The way forward in opening up civil nuclear energy to private participation

Opening the nuclear energy sector for private participation has been a long-standing demand of the industry since the time of civil nuclear deal between India and the US.

By Romit Dey 

The Government of India (GoI) in the Union Budget of 2025 set out India’s bold vision of having 100 GW of civil nuclear power generating capacity by the year 2047 – up from current generating capacity of 8.8 GW. GoI has also announced creation of a fund of Rs 20,000 crore for research and development of small modular reactors (SMRs) with an aim of having at least five SMRs operational by the year 2033. These policy initiatives are undoubtedly laudable and establishes a clear pathway for the nuclear energy sector in India.

India has achieved approximately 242 GW of non-fossil based fuel production capacity which is approximately 50% of its clean energy target of 500 GW by 2030. India is also now the third largest solar power generator in the world.

Nuclear energy needs to be an essential part of the mix

Notwithstanding the impressive growth of India’s renewable energy, given India’s need for power is projected to increase to 708 GW by 2047, it is a prudent step by the GoI to start incentivizing and developing technologies pertaining to civil nuclear energy. Further, in view of the current geo-political uncertainty and escalating tariff wars between the global south and west, nuclear energy may become a trusted source of stable energy for the country in the up-coming decade.

In the past decade, India has established five nuclear reactors having a capacity of 700-100 MW. India now intends to move towards installation of SMRs which are small reactors having a power capacity of upto 300MW and are modular making it possible for systems and components to be factory assembled and transported as a unit to the location for installation.

Tweaking legislation to meet goals

GoI has also set up a committee to suggest required amendments to the Atomic Energy Act, 1962 (Atomic Energy Act) and the Civil Liability of Nuclear Damages Act, 2010 (CLND Act) with an aim to facilitate an effective private-public partnership in nuclear energy.

Opening the nuclear energy sector for private participation has been a long-standing demand of the industry since the time of civil nuclear deal between India and the US. In addition to the amendments to the Atomic Energy Act and CLND Act, India will also have to amend the exchange control regulations pertaining to foreign direct investment in India (FDI Policy) to allow leading players like Rolls Royce, GE and Hitachi to invest in nuclear energy sector (not limited to technology transfers or supply of parts of nuclear reactors).

Required amendments to the Atomic Energy Act and FDI Policy

Under the Atomic Energy Act, only GoI or ‘Government Companies’ i.e., companies in which GoI holds more than 50% of the shareholding are permitted to own, use and operate atomic/ nuclear energy plants. Consequently, only NTPC Ltd. (NTPC) and Nuclear Power Corporation of India Limited (NPCIL) have been permitted to participate in projects pertaining to nuclear energy infrastructure in India.

Further, under the FDI Policy, foreign direct investment is prohibited in the atomic energy sector. Therefore, opening up of the nuclear energy sector to private players will mean amendments to the Atomic Energy Act to allow companies which are not owned by GoI to build/ operate/ use nuclear reactors. Additionally, given that participation of foreign companies having latest nuclear reactor technologies is essential for the growth of India’s nuclear energy ecosystem, the FDI Policy is required to be amended to allow for foreign equity participation in the nuclear energy sector.

Required amendments to the CLND Act

The CLND Act was enacted to create a domestic law consistent with international regime of nuclear liability principles and to affix liability in relation to trans-boundary damage caused due to any nuclear incident.

The CLND Act affixes the maximum liability in respect of each nuclear incident to be rupee equivalent of three hundred and fifty million (SDRs). The liability of the operator of a nuclear power plant in respect of nuclear reactors having thermal power equal to or above 10 MW is limited to INR 1500 crores. However, the operator has a right to recourse (against other entities involved in the nuclear power plant) (Section 17 of the CLND Act), (a) if such right is provided for in a contract in writing, (b) if the nuclear accident has resulted as a consequence of an act of the supplier (which includes supplier of equipment), or (c) where the nuclear incident has been caused due to intentional act of any person.

The provision of recourse set out in Section 17(b) of the CLND Act has been a cause of concern for a number of private players in the nuclear energy space who see this provision as a manner of extending unlimited liability on the supplier.

The ambit of Section 17(b) is in addition to extent of liability of the suppliers as has been provided for in Convention for Supplementary Compensation for Nuclear Damage. However, India’s position in the past has been that the liability of the supplier as set out Section 17(b) is to record product liability stipulations/ conditions which are common in service contracts and it is open to the parties to the contracts to agree on their extent of their obligations in respect of warranty and indemnity claims.

Many private players in the nuclear energy space have also noted that the term “supplier”, as set out in Rule 24 of Civil Liability For Nuclear Damage Rules, 2011 (Rule 24 pertains to Right of Recourse under Section 17), is of wide import and includes an entity providing design/ blue print of the nuclear plant, any entity manufacturing an equipment or component or providing design services or quality assurance. Thus, an operator can contractually seek recourse under Section 17 against consultants, vendors/ sub-vendors and quality assurance personal who can also be held responsible for a nuclear incident.

Future outlook

It can be noted that in March 2025, the US Department of Energy has granted specific limited authorization to Holtec International to sell its small modular reactor SMR-300 for deployment in India to three companies, namely, Larsen & Toubro, Tata Consulting Engineers and Holtec Asia. SMR-300 uses pressurized water technology (PWR) for its nuclear fission process which is different from Pressured Heavy Water Technology (PHWR) which are used in indigenously developed Bharat Small Modular Reactors (BSMRs) in India.

The action to add additional entities owned by the GoI such as NTPC Ltd., NPCIL to the eligible list of to whom Holtec can sell SMRs have been deferred until the issue of assurances needed by the government of the US from GoI is resolved to the satisfaction of both countries. While this is a seminal event in the road for private participation in the country’s nuclear program, foreign private players may not be enthused to invest in nuclear energy in India till the concerns under the Atomic Energy Act, the CLND Act and the FDI Policy are suitably addressed by GoI through necessary amendments to the aforesaid legislations. Further, given the critical nature of the amendments, the GoI may follow a broad consultative process before introducing the proposed amendments before the houses of the Parliament for approval of the members.

Consistent with how other key sectors were opened for private participation and foreign direct investment in past, minority equity participation with technology transfer may be the first step towards private participation in the nuclear energy sector.

The initial phase of adoption and use of civil nuclear energy may be slow, however given the concentrated efforts of the GoI, it may not be un-reasonable to assume that nuclear energy will contribute a large portion of India’s non-fossil based energy output in the next decade.

(Romit Dey is Partner, AP & Partners.)

Views are personal and do not represent the stand of this publication.