Fission for compliments: Remove nuclear liability hurdles before seeking NSG membership

Governments take the right decisions only after they have exhausted all the wrong ones. Nothing fits this better than India's self-goal on nuclear energy. And nothing felt more right than the finance minister's better-late-than-never announcement during the budget speech about amending Civil Liability for Nuclear Damage Act (CLNDA) 2010, and Atomic Energy Act (AEA) 1962, to allow private sector participation in the sector. This week, with the US company Holtec getting authorisation to build SMRs in India, we're coming full circle. Again.

It took an Indian PM willing to risk his government and a US president bold enough to challenge nuclear hardliners to break open the gates to a transformed India-US relationship. Together, they dismantled decades-old nuclear and technology sanctions on India through a landmark deal that ended India's global isolation. On his first visit to India after the agreement, George Bush greeted Manmohan Singh at a private lunch with a grin, saying, 'We got it done, didn't we? Broke some China in the process.' The room erupted in self-conscious laughter. Back then, we still clung to the pretence that China wasn't India's most formidable strategic challenge.

Having opened the door to nuclear commerce with a waiver from the Nuclear Suppliers Group (NSG), India did itself the service of legislating its own obstacle. CLNDA, with a web of complex clauses relating to supplier liability, froze any incipient ardour of international nuclear companies. GE-Hitachi and Toshiba-Westinghouse, awarded the right to build nuclear power plants at Kovvada (Andhra Pradesh) and MithiVirdi (Gujarat), refused to move forward due to the stringent conditions of the liability Act. But that is not all. In the years following the passage of CLNDA, Indian suppliers to Nuclear Power Corporation of India (NPCIL) refused to move as well, spooked by the same clause, freezing the Indian nuclear sector. It was not until 2016 that GoI described Indian suppliers as 'vendors', exempting them from supplier liability. The foreigners stayed out.

In essence, Clause 17 of CLNDA exposed system designers, quality assurance folks, technology owners and vendors to potentially unlimited liability. This was contrary to fundamental principles on nuclear liability under international conventions, including the 1997 Vienna Convention and the Convention for Supplementary Compensation (CSC), both of which place liability for nuclear damage exclusively upon the operator. India insisted it was compliant, but it was not. GoI argued that supplier liability was only limited to the value of the first contract, which was dodgy enough, but Article 46 slammed through another blow - that suppliers could be prosecuted under all other laws in India. Basically, if you were a supplier, you could not even calculate your liability, let alone buy insurance. Nobody wanted to touch the Indian nuclear market.

It had another chilling effect. Because India played hostile to foreign players, nobody saw much value in supporting India wholeheartedly when India went shopping for votes to become a member of NSG. By then, China was clear they would never again give in to US pressure regarding India. They did their damnedest - and succeeded - to keep India out of NSG. India is a member of three of four non-proliferation regimes, just not the most important one. China is now too powerful to open that door for India, except in return for a significant quid pro quo. This means many countries, like Japan, still restrict dual-use exports to India. Because just NSG waiver is not enough, they want to see the membership card.

In 2024, India tiptoed into privatising small modular reactors (SMRs). But without an amended AEA, it didn't get far. Now we want to decarbonise, build data centres with energy-guzzling GPUs, green steel, power up remote areas, and nuclear is clearly a better deal than untested green hydrogen.

GoI has set up two task forces to work on AEA and CLNDA. That sense of urgency is still missing, though. Babus will be babus, and atomic babus more so. Fires have to be lit. Once again, it was a two-step deal with the Joe Biden administration that breathed life into India's nuclear sector. In his last visit to India, Biden's NSA, Jake Sullivan, announced the lifting of restrictions from three Indian entities. In response, India offered to amend CLNDA and AEA. The first Donald Trump-Narendra Modi joint statement opened the door to civil nuke cooperation again. Now it's India's turn.

India's CLNDA needs to be fully CSC-compliant. That's a given, and frankly not a difficult amendment. Amending AEA will be tougher. It will entail a complex web of diluting government ownership of nuclear power plants, divvying up powers like who controls the fuel, the waste, who is in charge of safety and security, what percentage constitutes 'captive power', and other such abstruse issues.

In addition, India will need to grapple with several issues like the future of the fast-breeder reactor (FBR). Prototype Fast Breeder Reactor (PFBR) is outside IAEA safeguards, but new ones, if the design and technology are indeed proven, will go under IAEA full-scope safeguards. Can India privatise FBRs? That's a very big question with strategic consequences.

At some point, India will need to go back to apply for an NSG membership. For the time being, we should just shed some liabilities.