People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 12

March 21, 2010



Subsidising Foreign Suppliers with Indian Money


Prabir Purkayashta


THE Congress led UPA seems to have now got second thoughts on the Civil Liability for Nuclear Damage Bill, which they were scheduled to table in Lok Sabha on March 15. Whether this is only a tactical move --- waiting for the Budget to be passed before taking up such legislation or is it a desire to dialogue with other parties on the bill remains --- to be seen. However, the high voltage campaign unleashed in the media with now the National Security Advisor Shiv Shankar Menon briefing the Congress MPs seems to indicate that this is only a temporary retreat. For the Congress, it is only an issue of how to create a positive spin on a bill which is nothing but subsidising foreign suppliers using Indian taxpayers’ money along with Indian people carrying all the risks.

There are three sets of issues in the above bill. One is the political one: why is such a bill necessary now, considering that India has had operational nuclear reactors since the 1960s. The second sets of issues are the provisions on compensation --- the cap on total liability, the operator liability and also the suppliers liability. The third set of issues are the legal ones – the attack on common law on liability and even violations of constitutional provisions of citizens right to move courts. Has the government in its eagerness to please the US suppliers and possibly future Indian private operators, gone beyond the certain fundamental principles of jurisprudence.

The government's argument for the bill is that all suppliers --- the Russians, French and now the Americans --- have asked limiting their liability; therefore, this is not an exclusive measure for the US suppliers. What the government is hiding is that only US suppliers have made passing of a liability Act as a precondition for nuclear supplies. The Russians have supplied two reactors in Koodankulam without any such legislation. Similarly, France has linked the supply of Areva reactors dependent on India passing such an act.

The US ambassador Roemer made clear not only the US interest in the Nuclear Liability Bill but explicitly linked it to the Indo-US nuclear deal completion. Speaking to journalists on March 15, Roemer said, “Now we are hopeful and optimistic that this (passing of Nuclear Liability Bill) will happen sooner than later and that India will step up to its responsibility and obligation to complete this deal." He continued, “This (Indo-US nuclear agreement) is an important deal that the United States and India need to be able to finish and complete and part of this completion is for the parliament to pass this bill” (emphasis added). The link between the two --- passing of the Nuclear Liability Act and completion of the India-US nuclear deal --- is not being made by only the Left as the UPA government would have the people believe but also by the US officials.

This is not the only statement that US officials have made on India needing to pass a nuclear liability bill for the US companies do business in India.

Why is the US government so keen on India passing a Nuclear Liability Bill? The reasons are quite simple: without legal protection from claims of liability, no US supplier is willing to supply equipment to any country. The Price Anderson Act in the US passed in 1957 was explicitly designed to give private operators and suppliers this comfort and this is what they seek in all countries. In the US, as in Canada where a similar law exists, the critics have pointed out that this is a huge hidden subsidy to the nuclear industry. The US suppliers have no economic liability in the US under the Price Anderson Act --- all economic liabilities are channelled exclusively to the operator. What the US suppliers want are that US conditions must apply to them irrespective of the country they operate in.

The insistence by the US on protecting suppliers from liability is not with India alone. This has been a matter of dispute with Russia as well. The US suppliers have insisted that the US government ask Russia to pass a comprehensive nuclear liability law and also ratify the Convention on Supplementary Compensation for Nuclear Damage (CSC). Omer Brown, the lead lawyer for the Contractors International Group on Nuclear Liability (CIGNL) consisting of major nuclear suppliers --- Babcock & Wilcox Company, Bechtel Power Corporation, BWX Technologies Inc, General Electric Company, USEC Inc, Washington Group International Inc, and Westinghouse Electric Company LLC, wrote to the US State Department on December 18, 2003 stating that unless Russia met the above conditions, US suppliers will not be able to work in Russia. This is almost verbatim what Omer Brown has said of India as well. Give us protection from liability, only then we will supply you equipment.

Are these normal for all countries? They are not. Most countries do not exempt nuclear suppliers from product liability regime. Product liability means if a manufacturer supplies equipment which is defective, it bears the liability and must pay for all the damage resulting from the defective equipment. This allows the nuclear operator to recover the damages he must pay to those affected in a nuclear accident from the manufacturer.

The Indian bill is very clear on this. Instead of normal product liability, the manufacturer is now only liable if there is wilful act or gross negligence (clause 17 b). Otherwise, instead of the normal legal responsibility for defective products, the operator can take recourse only if the operator and the supplier have agreed to this in the contract between them. A legal right of the operator now becomes a matter of mutually agreement reached in a private contract. 

India has been building nuclear plants since the 1960s. From the 1970s these plants have been built with largely indigenous supplies. Nor has any public sector or private company in India insisted that they need protection against liability claims before supplying equipment to Indian nuclear plants. While the government is now saying that the Russians in Koodankulam also wanted protection from liability, the fact is that they have supplied the reactors without any such protection.

The UPA spokespersons have tried to confuse the public by claiming that 17(b) holds the manufacturer responsible for defects. It does not. Proving wilful act or gross negligence resulted in the defect is quite different from establishing that a defect exists in the equipment. A leading TV anchor who claimed to have read the Bill, asserted that bill provides for the manufacturer to be held liable for manufacturing defects. What probably he had read is the briefing note by the government. But then this is the age of 24x7 television where the media has time for only bytes and little else.

The UPA spokespersons have argued that most countries have caps and these caps are of similar order. There is a deliberate attempt to confuse issues here. For example, Japan has a cap of 1.2 billion dollars on the operator but not the Japanese government. The Japanese state has unlimited liability. Germany and Finland have no cap on operator’s liability. Russia does not have legislation on nuclear liability and therefore the normal laws on liability apply.

In any case, the fundamental issue for us is what our concerns on nuclear plants are and not what other countries are doing. After Bhopal, it should be clear that a liability limit of 470 million dollars was a gross underestimate of the actual requirements. It is surprising that the government should come up with similar figures now when the possible damages from a nuclear accident is much greater.

The government spokespersons have now started saying that India needs to join the Convention on Supplementary Compensation for Nuclear Damage as this will provide India with higher compensation over and above the 300 million SDRs. The reality is that this US drafted Convention is unlikely to take off. It has been ratified by only four countries including the US. The other three are Morocco, Argentina and Rumania, who between them own four reactors. No other major nuclear reactor owning country such as Russia, France and Japan has ratified this even after 13 years of its existence. For the convention to become operational, at least five countries must join the convention and the countries put together must have 400,000 MW thermal. India joining will not make the convention operational – it does not have enough installed capacity to cross this number of 400,000 MW thermal.

In any case, the convention is an insurance mechanism --- India will have to pay for accidents in other countries as well and also pay into a joint insurance fund. Why is India rushing to join this US sponsored convention, when no major nuclear power country is joining, is a question that the government has to answer. There are at least three more conventions on nuclear damages. The convention on supplementary compensation is the worst. It is the only one that allows the suppliers of nuclear equipment total immunity from liability. One can understand why the US is interested in this convention. That appears to be the driving force for the government of India.

There is a further legal issue in the bill. Clause 32 of the bill makes the claims commission’s verdict final. The claims commissioners’ proceedings or its verdict cannot be challenged in any court in the country. The fundamental right of a citizen to file for an injunction or a writ petition in courts have been abrogated in clause 35 of the bill. So also the right of a citizen to move the courts for judicial review of the commission’s decisions. No other commission set up by the government has ever had such bars. 

This bill has little to do with the needs of the Indian people. It has been drawn up primarily to help the US manufacturers. The US government’s position is quite clear; it is working to help US suppliers. The question is in whose interest is this government working, for the Indian people or the US suppliers?