Parliamentary Standing Committee proposes major dilution of nuclear liability Bill

Their hand-wringing and finger-pointing over Union Carbide now behind them, Congress and BJP legislators came together on Tuesday to recommend modification of the proposed law on civil nuclear liability to let foreign suppliers of equipment off the hook for any accident caused by their negligence.

In its report submitted to Parliament on Tuesday, the Standing Committee on Science & Technology suggested a change in the nuclear liability Bill, making the recovery of damages from a supplier — even in the event of gross negligence — contingent upon his prior acceptance of liability in a written contract. This is a major dilution of the existing provision.

The draft Bill makes the operator of a nuclear facility wholly liable for any damage stemming from an accident. As it stands, Clause 17 allows him to exercise a right of recourse under three circumstances: (a) where it is expressly provided for in a contract in writing; (b) where the accident results from the gross or wilful negligence of the supplier or his employees; or (c) where an individual intentionally causes the accident.

Citing the legal difficulty in establishing the culpability for negligence, the standing committee has recommended expanding the scope of 17 (b) to include accidents caused by “latent or patent defect, supply of sub-standard material, defective equipment or services.” But it has made this contingent on the written contract between operator and supplier expressly providing for these eventualities. “The Committee … recommends that Clause 17(a) may end with the word ‘and',” the report says, adding “that the operator must secure his interest through appropriate provisions in the contract with the supplier.”

The report was adopted by all members of the committee, barring two Left MPs who submitted dissent notes, protesting this effective dilution of 17(b).

The Hindu first reported the U.S. nuclear industry's unhappiness with the original text of 17(b) on April 1, 2010. In June, this newspaper highlighted the government's surreptitious attempt to delete the sub-clause even as the standing committee was considering the Bill. In the ensuing uproar, the Department of Atomic Energy backed off. But if the parliamentary panel's recommendation is incorporated — the Cabinet is to clear the Bill's final version on Thursday and the House may vote on it next week — the suppliers would have had their way.

Left MPs say the insertion of the word “and” after 17(a) was clearly an afterthought as a new sheet was inserted into the printed report of the committee to accommodate the change.

The reason for this last minute modification is presumably the September 2008 promise the Manmohan Singh government made to the U.S. to “take all steps necessary to adhere to the Convention on Supplementary Compensation for Nuclear Damage (CSC).” The U.S. wants India in it because Indian victims of an accident would then be barred from filing damage claims in U.S. courts in the event of an accident caused by American-supplied equipment.

The CSC limits the operator's right of recourse essentially to what his contract with the supplier provides for. Despite this, Indian officials, aware of the link between liability and safety, included supplier negligence as a standalone ground. But in the face of U.S. pressure, the government is now trying to retrofit the Bill to make it CSC compliant.

Globally, South Korea and Hungary provide the operators with a right of recourse against the suppliers in the event of gross negligence, regardless of whether or not the contract provides for it or not. Even with a trusted friend like Russia, India is having a tough time including a right of recourse in the contract. That is why the Bill envisaged explicitly giving the operator the right in the event of the supplier's gross negligence.