Why in the News?

US National Security Advisor Jake Sullivan announced that the US is working to remove long-standing rules that have hindered nuclear cooperation between India’s top nuclear entities and American companies.

What are the legal barriers hindering India’s participation in nuclear manufacturing?

• 10CFR810 Authorization: This regulation, part of the US Atomic Energy Act of 1954, restricts US nuclear vendors from manufacturing nuclear equipment or conducting nuclear design work in India.
  • While it allows for the export of equipment under strict safeguards, it prevents India from engaging in the manufacturing value chain and co-producing nuclear components for atomic power projects.
• Civil Liability for Nuclear Damage Act, 2010: This Indian legislation establishes a framework for compensating victims of nuclear accidents and allocates liability to equipment suppliers. This provision raises concerns among foreign companies, such as GE-Hitachi and Westinghouse, regarding potential financial exposure and liability risks, which deters investment in India’s nuclear sector.

How does Indian liability law impact the Indo-US nuclear deal?

• Liability Allocation: The Civil Liability for Nuclear Damage Act, 2010, establishes a framework that assigns strict liability to nuclear operators for damages resulting from nuclear incidents.
  • This means that operators are primarily responsible for compensation, which is capped at ₹500 crore (approximately USD 60 million), with the central government liable for additional amounts up to 300 million Special Drawing Rights (SDRs) in case of higher damages.
• Right of Recourse: The Act provides operators with a right of recourse against suppliers, which means that operators can seek compensation from suppliers if they incur costs due to an accident.
  • However, this right is not mandatory and is seen as an enabling clause, leading to concerns among suppliers about their financial exposure in the event of an incident.
• Insurance Challenges: The liability law’s structure creates significant challenges for foreign suppliers in obtaining insurance coverage. Many suppliers require a clear legal cap on liability to insure themselves against potential accidents.
  • The open-ended nature of liability and the potential for significant financial exposure deter investment from companies like GE-Hitachi and Westinghouse, who are wary of entering a market where they could face unpredictable liabilities.
• International Standards Compliance: The Indian liability framework is viewed as an outlier compared to international norms, which typically channel all liabilities to operators rather than suppliers. This divergence complicates foreign participation in India’s nuclear sector and hinders the operationalization of agreements like the Indo-US nuclear deal.

What steps are being taken to enhance Indo-US cooperation in the nuclear sector?

• Removal of Regulatory Barriers: The US is finalizing steps to ease restrictions that have hindered nuclear collaboration since the 2005 deal, enabling closer ties between Indian entities and US private sector players.
• Facilitating Technology Transfer: The regulatory changes will support the transfer of US nuclear technology to India, boosting India’s clean energy expansion efforts.
• Strengthening the iCET Framework: Emphasis on the US-India Initiative on Critical and Emerging Technologies (iCET) to foster collaboration in nuclear technology and other high-tech sectors like AI and quantum computing.
• Addressing Liability Concerns: Discussions to resolve issues related to India’s nuclear liability laws aim to attract foreign suppliers and enhance investment opportunities in India’s nuclear energy sector.

Way forward: 

• Policy Reforms for Liability Clarity: Amend India’s Civil Liability for Nuclear Damage Act to align with international norms by channelling liability solely to operators, reducing suppliers’ financial risks and encouraging foreign investment.
• Promote Joint Ventures and Technology Transfer: Facilitate joint manufacturing and R&D collaborations under the iCET framework, leveraging US expertise in light water reactor technology and India’s manufacturing capabilities to achieve shared clean energy goals.

Mains PYQ:

Q What is the significance of Indo-US defence deals over Indo-Russian defence deals? Discuss with reference to stability in the Indo-Pacific region. (UPSC IAS/2020)

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