August 18, 2010 / 7:53 AM / 10 years ago

UPDATE 2-India panel suggests tougher nuclear liability bill

(Adds quotes, details)

By Nigam Prusty and Bappa Majumdar

NEW DELHI, Aug 18 (Reuters) - A parliamentary panel on Wednesday recommended changes to a bill aimed at opening up India’s $150 billion nuclear power market, including trebling accident compensation and extending liability to private firms.

If passed by parliament, the bill will help open up the nuclear power market to firms such as U.S.-based General Electric (GE.N) and Westinghouse Electric, a subsidiary of Japan’s Toshiba Corp (6502.T), who are reluctant to step in without clarity on accident compensation.

The revisions, presented to parliament on Wednesday and largely backed by opposition parties, mark another instance of policy climbdown by a government struggling to push through bold financial reforms in the face of political pressure.

India’s nuclear power sector is tightly controlled and there is only one state-run operator. The panel suggested that the liability cap on the operator be fixed at $320 million, while giving it the option to claim compensation from private firms if a defect in their nuclear gear causes an accident.

State compensation, or the liability burden on the federal government, is estimated at the equivalent of 300 million special drawing rights, which will be over and above the operator compensation.

The government set up the panel to examine the bill following protests by the opposition and critics who said the original draft law pegged the compensation liability of the operator too low — at about $110 million, almost 23 times less than that of an operator in the United States. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a Q+A on the nuclear bill, please click [ID:nSGE67H05X] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The recommendations, if accepted, would mean higher costs for private firms by way of higher insurance premiums, but will bring in policy clarity which will help speed up projects.

The original draft law had capped liability at about $110 million for the state-run reactor operator without placing any compensation burden on private suppliers and contractors.

“It has been the attempt of the committee to ensure that the bill is in line with India’s expectations in terms of adequacy and promptness of payment of compensation and also to enable Indian nuclear industry to grow by not subjecting to excessive burden,” the panel said in its report.


The bill is important for private companies whose liabilities are not underwritten by their governments as is done by the governments of Russia and France. Compensation claims from one nuclear accident could be enough to bankrupt a private company.

Once the bill turns into law, the U.S. firms can start work on building reactors at at least two sites identified for them. The first fruits of the India-U.S. deal could fetch GE and Westinghouse up to $10 billion.

The bill has the personal backing of Prime Minister Manmohan Singh whose 2008 deal with former U.S. president George Bush ended India’s isolation in the global nuclear market.

The government is keen on ratifying the nuclear bill and smoothing entry for global firms, including those from the United States, before President Barack Obama’s November visit to India.

While support from the opposition Bharatiya Janata Party (BJP) means the government could push through the bill in parliament, there is still some opposition from smaller parties whose protests briefly shut the house on Wednesday.

Other hurdles also remain.

Problems over acquisition of land for nuclear power plants could delay projects. In India, farmland acquisition has highlighted a broader standoff between industry and farmers in a country where two-thirds of the population lives on agriculture.

There have already been several farmers’ protests against upcoming nuclear reactors and opposition support for such demonstrations will complicate the land acquisition process. (Writing by Krittivas Mukherjee; Editing by Sugita Katyal)

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