Nuclear-push: DAE to indemnify small suppliers from liability

Nuclear-push: DAE to indemnify small suppliers from liability

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In a bid to break the continuing stalemate on nuclear power projects, the Department of Atomic Energy is working to ensure that the smaller suppliers, or those supplying components to the main equipment vendors of a project, are indemnified against any potential liability claims. This comes in the backdrop of an equipment sourcing crunch faced by the state-owned project developer Nuclear Power Corporation (NPCIL) for two of its under-construction indigenous reactor technology-based projects coming up in Gujarat and Rajasthan, with domestic equipment vendors and part-fabricators dragging their feet on supply of components for nuclear power plants citing liability concerns.

Sekhar Basu, secretary, Department of Atomic Energy, said the contentious issue of right to recourse against suppliers could be resolved contractually. “We could put it in writing in the suppliers’ contract that they have no such responsibility in case of an accident,” Basu said on the sidelines of an event here. He also indicated that the Rs 1,500 crore India Nuclear Insurance Pool will be in place shortly.

“The right of recourse issues needs to be settled once and for all… Suppliers for Indian reactors make equipment as per our (design) specifications… We will mention it in the contract that they will have no obligation (in case of any liability) as ultimately it is we (NPCIL) who are designing, fabricating, constructing, commissioning,” Basu said at the Seventh Nuclear Energy Conclave here.


“Indian reactors are designed, fabricated, quality assured, commissioned under our supervision. So, there is no point in calling somebody else a supplier. Because whatever he has supplied and whatever he has made is as per our requirement. So we are responsible for that and this has to come in the document by which we will be doing the purchase or get the item fabricated,” Basu, who is also the Chairman of Atomic Energy Commission, said at the event organised by the India Energy Forum.


The move, which is likely to be incorporated as clause in the contract signed by NPCIL with equipment suppliers, could allay a major concern raised by small equipment suppliers and part-fabricators (those supplying components to an NPCIL vendor), who have been apprehensive about the stringent provisions of the Civil Liability Nuclear Damage(CLND) Act 2010. The Act, which was enacted to ensure a speedy compensation mechanism for victims in case of a nuclear accident, has been singled out by industry as the biggest reason for the stalemate on the engagement between India and the US.

The two provisions in the law that has been cited by equipment suppliers as areas of concern for them pertain to the channelling of the operator’s right of recourse on suppliers — Section 17(b) — and the liability provisions under other laws (Section 46).

Equipment suppliers such as Walchandnagar Industries Ltd. said that the move proposed by the DAE to contractually indemnify part-fabricators should offer enough comfort for domestic companies. Responding to Basu’s proposal, G K Pillai, managing director & CEO of Walchandnagar Industries said that if NPCIL were to spell this out in the contract that it signs with suppliers, “it should offer enough comfort to them”. Pillai, however, said that NPCIL should ideally identify material vendors across the globe, from where all equipment firms can source inputs. “This will ensure uniform quality, which, if left to the choice of the suppliers alone, could have an adverse impact on quality,” he said.

In his remarks, Basu said that for foreign equipment suppliers, the insurance pool should offer adequate comfort to vendors. “On the foreign front, suppliers have to take the insurance of Rs 1,500 crore. I am told for five years it is not much and will be around Rs 50-70 crore. It’s a small fraction in comparison to the cost of the reactors…” he added.

Basu also said the DAE is also looking for cheaper loan option abroad. “The loan component is a bigger problem because whatever amount we are looking for, particularly from the banks, they will not be able to provide us all this amount and Indian lenders will not be able to cover this. We are looking for big loans from the foreign markets. This is possible more for the foreign reactors,” he said.

Reinsurer GIC Re, four government-owned general insurers and a clutch of private general insurers have provided the capacity to insure the risks to the tune of around Rs 1,000 crore and the balance Rs 500 crore capacity has been obtained from the British Nuclear Insurance Pool. All the 21 operating nuclear reactor units in India are owned and operated by the NPCIL are come under the public liability insurance cover.