Harnessing nuclear energy: Bill seeks to address key investor concerns

The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Bill, 2025, which was introduced in the Lok Sabha on Monday, opens the pathway for the entry of the private sector into producing nuclear power by responding to major concerns that have hindered investment in the area for 15 years. The umbrella Bill replaces the Atomic Energy Act, 1962, which prohibited private participation in nuclear energy, and more crucially the Civil Liability for Nuclear Damage Act (CLNDA), 2010, which had legislated for operators’ right of recourse on suppliers of nuclear equipment in the case of accidents. A government statement says the Bill, which allows up to 49 per cent foreign direct investment in certain nuclear activities, intends to provide a “pragmatic” civil-liability framework for nuclear damage. Pragmatism principally lies in the removal of a contentious clause on suppliers’ liability and the delineating of operators’ liabilities. Removing suppliers’ liability from the legislation does not, however, imply a blanket exoneration if nuclear accidents occur. In the normal course, however, such liabilities are explicitly incorporated in commercial contracts, usually under a liquidated damage clause, which specifies a mutually agreed percentage of the contract value that the operator can recover from the supplier or contractor in the case of damage or defects. By explaining that such a right is expressly provided for in a contract in writing, the Bill reverts to a global standard.

 

Changes in the provision on operator liabilities can be expected to encourage investment. The SHANTI Bill retains from the CLNDA the maximum amount of “no fault” financial liability of a nuclear operator in the case of a nuclear accident as the rupee equivalent of 300 million Special Drawing Rights (SDRs). The “operator liability” in this case refers to the immediate assistance that the operator must pay victims without waiting for the investigation that fixes responsibility for the accident. The Bill also specifies that an operator must obtain an insurance policy or other such financial security (or a combination of both) covering the liability. One question that will need clarification is whether premium costs can be loaded on to the tariffs nuclear plants charge buyers. The significant addition under the SHANTI Bill is a clause stating that any compensation amount exceeding the specified limit of 300 million SDRs would be met by the government. This would include access to funds under the International Convention on Supplementary Compensation for Nuclear Damage, a global framework to increase compensation for victims by establishing an international fund to supplement national limits. India signed the convention in 2010 and ratified it in 2016. This clarification, too, addresses a significant hurdle for foreign investment in the nuclear sector.

 

These key amendments are likely to attract an interest from the private sector in at least small modular reactors, which are being seen as a quicker way to reach the target of 100,000 Mw of nuclear power by 2047 from 8,900 Mw now. One potential pain point, however, lies in the sensitive parts of the nuclear-fuel cycle such as mining and enrichment (beyond a certain threshold). These functions, plus spent-fuel management and producing heavy water, will remain the exclusive preserve of the government, principally to meet international obligations. Whether this limitation will deter investors eyeing vast opportunities in this nascent sector is an open question.