In July 2024, the Government of India, while presenting the Union Budget for FY 2024-25, inter alia, made announcements on the expansion of India’s nuclear energy sector, proposing partnerships with the private sector for research and developing Bharat Small Reactors (BSR), Bharat Small Modular Reactors (BSMR) as well as newer nuclear energy technologies. Presumably, this announcement is aimed at India’s ambitious pursuit of the decarbonisation of energy generation and achieving 500 Gigawatts of non-fossil fuel-based energy generation in India by 2030, as pledged at the COP26 Summit in Glasgow, in 2021.
With the government’s new announcement, there is renewed interest in visiting the existing framework governing the Indian nuclear energy sector to assess what kind of changes that may be required. The Atomic Energy Act, 1962 (AEA) — it was amended as the Atomic Energy (Amendment) Act, 1987 (No. 29 of 1987) — is the primary governing statute at the helm of the development and the operation of the nuclear energy sector. Pertinently, Section 3(a) of the AEA, 1962 empowers only the central government “to produce, develop, use and dispose of atomic energy”.
Ironically, on September 17, 2024, the Supreme Court of India dismissed a petition, Sandeep T.S. vs Union of India & Ors., challenging the provisions of the AEA, which restrict involvement of private entities in the licensing of nuclear power, observing that “The Parliamentary regime envisages a calibrated exploitation of atomic power, subject to stringent safeguards, bearing in mind the likely consequences of misuse and, for that matter, of an accident”.
In addition to the challenges listed above, there is also the issue of the pending challenge to the constitutionality of the Civil Liability for Nuclear Damage Act, 2010 (CLNDA), which seeks a declaration for the act to be void ab initio. These challenges not only introduce a high degree of regulatory uncertainty but also have the potential to leave private investments in the sector in a state of limbo.
Thus, the road map for private participation in the Indian nuclear energy sector must run in consonance, and not in conflict with the applicable laws.
AEA, restrictions on private sector
The governing scheme, i.e., the AEA, gives the government sole control and responsibility over all activities in respect of nuclear energy either through an authority or company established by it. In essence, the Department of Atomic Energy (DAE) and the Nuclear Power Corporation of India Limited (NPCIL) currently have overarching control over the nuclear energy infrastructure.
This, however, does not suggest that there is no record of or attempt to alter this situation. Last year, the DAE and NITI Aayog released “A Report on the Role of Small Modular Reactors in the energy Transition”, which specifically discusses key enablers to promote the private sector in Small Modular Reactors (SMRs). The report focuses on “Conducive SMR regulatory framework led by national regulators” and “Unambiguous Civil Nuclear Liability Framework and supporting legal structure” to ensure a sustainable and continuous engagement of the private sector.
Historically, the NPCIL has involved the private sector only in engineering, procurement and construction (EPC) where the infrastructure for the reactor is developed by private entities such as Megha Engineering & Infrastructures and Reliance.
In so far as the cost implications are concerned, the NITI Aayog report, and the Union Minister of Finance’s statement contemplate partnering with private participants to attract nearly $26 billion of investments into the sector. Such involvement, specifically for research and development (R&D), is strictly prohibited as in Section 3(a) of the AEA.
Rule 35 of the Atomic Energy (Radiation Protection) Rules, 2004, grants Atomic Energy Regulatory Board (AERB) authority over radioactive technology. But concerns about its lack of independence persist. The Nuclear Safety Regulatory Authority Bill 2011 aimed to address this but it was never enacted. Attracting private investment in nuclear energy will require significant changes to the AERB’s structure and functions, alongside efforts by organisations such as the NPCIL and the DAE to create programmes that encourage private participation while ensuring a robust regulatory oversight of the sector.
A possible structure
A possible approach is in forming public-private partnerships, where the NPCIL or a similar government body/authority holds 51% ownership of nuclear plants, aligning with existing laws. This structure may invite private capital while keeping responsibility, ownership, and accountability with the government. Additionally, entities with a majority government stake would also be covered under Section 2(h) of the Right to Information Act (RTI) Act, ensuring transparency. The entity would also be required to make disclosures under Section 4 and respond to reasonable public queries under Section 6 of the RTI Act, maintaining public accountability.
The other large concern is a significantly higher standards of liability with nuclear infrastructure. For reasons that are obvious to anyone who is vaguely familiar with nuclear technology, the presence of nuclear reactors in the vicinity of human settlements introduces a gnarly threat. The Chernobyl disaster of 1986 and the Fukushima Daiichi accident of 2011 are near synonymous with the word nuclear in this context.
In India, compensation for nuclear disasters is given to affected parties under the CLNDA. The CLNDA aims to provide civil liability for nuclear damage and prompt compensation to victims of a nuclear incident through a no-fault liability to the operator. As mentioned at the outset, the constitutionality of this act is presently challenged in a writ petition and is pending adjudication before the Supreme Court. This petition challenges the constitutionality of the CLNDA, inter alia, on the grounds of: violation of absolute liability principle; violation of polluter pays principle and serious dangers to nuclear safety.
The judgment in G. Sundarrajan vs Union Of India and Ors. (2013) has references to the Chernobyl and Fukushima disasters while addressing a Special Leave Petition (SLP) concerning protests over the Kundankulam nuclear power plant in Tamil Nadu. Although the Supreme Court allowed the plant’s commissioning, it issued directions for regular inspections, reports, and due diligence by the DAE, the NPCIL, and Ministry of Environment, Forest, and Climate Change.
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Specific needs
India’s country profile, as published by the World Nuclear Association in September 2024 recognises an in-principle proposed gross increment of 32 GWe in the Indian nuclear energy production capacity. It is evident that this ambitious growth in nuclear energy infrastructure is very capital intensive and requires extremely skilled construction resources due to high-risk physical reactions.
Given the sensitive requirements for nuclear technology, strict and comprehensive legislation is crucial to address these needs and ensure ease of business. The legislative restriction on R&D under the AEA is just one issue, while litigation on the constitutionality of the Civil Liability Law, has been pending before the top court for over 12 years now. These factors only contribute to uncertainty of this ambitious target.
Energy generation capacity has been central to all economic development across the globe after the Industrial Revolution and a commitment to achieving the same through renewable sources makes India’s ambition just as admirable as it is challenging. It will undoubtedly be interesting to see how legislative and policy changes will shape the Indian nuclear energy sector.
Akash Lamba is Senior Associate at SKV Law Offices. Vineet Kumar is Senior Associate at SKV Law Offices. Bharath Gangadharan is a Counsel at SKV Law Offices. The writers have significant experience in dispute resolution and litigation in the energy sector
Published - October 01, 2024 01:36 am IST
