Opinion India moves towards unlocking nuclear energy. The hard work begins now

The most consequential change is the restructuring of civil nuclear liability. The Civil Liability for Nuclear Damage Act, 2010, despite its well-intentioned origins in the Bhopal tragedy, had become a threshold obstacle for foreign suppliers. Section 17(b), which permitted operators to seek recourse against suppliers for defective equipment or substandard services, diverged fundamentally from international norms under the Convention on Supplementary Compensation. Neither the CLND Rules nor the government’s FAQs, which lacked statutory force, reassured the American, French and Japanese OEMs whose participation India sought.

The SHANTI Act addresses this. Operator recourse against suppliers now exists only where expressly provided in contract, or where the nuclear incident resulted from intentional acts to cause damage. This aligns India with the international liability architecture and removes the problem that has long troubled potential projects at Kovvada and Jaitapur.

One gap remains: The Act does not define “supplier”. Earlier proposals for a CLND amendment had recommended a statutory definition, distinguishing between those who manufacture and supply systems or components on functional specifications, those who provide design specifications to vendors, and those who provide quality assurance or design services. Such clarity would complete the liability picture and eliminate residual uncertainty about who bears what responsibility through the nuclear supply chain.

Private investors committing capital to long-gestation, capital-intensive and sensitive (from a safety and security perspective) nuclear projects will require high levels of predictability. The Act leaves significant details to rules and regulations, and how these are framed will be crucial to determine whether the reform achieves its objectives.Three areas will benefit from closer attention.

The scope of key terms remains unclear. “Sensitive” activities (which cannot be patented by private parties), matters with “national security implications” (which may be carved out from AERB jurisdiction), and those of a “strategic nature” (which may trigger the creation of separate regulatory bodies).

Without at least indicative definitions or procedures for advance determination, start-ups developing technology, especially small modular reactors (SMRs), will not know whether their innovation efforts will ultimately become the property of the central government. This will choke investment in R&D.

Second, Section 25 permits the constitution of additional regulatory bodies for “strategic” activities. The open-ended nature of this provision creates uncertainty as investors will not know whether their facilities might be subjected to a different, yet-undefined regulatory regime. Circumstances requiring additional oversight could be anticipated and specified in rules, or procedural safeguards could be established before any new bodies assume jurisdiction.

Third, the selection of AERB members is through a committee constituted by the Atomic Energy Commission, which falls under the Department of Atomic Energy. Established Indian regulatory practice, such as that embodied in the Financial Sector Legislative Reforms Commission model, would suggest a search committee comprising independent experts and retired judges alongside government

representatives. Section 17(5) permits rules to prescribe the committee’s procedure. These could specify an AERB composition that promotes structural independence while retaining a right for the central government to approve members from a security perspective.

Section 37 of the SHANTI Act vests pricing authority for nuclear electricity in the central government, explicitly overriding the Electricity Act, 2003. This creates avoidable problems.

Once produced, an electron is an electron. There is no principled reason to treat electricity generated from nuclear plants differently from that generated by any other source. The Electricity Act provides a well-understood framework for tariff determination, open access, captive power, power exchanges, and bilateral contracts, one that has enabled India’s renewable energy explosion. Nuclear power should benefit from this architecture, rather than be excluded from it.

The rationale for central government control possibly lies in nuclear power’s high cost. But this is precisely why administered pricing is not the way to go. Nuclear power is expensive and state discoms, already in precarious financial condition, should not be burdened with mandated procurement of high-cost power.

What will contribute to the scaling and success of India’s nuclear programme is matching the right producers with the right buyers and promoting captive nuclear power generation. Power-hungry data centres and other industries seeking reliable, clean, baseload supply are

natural customers for SMRs. Industrial clusters, SEZs and commercial consumers, including GCCs, are more likely to pay a premium for round-the-clock, non-fossil generation and such demand could sustain larger plants. One of the proposed models for offshore wind, where generators find their own commercial and industrial customers rather than relying on discom offtake, provides a way forward.

These are transactions between willing private parties and there is no policy rationale for central government price intervention here. Long-term stability will come from commercial relationships between producers and consumers who value what nuclear power offers, not from a top-down system of fixed tariffs that insulates generators from the market.

Ideally, this would require legislative amendment to Section 37. Alternatively, a notification could exempt private-to-private transactions from administered pricing. If felt necessary, central government tariff-setting powers could be retained for transactions involving PSUs (including discoms), leaving purely private arrangements to mutual agreement, with grid access on non-discriminatory terms.

India has taken a decisive step toward unlocking nuclear energy’s potential for its development goals. A robust legislative framework is in place. The next phase, involving rulemaking, regulatory design, and tariff policy, will be crucial to its success.

The writer is a founding partner of Trilegal