India Inc against supplier liability

India Inc on Tuesday expressed deep reservations over the supplier liability provision -- the contentious Clause 17(b) -- in the Civil Liability for Nuclear Damages Bill, 2010, saying it would seriously hinder nuclear commerce.

Industry chambers Federation of Indian Chambers of Commerce and Industry and Confederation of Indian Industry have both written to the government, stating that the proposed liability provision jeopardises the participation of Indian industry, not only in future programmes, but also in supporting the country's existing 17 nuclear power plants.

This comes at a time when political compulsions have forced the government to go a step further in holding suppliers responsible in case of a nuclear accident. The latest government version of the Bill omits the word 'intent' altogether and is likely to sail through the Lok Sabha when it is discussed on Wednesday afternoon.

By agreeing to drop the word -- thereby erasing the formulation that to be punished in case of a mishap, a supplier has to show 'intent' to cause damage -- and making a supplier liable, the government has taken the edge off the Opposition's criticism of Clause 17(b).

After the series of political consultations on Tuesday, government managers have indicated that the final formulation of the clause would suggest that an operator, after paying compensation to victims, would have the right to seek recompense where "the incident has resulted, as a consequence of an act of a supplier or his employees, to cause nuclear damage, and (that) such act includes supply of equipment or material with patent or latent defects or sub-standard services".

This has left industry bodies like Ficci deeply concerned. In a letter to the Prime Minister, Ficci President Rajan Bharti Mittal argued that distinction had to be made between civil and criminal liability. Operators could sue suppliers for limited criminal liability according to existing laws of the land. But, Mittal said: "Any civil nuclear liability claim on suppliers and service providers beyond their terms of supply, ie, for 60 years' plant life plus claim liability period of 20 years, will make impossible (industry's) participation in future."

CII, too, said no more should be expected from Indian industry than the international liabilities regime. The body warned that between 300 and 400 Indian suppliers and service providers were used to complete each nuclear power plant (both foreign as well as domestic design). "It may not be practical for the operator to have multiple recourse against all such suppliers," CII said.

In a letter to Minister for Science & Technology Prithviraj Chavan, it explained that to protect themselves, suppliers would seek higher insurance. "Globally, there is no insurance coverage available for suppliers in the nuclear business. Further, as insurance cover is available for operators, international liability regimes use the channelling principle to make the operator's liability absolute and exclusive, thus ensuring effective and timely settlement of nuclear damage claims. Given this context, Indian suppliers and sub-suppliers (including  SMEs) will be precluded from conducting business in the nuclear power sector."

The other contingency, CII said, was that foreign suppliers would not be able to participate because of a lack of insurance coverage. When they were permitted to do so, they will pass-on the liability to Indian suppliers. "This will stall the growth of the nuclear manufacturing industry in India, and will be a setback for the government's plan to indigenise maximum supplies for the foreign technology plants," the industry body said.

Operators were equally disappointed. Government-owned Nuclear Power Corporation, the only nuclear power generator in the country, said provisions of Clause 17(b) were neither practical nor implementable. It made a strong argument in favour of three separate legislations: for civil, criminal and product liabilities.

NPCIL, which operates 19 nuclear power reactors with a total installed capacity of 4,560 Mw, clearly indicated that its indigenous programme would be severely impacted as nearly 60-odd component vendors would stop supplies to the company because they would not be willing to take on liability for a period of some 80 years after their contract is executed.

NPCIL, which had put out a release cautioning that no Indian or foreign manufacturer would be able to serve the nuclear power industry, today quietly withdrew it to avoid direct conflict with the Centre. An NPCIL official, who requested anonymity, told Business Standard: "The government should not dilute liability nor bring in new provisions, but restrict the liabilities on an operator. The objective is that victims of a nuclear accident be compensated adequately. The government should not mix civil, product and criminal liabilities."

From the point of view of foreign suppliers, the situation was clear: it was the international liability regime that they would follow and, according to this, suppliers had no liability. Areva, for instance, is currently engaged in negotiations with NPCIL for the supply of two European pressurised reactors of 1,650 MW each in Maharashtra.

Areva Chairman and Managing Director Arthur de Montalembert, said, "Areva, a global company working in many jurisdictions around the world, always respects and abides by existing national and international rules and regulations."