India rolls out the red carpet for private nuclear firms

India’s nuclear liability law has been a maze since its inception.

When Finance Minister Nirmala Sitharaman presented the first full budget of Modi 3.0 on February 1, 2025, a major policy change on nuclear energy was unmistakably striking. There were three elements to Sitharaman’s announcement. First, intention to amend the Civil Liability for Nuclear Damage Act (CLNDA), 2010, and the Atomic Energy Act (AEA), 1962 to foster greater involvement of the private sector in India’s tryst with nuclear energy. Second, ‘Nuclear Energy Mission for research & development of Small Modular Reactors (SMR) with an outlay of Rs 20,000 crore’ with 5 SMRs (indigenously developed) at least to be operationalised by 2033. Third, generating at least 100 GW nuclear energy by 2047 to aid India’s ‘energy transition efforts’.

100 GW target should be seen as a signal to the private sector

The third element is unrealistic, and the government in all likelihood knows it too. It has taken more than seven decades to get from zero to 8 GW installed nuclear capacity. To scale it up from 8 GW to 100 GW in about two decades would be a mammoth undertaking requiring about $200 billion (taking a conservative estimate of  $2 billion per GW), tens of geologically stable sites with nearby water sources, and a reliable nuclear fuel supply chain.

Rather than an achievable target, the 100 GW goal is intended as an audacious signalling to the private sector. This argument is supported by the other two elements of Sitharam’s speech mentioned earlier: amending CLNDA and the AEA.

The earlier in its existing form has dissuaded private players from investing in India’s nuclear sector given concerns around provisions for supplier liability in case of a nuclear accident. Specifically, concerns stemming from the sub-section (b) of the section 17 of the CLNDA that provides a right of recourse to the operator when ‘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 or sub-standard services’. India’s liability regime has been often cited as a reason for the failure of private investment by American and French companies in India’s civil nuclear programme.

Navigating India’s liability maze 

India’s nuclear liability law has been a maze since its inception and the Modi government made no efforts to streamline the liability regime in its first two terms in power. The CLNDA primarily lays the liability responsibility at the door of the operator (in India’s case, the public sector Nuclear Power Corporation of India Limited) while capping it at Rs 1500 crore. But what happens if the liability from a nuclear accident is more than Rs 1500 crore?

If the Fukushima nuclear accident is any indicator, then the cost would run into billions of dollars: according to a Nikkei Asia report in 2023, Japan has spent about USD 7 billion annually since the accident in 2011. The Indian government says that ‘In case the total liability exceeds Rs 1500 crore, as per Section 7 (1) (a) of the CLND Act, the gap between this and 300 million SDR equivalent rupees will be bridged by the Central Government. Beyond 300 million SDRs equivalent rupees, India will be able to access international funds under the CSC [Convention on Supplementary Compensation for Nuclear Damage].’

Ambiguity about liability rather than quantum is the dealbreaker

Given the relatively limited amount of INR 1500 crore that operators (and in extension suppliers) are liable to, the quantum of liability is not the primary issue with India’s liability regime. There are ambiguities and questions regarding applicability of other Indian laws to the suppliers, mandatory versus contractual nature of the right to recourse, compatibility of liability law with the CSC and a future possibility of the revision of the liability amount by the government. This is despite the Ministry of External Affairs as well as the Department of Atomic Energy issuing detailed FAQs.

While what the amendments to CLNDA would entail is not clear at this moment, they should attempt to streamline the law while not doing away completely with liability of the supplier — this is because, as historical accidents have demonstrated, the supplier's fault has contributed to the accidents.

Signalling through AEA amendment and SMRs

Proposing to amend the AEA is also significant because this law forms the very basis of India’s nuclear establishment. Whether the amendment to AEA for fostering private sector involvement would mean breaking the NPCIL monopoly on operation of nuclear power plants has to be seen.

The announcement on five SMRs by 2033 and an outlay of Rs 20000 crore also appear to be a signalling mechanism to the private sector. This is because of two reasons: first, no allocation — even nominal — has been made towards this in the 2025-26 budget documents. Second, there is a possibility that India will recreate with SMRs something similar to what it experimented with in 2024 when the nuclear establishment invited the private sector to build Bharat small reactors (220 MW version of pressurised heavy water reactors distinct from SMRs). It is not a coincidence that India and France announced plans for developing SMRs during the recently concluded visit of PM Modi to France. If the last few days are any indicator, 2025 is slated to be a year of such non-coincidences aimed at giving a fillip to India’s nuclear industry.