Nuclear Power Corp vendors contest liability clauses

Vendors to the Nuclear Power Corporation of India Ltd (NPCIL) say the the Civil Liability for Nuclear Damage Act, 2010, has put unlimited liability on them, leading to insurance companies denying them cover.

The vendors also have a problem with a section of the Act that seems to allow proceedings against them under other laws as well. The Federation of Indian Chambers of Commerce and Industry (Ficci) has raised the issue with the Prime Minister’s Office (PMO). In a letter to

V Narayansamy, minister of state, Ficci has sought clarifications on Section 17(b) of the Act, for which the rules were notified last November.

The section says the operator (NPCIL) will have the right to recourse if “the nuclear incident has resulted as a consequence of an act of supplier or his employee, which includes supply of equipment or material with patent or latent defects of sub-standard services.” This, according to the vendors, puts unlimited liability on them. The Ficci communication stated liability on suppliers should not be there in the case of equipment supplied over five years before.

Hence, Ficci has asked the government to change the rules to quantify the liability in terms of time and amount. S K Ghosh, advisor to the nuclear business of Walchandnagar Industries, said it was a very important issue, affecting vendors and their employees, too.

Industry officials say insurance companies, including those in the public sector, refuse to provide them insurance cover since the liability under Section 17(b) cannot be quantified. This is surprising, said the vendors, as the proposed International Financial Reporting Standards says all liabilities must be disclosed in the balance sheet of the company.

Ficci also said Section 46 of the Act allowed for proceedings under laws other than the Act. This would “put suppliers at the risk of unlimited liability,” the chamber said. The rules under the Act are silent on this section.

However, officials of the department of atomic energy said the apprehensions regarding Section 46 are too far-fetched, as the section was relevant only for the operator and not the suppliers. Hence, there does not appear a need for a re-look, the officials said.

Another objection, according to a section of the vendors, is the removal of the indemnification clause from the NPCIL tenders after the new rules. Earlier, the operator was to take the liability in the case of any accident that would result in third-party loss to life and property.

At the time of sanctions against India for proceeding with a nuclear programme from the late 1990s, vendors continued supplying equipment to NPCIL despite the fact that they also came under the ambit of those sanctions and had to bear a loss of business in their other ventures with the United States. They were assured because of the indemnification clause, the vendors said.

“We continued to supply equipment even at the cost of other businesses only due to the indemnification clause that assured us,” industry players said.

Though analysts said public sector companies were also not very comfortable with the new rules, officials of Bharat Heavy Industries Ltd, one of NPCIL’s suppliers, refused to comment when asked. Larsen & Toubro and Godrej are among the non-government vendors to NPCIL.

NPCIL officials tried to play down objections by the vendors, saying there had been some contracts despite the new rules. The government has a target of 63,000 Mw of energy from nuclear sources by 2032, of which 4,000 Mw has been achieved. Only 2.5 per cent of the installed power capacity in the country is through nuclear sources.