Profitability Without Accountability


Profitability Without Accountability – With the Indian government acting in favour of the nuclear industry, contrary to the interests of potential victims of a disaster, the question of liability deserves greater attention

In its efforts to promote nuclear commerce with the United States, the Narendra Modi government has run into a dichotomy that lies at the heart of this industry. While multinational nuclear suppliers, such as G.E. and Westinghouse publicly insist that their products are extraordinarily safe, they are adamant that they will not accept any liability should an accident occur at one of their reactors. The joint announcement by Mr. Modi and U.S. President Barack Obama last month raised concerns that the government would move to effectively indemnify suppliers, contrary to the interests of potential victims. The list of “frequently asked questions” (FAQs) on nuclear liability released by the Ministry of External Affairs on February 8 confirms the suspicion that the Modi government is trying to reinterpret India’s liability law by executive fiat in order to protect nuclear vendors.

Profitability Without Accountability

The government has disingenuously suggested that it achieved the recent “breakthrough” by establishing an insurance pool to support suppliers. However, to focus on this arrangement is to miss the wood for the trees as even a cursory analysis of the economics of nuclear plants shows.

A section in the Indian law called the “right of recourse” allows the Nuclear Power Corporation of India Ltd. (NPCIL) to claim compensation from suppliers up to a maximum of Rs.1,500 crore ($240 million). This pales in comparison with the total cost of the six planned Westinghouse reactors at Mithi Virdi in Gujarat; estimates from similar plants under construction in the U.S. suggest that this may be as high as Rs.2.5 lakh crore. In the U.S., all nuclear plant operators must have third-party insurance for at least $375 million, and suppliers could easily set aside a small portion of their profits to do the same for reactors sold in India.

Problematic principle

What suppliers are worried about is not the amount, but the principle. More concretely, if the law places some responsibility on suppliers, then a future Indian government could use this to gain leverage by forcing them to pay substantially more for a serious disaster. Moreover, their executives could be held accountable under other civil and criminal statutes in India. The FAQs released by the government are meant to reassure nuclear vendors on these counts.

The FAQs claim that the provision allowing the NPCIL a right of recourse “is to be read … in the context of … the contract between the operator and supplier.” This goes beyond the law, where the right of recourse exists independently of a contract.

In 2010, when a parliamentary standing committee suggested such a linkage, its recommendation was rejected by the Cabinet after a public outcry. Although the FAQs later state that “a provision that was expressly excluded from the statute cannot be read into the statute by interpretation,” this is precisely what the government is doing here.

The FAQs suggest that the government is also committed to the interests of the public sector NPCIL which “would insist that … contracts contain provisions that provide for a right of recourse consistent with Rule 24 of CLND Rules of 2011.” However, this is a cunning sleight of hand. A central element of these rules is that “the provision for right of recourse … shall be for the duration of initial license,” which is usually granted only for five years. In contrast, the promised lifetime of modern reactors is 60 years, and failure rates tend to increase in later years. Therefore, linking the right of recourse to a contract is an attempt to water down supplier liability to a meaningless level.

“Just because the Manmohan Singh government accepted the Faustian Indo-U.S. nuclear pact does not mean that India needs to bend its laws and spend billions of dollars on U.S. reactors”

The FAQs also declare that suppliers cannot be “asked to pay more compensation in the future … than currently provided under the law.” However, this ignores the fact that the law itself has a provision for revising liability, which states that “the Central Government may … from time to time … specify, by notification, a higher amount.”

A revision of the cap with time is only natural. Several decades from now, Rs. 1,500 crore may be worth much less than it is currently. Therefore, the government’s move to perpetually limit supplier liability to this nominal amount defies basic economic principles, and implies that victims will receive a lower compensation, in real terms, for future accidents.

Finally, the FAQs assert that the liability act, ipso facto, takes away the rights of victims to sue suppliers even under other laws. If this interpretation of the law is correct, then it implies that suppliers cannot be prosecuted even for criminal negligence.

Double standards
This provides a striking example of double standards. Under U.S. law, suppliers can be held legally responsible for accidents. Consequently, for decades, the U.S. refused to join any international convention that would require it to legally indemnify suppliers. When it engineered the Convention on Supplementary Compensation for Nuclear Damage, it inserted a “grandfather clause” to ensure that it would not have to alter its own law. In contrast, the Indian government seems willing to meekly surrender the rights of its citizens.

It is sometimes argued that India must make these concessions to “repay” the U.S. for its help in facilitating India’s access to international nuclear commerce. U.S. policymakers pushed for such access in a calculated attempt to induce India to support its geostrategic objectives and to ensure that U.S. companies would have access to the emerging Indian nuclear market. However, just because the Manmohan Singh government accepted this Faustian pact — and even cast an unconscionable vote against Iran at the International Atomic Energy Agency — does not mean that the country needs to repay this self-serving “favour” endlessly by bending its laws and spending billions of dollars on U.S. reactors.

Although the question of liability is somewhat abstruse, it deserves greater public attention because it serves as a clear lens to understand the central conflict involved in India’s nuclear expansion: the desire of nuclear vendors to have profitability without accountability and the interests of ordinary people who could be potential victims. The government’s attempt to resolve this conflict in favour of the industry is a revealing indicator of its priorities.

(M.V. Ramana and Suvrat Raju are physicists with the Coalition for Nuclear Disarmament and Peace. Ramana is the author of The Power of Promise: Examining Nuclear Energy in India, 2012.)

Analysis: From Team work for CSE-2015

What portion it will fill
GS -3
1/ infrastructure- energy
2/ science and technology development and their impacts on everyday life.
3/ Disaster and disaster management.
4/ Environmental pollution and degradation
5/ role of external state and non state actors and creating challenges to internal security.
GS –1
6/Distribution of major resources.
Essence of the editorial
Provision of ” Right to recourse “.
It compels the suppliers to pay to NPCIL in case of failure or accident.
Why the suppliers protest against it
A/ Under Indian law ; this ” right of recourse ” is signed between suppliers and NPCIL under a contract but in Western countries it is independent of any contract.
B/ Under Indian law there is a chance to make suppliers and executives to be more liable and punishable in future.
What is the ground of criticism from Indian side
1/ The ” right of recourse ” is only for initial 5 years.
What is the problem here ?
A/ The life of a nuclear plant is 60 years. The failure of nuclear plant might come towards the last part. In that case compelling suppliers only for 5 years is meaningless.
B/ It is dangerous both to NPCIL and victims. The latter will be hugely affected by this provision.
2/ Indian law prevents victims filing cases against suppliers while US government strictly observe this rule where under strict provision victims can file suit against suppliers.
Why this is leverage to suppliers ?
As believed ; US has greater role in making india a nuclear enriched country. So ; this kind of flexibility is to suppliers.
How it will help us ?
1/ It gives us light about energy related issues fulfilling topic 1.
2/ it says impact of any accident by nuclear plant and development of indigenous nuclear technology and fulfills topic 2+3
3/ you can extract about possible environment pollution related with nuclear plant thus fulfilling topic 4.
4/ It gives us light to consider security issue of nuclear plant and possible threat of non state actors to nuclear sector fulfilling topic 5.
5/ we can search for major nuclear deposits in world along with india thus fulfilling topic 5.
Q/ The southern coast of India is said to be deposit golden sand– why?
Q/ Recently NGT banned mining of sand ore in southern coast– why ?
Q/ What is rare earth materials ? Narrate the environmental pollution caused by rare earth material with reference to major countries dealing with it.
Q/ There is a need to regulate NGO run by foreign aid through strict law. Consider the statement under the controversy of Kalpakkam.
Q/ Write a short note on the nuclear resources of india.
You are president of a NGO working for protection of environment. You are a nuclear scientist. A nuclear power plant is going to establish in your region. A public outcry is already in out.
What you will do in such cases as a nuclear scientist as well as a president of NGO for protection of environment ?
A/ Domiasiat is the largest sandstone type uranium deposit in khasi hills in arunachal.
B/ A peculiar type of bacteria exist here.
1/ both
2/ none
3/ a
4/ b
2/ correct decreasing order regarding the position of their utilisation in india–
A/ Electricity energy; thermal; hydro and renewable energy; nuclear energy.
B/ electricity energy; hydro n renewable energy; thermal; nuclear energy..
C/ Electricity energy; thermal; nuclear; hydro and renewable energy.
3/ arrange the following in decreasing order of their deposit of uranium.
A/ Tummalapalle; chitrial; peddagattu; rohil
B/ rohil; chitrial; tummalalpalle; peddagattu.
4/ correct
A/ Rare earth materials are very rare in earth.
B/ They are 17 materials found in periodic table like scandium and yttrium and difficult to extract.
C/ Extracting rare earth materials causes huge scale environment pollution and china and Malaysia are the example of it.
1/ all
2/ ab
3/ bc
4/ ac
5/ correct
A/ monazite is a rare earth material found in southern coast sand of india.
B/ it is mixed up with thorium.
C/ India has rare earth material treaty with japan
D/ Rare earth materil is used from mobile to laptop.
E/ singhbhum in bihar has
1/ all
2/ abc
3/ bce
4/ abde
Major nuclear power plants in India
Kalpakkam– Tamilnadu
Kakrapara — gujrat
Raeathbhata — Rajasthan
Tarapur– Maharashtra
Narora– uttar pradesh.
I have furnished an article on nuclear law.
After the Nuclear Cooperation treaty with US india has to create a domestic law to find consonance with the Convention on supplementary compensation for nuclear damage ( CSG) as india has not ratified the CSG treaty. To enter into the global arena of nuclear power india legislates the Nuclear Liability Law of india but it is vehemently criticized on various grounds. This article tries to throw light on some grounds of criticism of the bill.
Liability cap
The nuclear liability law caps the compensation to be paid by operator to the victims at a very minimum level. It breaches indian and international law on various grounds—
1/ Article 21 of indian constitution
Protection of environment comes under the ambit of article 21 as it is related with right to life. A healthy environment is necessary for healthy life. The supreme court in Oleum gas leak case clearly mentions that an enterprise with hazardous process of producing any chemical or any hazardous substances that viable the integrity of environment is solely responsible to the compensation. From this point of view capping of the compensation amount of the nuclear operator and rest to be paid by the government violates the rule of Supreme court.
2/Indian law of full compensation
The Indian law provides for full compensation to any victim. This capping system violates this principle also.
3/Polluter pay principle
Both indian law and international law says that it is the polluter who have to pay the ultimate price. Both law even says that an enterprise has to pay not only the compensation to victim but also to the price for environmental regeneration. In Indian council for enviro legal action Supreme court applies this principle that only the polluter will pay. From this point of view also; capping of compensation amount by the enterprise violates indian and international law.
4/ Propensity of the nuclear damage
The damaged caused by a nuclear accident is enormous and it cant be fulfilled by a minimum capping amount as provided in India’s Nuclear Liability Law.
5/ Government enterprise
One section of society accuse that pushing the enterprise only to liability without nuclear supplier is to attract the foreign investment in nuclear field. In india; the enterprise is government controlled. So; ultimate responsibility remains with the government.
6/Burden on tax payer
Besides these; to fulfill the rest compensated amount by the government; government might have to increase the the tax on its citizens.
7/No mention of cap
The convention of supplementary compensation for nuclear damage act (CSG) doesn’t mention about any cap as a condition to entry into the nuclear suppliers group and no other country who are part of this convention has provided such cap.
Other grounds of criticism
1/ The bill provides a ground to sue the nuclear supplier if it is proved that any incident has been occured due to the negligency of nuclear supplier group. It prevents the foreign nuclear companies to invest in indian nuclear field.
2/ The bill relieves the nuclear operator from liability if accident is due to cause of natural disaster; terrorism and armed conflict. It invites utter threats to the life of millions of people.
Some legal grounds of criticism regarding conflicting clause of the Nuclear Liability law
Clause 6 and emanating controversy
According to this clause the operator can claim any liability from manufacturer and supplier in case of nuclear accident if it is written in the contract. But here the operator is Nuclear Power Corporation of India which itself is a government owned enterprise. So; in that case; to cope up with current situation government can put up a new bill or mayvamend the existing bill that might go against the victims.
Controversy regarding clause 18
The clause 18 of the nuclear liability bill maximizes the time of 10 years under which a victim has to file a complaint while it is well known to all that it is a very short duration of time because DNA of human bodies expresses nuclear related syndromes upto a long time along with several mismatches caused by nuclear disaster.
Controversy regarding clause 35
Thr clause 35 of the nuclear liability law provides that only nuclear damage claim commissioner can run the trial of operator or responsible person liable to the accident without any provision of civil court. It is contrary to the counterpart of US where accused are tried under civil court. It also conflicts with indian law.
Controversy regarding clause 17 and other deprivation of victim’s rights
The nuclear liability bill provides utmost responsibility to determine the claim of victims to the Nuclear damage commissioner.Not only this; the clause 17 of the bill prohibits the victims from filing any case against liable persons which can be done only by the operator that is NPCIL. It also prohibits the victims from filing any cases against the order of nuclear damage commissioner. It violates the civil rights of citizens.
From international front
As said by foreign nuclear companies and the US government the section 17 (b) and 46 of the Nuclear Liability Law that provides strict legal action against the nuclear suppliers in case of default of any mechanism or equipment is neither mentioned in CSG treaty nor mentioned in law of the countries who are party to the convention.
To resolve the problem; without diluting the provision but a much rationalised provision can be added diplomatically.
In case of insurance stalemate; a perfect risk management system combining insurance pool of indian insurance companies and US insurance companies can solve the matter.
From domestic front
After the Bhopal gas incident the domestic problems that might atise by such hazardous industry should be concerned effectively. A proper compensation system considering the propensity of such huge loss caused by nuclear accident and with inclusion of a longer time period to file suit can mitigate the problem. The inclusion of civil court in the trial process will add transparency and also will be in resonance with indian law.
India needs clean energy to appear on equal foot with other developed countries. Nuclear energy can pave this way for india. But a highly effective protection system with utterly responsible government machinery along with adequate law is necessary for a balancing nuclear power in india.
Questions to try
1/ The nuclear liability law of india conflicts with the indian as well as international law– exemplify.
2/ The nuclear liability law of india deprives the indians from entertaining fundamental rights– put forward valid reasons.