Feb 17: Nuclear commerce with USA – Profitability without accountability

February 17, 2015

http://www.thehindu.com/opinion/op-ed/comment-profitability-without-accountability/article6898851.ece

Profitability without accountability

M. V. Ramana and Suvrat Raju

In its efforts to promote nuclear commerce with the United States, the
Narendra Modi government has run into a dichotomy that lies at the heart
of this industry. While multinational nuclear suppliers, such as G.E.
and Westinghouse publicly insist that their products are extraordinarily
safe, they are adamant that they will not accept any liability should an
accident occur at one of their reactors. The joint announcement by Mr.
Modi and U.S. President Barack Obama last month raised concerns that the
government would move to effectively indemnify suppliers, contrary to
the interests of potential victims. The list of “frequently asked
questions” (FAQs) on nuclear liability released by the Ministry of
External Affairs on February 8 confirms the suspicion that the Modi
government is trying to reinterpret India’s liability law by executive
fiat in order to protect nuclear vendors.

The government has disingenuously suggested that it achieved the recent
“breakthrough” by establishing an insurance pool to support suppliers.
However, to focus on this arrangement is to miss the wood for the trees
as even a cursory analysis of the economics of nuclear plants shows.

A section in the Indian law called the “right of recourse” allows the
Nuclear Power Corporation of India Ltd. (NPCIL) to claim compensation
from suppliers up to a maximum of Rs.1,500 crore ($240 million). This
pales in comparison with the total cost of the six planned Westinghouse
reactors at Mithi Virdi in Gujarat; estimates from similar plants under
construction in the U.S. suggest that this may be as high as Rs.2.5 lakh
crore. In the U.S., all nuclear plant operators must have third-party
insurance for at least $375 million, and suppliers could easily set
aside a small portion of their profits to do the same for reactors sold
in India.

Problematic principle

What suppliers are worried about is not the amount, but the principle.
More concretely, if the law places some responsibility on suppliers,
then a future Indian government could use this to gain leverage by
forcing them to pay substantially more for a serious disaster. Moreover,
their executives could be held accountable under other civil and
criminal statutes in India. The FAQs released by the government are
meant to reassure nuclear vendors on these counts.

The FAQs claim that the provision allowing the NPCIL a right of recourse
“is to be read … in the context of … the contract between the operator
and supplier.” This goes beyond the law, where the right of recourse
exists independently of a contract.

In 2010, when a parliamentary standing committee suggested such a
linkage, its recommendation was rejected by the Cabinet after a public
outcry. Although the FAQs later state that “a provision that was
expressly excluded from the statute cannot be read into the statute by
interpretation,” this is precisely what the government is doing here.

The FAQs suggest that the government is also committed to the interests
of the public sector NPCIL which “would insist that … contracts
contain provisions that provide for a right of recourse consistent with
Rule 24 of CLND Rules of 2011.” However, this is a cunning sleight of
hand. A central element of these rules is that “the provision for right
of recourse … shall be for the duration of initial license,” which is
usually granted only for five years. In contrast, the promised lifetime
of modern reactors is 60 years, and failure rates tend to increase in
later years. Therefore, linking the right of recourse to a contract is
an attempt to water down supplier liability to a meaningless level.

The FAQs also declare that suppliers cannot be “asked to pay more
compensation in the future … than currently provided under the law.”
However, this ignores the fact that the law itself has a provision for
revising liability, which states that “the Central Government may … from
time to time … specify, by notification, a higher amount.”

A revision of the cap with time is only natural. Several decades from
now, Rs. 1,500 crore may be worth much less than it is currently.
Therefore, the government’s move to perpetually limit supplier liability
to this nominal amount defies basic economic principles, and implies
that victims will receive a lower compensation, in real terms, for
future accidents.

Finally, the FAQs assert that the liability act, ipso facto, takes away
the rights of victims to sue suppliers even under other laws. If this
interpretation of the law is correct, then it implies that suppliers
cannot be prosecuted even for criminal negligence.

Double standards

This provides a striking example of double standards. Under U.S. law,
suppliers can be held legally responsible for accidents. Consequently,
for decades, the U.S. refused to join any international convention that
would require it to legally indemnify suppliers. When it engineered the
Convention on Supplementary Compensation for Nuclear Damage, it inserted
a “grandfather clause” to ensure that it would not have to alter its own
law. In contrast, the Indian government seems willing to meekly
surrender the rights of its citizens.

It is sometimes argued that India must make these concessions to “repay”
the U.S. for its help in facilitating India’s access to international
nuclear commerce. U.S. policymakers pushed for such access in a
calculated attempt to induce India to support its geostrategic
objectives and to ensure that U.S. companies would have access to the
emerging Indian nuclear market. However, just because the Manmohan Singh
government accepted this Faustian pact — and even cast an unconscionable
vote against Iran at the International Atomic Energy Agency — does not
mean that the country needs to repay this self-serving “favour”
endlessly by bending its laws and spending billions of dollars on U.S.
reactors.

Although the question of liability is somewhat abstruse, it deserves
greater public attention because it serves as a clear lens to understand
the central conflict involved in India’s nuclear expansion: the desire
of nuclear vendors to have profitability without accountability and the
interests of ordinary people who could be potential victims. The
government’s attempt to resolve this conflict in favour of the industry
is a revealing indicator of its priorities.

(M.V. Ramana and Suvrat Raju are physicists with the Coalition for
Nuclear Disarmament and Peace. Ramana is the author of The Power of
Promise: Examining Nuclear Energy in India, 2012.)