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Tuesday, July 17, 2018

India suggests liability insurance rate chart for Kudankulam 3,4

As a result,both foreign and local suppliers are worried about the amount they would have to pay in case of a disaster.

Written by PranabDhalSamanta | New Delhi | Published: October 18, 2013 2:11:25 am

Keen on sealing the agreement for two more nuclear reactors in Kudankulam during Prime Minister Manmohan Singh’s visit to Russia next week,India has suggested a way to quantify the insurance risk amount for Russian suppliers to try and cross the civil nuclear liability roadblock that has held up the deal.

While Moscow’s response confirming this is still awaited,sources said New Delhi is hopeful the response will be positive and the agreement can be firmed up this time.

Essentially,India has asked the government-owned General Insurance Corporation (GIC) to work with the Department of Atomic Energy and come up with an insurance rate chart of sorts which would put a liability amount against every supplier item for a stipulated timeframe. The amount and time period would depend on the item in question.

This commitment,sources said,is an attempt to answer Russia’s key question about how much a supplier would have to pay in case of a disaster. The problem with India’s Liability Act is that while providing the operator a right to recourse to the supplier through Article 17 (b),which extends this right even if such a clause is not mentioned in the contract,it does not specify a way to calculate the amount.

As a result,both foreign and local suppliers are worried about the amount they would have to pay in case of a disaster. While the rules of the Civil Liability for Nuclear Damage Act later specified that any liability has to be time-barred just like a guarantee period,the amounts were not mentioned.

Not only will GIC now undertake this exercise,it will also offer insurance to these companies based on that chart. This would mean the government itself would end up providing the risk cover through a state-owned insurance company but sources added suppliers were free to take insurance from other insurers too. While there is not much on offer in terms of both product and experience on nuclear liability in the international insurance market,state-owned foreign suppliers get sovereign support.

Regardless of the final arrangement,sources conceded that a higher risk cover cost would eventually mean a jump in the per unit cost of nuclear power and that may have to be passed on to the supplier unless subsidised by the government.

In the case of Kudankulam 3 and 4,the estimated cost is around Rs 6 per kWh . While this is still negotiable,it is almost double of what Indian consumers now pay.

The impact of this on US companies such as Westinghouse,which plans to set up a plant in Gujarat,would be even more as sovereign guarantee is not an option for them. Their upper limit cost is quoted at Rs 12.19 per kWh. The industry fear is all of this may just make nuclear power both less viable and unattractive as a business venture in the long run.

India and Russia have been negotiating this agreement for a while and matters got complicated after the Cabinet Committee on Security decided that the liability law will have to apply on the two new reactors.

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