mean unlimited financial exposure in case of accidents.

India, which has refused to exempt the Russian reactors from the liability law, has accepted Moscow’s demand to revise costs but is negotiating to limit the extra payment, senior Indian and Russian officials have told The Telegraph.

Negotiations over nuclear reactors and key Indian defence projects that Moscow is eyeing will shape the agenda when Prime Minister Manmohan Singh travels to Russia for a second time in two months this October for an annual bilateral meet with President Vladimir Putin, the officials said.

Singh returned from the G20 summit in St Petersburg on Saturday.

“We understand the Russian need to raise the cost of the reactors because of our liability law,” an official here said. “But it has to be worth the cost for us too. That’s what we are negotiating on.”

That cost-benefit analysis will need to take into account the diplomatic and strategic significance of the deal with Moscow, and India’s target of a capacity to produce 63,000MW of nuclear power by 2032 — up from under 5,000MW at present.

Russia and India signed the agreement for the supply of up to four reactors in December 2008, barely months after the Indo-US nuclear deal paved the way for New Delhi to join the club of capitals allowed to engage in nuclear trade. Two of the four reactors — each with a capacity to generate 1,170MW — will join the existing two Russian reactors at the Kudankulam nuclear power plant in Tamil Nadu that protesters have campaigned against for a decade now.

India is still to finalise a location for the remaining two Russian reactors, after the Bengal government rejected a plan to build a nuclear plant in Haripur, East Midnapore.

“For the Russians, the nuclear reactors are a major part of their relationship with India,” a diplomat who has worked in India’s mission in Moscow said, requesting anonymity because he is now serving in another Indian embassy. “They see the nuclear pact as part of their long-standing commitment to India.”

Russia had promised the first two reactors in Kudankulam in 1988, when the US, France and other western countries shunned India’s nuclear programme. The first of those reactors is expected to start feeding power to India’s southern electrical grid before the end of the year.

Singh, Indian officials said, will point to that progress as an exemplar of New Delhi’s commitment to its nuclear ties with Moscow, when he meets Putin in October.

But Singh will also reiterate India’s position that unlike the reactors committed 25 years ago, the ones agreed on under the 2008 pact must be covered under its nuclear liability law, passed in 2010.

India has rejected Russia’s assertion that these reactors be exempt because they were promised under a 2008 pact that predates the liability law. Such an exemption, Indian officials argue, would force India to offer similar escape routes to American and French reactors that those nations also committed in 2008.

Two sections of the liability law have raised alarm among the Russians, Americans and the French. Section 17(b) of the Civil Liability of Nuclear Damages Act, 2010, allows the operator — the Nuclear Power Corporation of India Limited — to seek recourse for compensation it has had to pay for accidents caused because of “patent or latent defects” in the reactor or its components.

Foreign suppliers like American firms Westinghouse and GE, French company Areva, and Russia’s nuclear corporation Rosatom are effectively exposed to liability of up to Rs 1,500 crore under Section 17(b), for the duration of their reactors’ life.

But Section 46 of the law also allows citizens affected by a nuclear accident an opportunity to sue the suppliers — with no limit on the compensation.

Disenchantment among suppliers over these sections has effectively stalled every attempt made by India since 2008 to implement the nuclear pacts it signed that year with the US, France and Russia.

Rules accompanying the liability law offer a way out to suppliers — a route India is willing to explore, officials said. Contracts between the Indian operator and the foreign firm can limit the duration within which India will make any claims of “patent or latent defects” — to a period of five or 10 years.

“This will help the supplier limit the insurance coverage it needs, and restrict its liability to a realistic period within which we should be able to determine whether there’s a problem with the reactor,” an official of the Indian nuclear operator said, requesting anonymity.