Nuclear energy — dangerous concessions on liability

In the Union Budget speech on February 1, the Finance Minister Nirmala Sitharaman announced the government’s intention to take up “amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act…” This announcement is likely to please Washington, where successive administrations have been unhappy that the law places some minimal responsibilities on nuclear manufacturers in the event of an accident. But, in India, any move to indemnify suppliers should be a matter of serious concern since this could undermine nuclear safety.

Moreover, the reactors that the American government is pushing India to buy are extremely expensive and their import makes no sense on economic grounds.

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Any nuclear reactor carries the risk of accidents — some of which, such as the multiple reactor meltdowns at Fukushima, Japan, in 2011, can be catastrophic. Such a disaster affects three parties: the victims, the operator of the nuclear plant (which, in India, is likely to be the public sector company, Nuclear Power Corporation of India Limited or NPCIL) and its supplier, which might be a large multinational corporation.

Following the Bhopal gas disaster (1984) the Supreme Court of India ruled, in 1986, in the Delhi Oleum gas leak case, that any enterprise engaged in a hazardous activity is “absolutely liable” for harm suffered by the victims. However, in 2010, the United Progressive Alliance (UPA) government created a special law for nuclear accidents that diluted this principle. Under this law, primary liability is channelled to the operator and capped at ₹1,500 crore.

This is unfair to victims because the economic damage caused by an accident can be much higher. The Japan Center for Economic Research estimated that the eventual cleanup costs of the Fukushima disaster could range from ¥35 trillion to ¥80 trillion (or ₹20 lakh crore to ₹46 lakh crore) — more than a thousand times the cap on operator liability in the Indian law.

Assigning responsibility

Despite this gross mismatch, the law did have one slightly redeeming feature. Under pressure from civil society groups and the political opposition, the UPA government was forced to include a clause called the “right of recourse”. This allows the operator to recoup compensation paid to victims from the supplier if the accident was caused by “supply of equipment … with patent or latent defects or sub-standard services”.

Because of the historical monopoly enjoyed by U.S. nuclear companies, liability laws in many other countries lack this feature. Instead, they completely indemnify suppliers. This simply reflects the influence of powerful corporations and is not based on a scientific analysis of previous accidents. In fact, design defects have played a role in every major accident to date. A weakness in the Mark 1 containment used in the reactors at Fukushima contributed to that accident. This defect was flagged as early as 1972, when a U.S. Atomic Energy Commission official warned that General Electric (GE), the reactor’s designer, had used “data from tests not applicable to accident conditions” in safety assessments. The official recommended that “such designs not be accepted for construction permits” in the future. GE simply brushed aside this concern and, because it is indemnified by the Japanese liability regime, has not paid anything for the Fukushima accident.

Indemnity removes any direct economic incentive for suppliers to ensure reactor safety once a sale is completed. This is not a hypothetical concern. Following the 1979 accident at Three Mile Island, the Kemeny Commission established by the U.S. government noted that Babcock & Wilcox, the supplier of the reactor, had identified a safety hazard in an “earlier accident, bearing strong similarities to the one at Three Mile Island”. Even though an engineer at the company had “urged, in the strongest terms, that clear instructions be passed on to the operators” to mitigate this hazard, the supplier failed to do so.

Backtracking on progress

Nuclear suppliers were furious at the idea that they might have to pay for accidents in India. To appease these companies, the UPA government made farcical attempts to dilute the right of recourse, both during and after the parliamentary debates on the law. This led the Bharatiya Janata Party leader Arun Jaitley to write that a “leopard never changes its spots.”

However, after assuming power, the National Democratic Alliance government has pursued precisely the same policy of prioritising nuclear corporations over potential victims. Following U.S. President Barack Obama’s visit to India in 2015, the Ministry of External Affairs issued a set of “frequently asked questions” downplaying the operator’s right of recourse, and disingenuously suggesting that it could be bypassed using a contractual arrangement between the supplier and the NPCIL.

These machinations have not satisfied U.S. suppliers who are unwilling to expose themselves to any legal hazard in India. Their concerns are easy to guess. Although the current liability cap is low, a future government might rationalise it to reflect the true cost of an accident, exposing these companies to large financial risks. Moreover, accepting even minimal liability in India endangers their cosy arrangements in other countries where they have successfully demanded complete indemnity.

Finally, if the liability law mandates an assessment of the supplier’s culpability, this might allow victims to hold corporate executives to account using criminal laws in the event of a disaster.

U.S. officials have actively lobbied on behalf of these politically influential companies. The outgoing U.S. Ambassador to India, Eric Garcetti, recently indicated that he had been in touch with leaders from both the ruling party and the Opposition in an effort to have the law amended. He also lamented that U.S. corporations had been unable to sell a single reactor to India nearly two decades after the U.S.-India Civil Nuclear Agreement. However, this has allowed India to avert a costly mistake as the troubled track record of these reactors in their home country shows.

The leading American reactor design on offer is called the AP1000. Electric utility companies commenced construction on four such reactors in the U.S. Two of these reactors, in South Carolina, were abandoned after repeated delays and cost escalations even though more than $9 billion had already been spent. Two other reactors, in Georgia, were completed at an eye-popping cost of $36.8 billion, over 250% of the $14 billion estimate provided at the start of construction.

These high costs translate to expensive electricity. Even taking into account lower labour costs in India, the cost of electricity from such reactors would be several times higher than competing sources as the writers of this article showed in a 2013 study in the Economic & Political Weekly. Small modular reactor designs, such as those offered by the U.S.’s NuScale Power corporation, are likely to be even less economical since they lose out on “economies of scale”.

Hollow safety claims

The debate on liability also exposes the exaggerated safety claims made by suppliers. Westinghouse claims that a large release of radiation from an AP1000 reactor would happen only once in 50 million years. If reactors are so safe, why would nuclear vendors take extreme precautions to protect themselves from the consequences of an accident? If companies such as Westinghouse recognise that the risk of an accident is real and are unwilling to risk financial losses, why should Indian citizens who live near a reactor be willing to risk their lives and property?

Prime Minister Narendra Modi projects an image of a strong global leader. However, the government’s announcement on the liability law is a revealing commentary on that message. When faced with pressure from the U.S. government, which puts the profits of U.S. corporations above all else, Mr. Modi’s government seems unable to stand up for the basic rights and the safety of Indians.

M.V. Ramana is a physicist with the Coalition for Nuclear Disarmament and Peace (CNDP). Suvrat Raju is a physicist with the Coalition for Nuclear Disarmament and Peace (CNDP)