India Plans to Limit Nuclear Liability to Boost Trade and Energy
Who Bears the Risk When Things Go Wrong?
April 19, 2025
The Indian government has proposed to ease its nuclear liability laws, driven mostly by commercial and geopolitical goals, according to Reuters. The move involves a shift in how legal responsibility is assigned in the event of a nuclear accident, raising concerns that public interest may have been sidelined.
The existing Civil Nuclear Liability for Damage Act, 2010, was created with the shadow of the Bhopal gas tragedy looming large. That disaster—caused by Union Carbide, a foreign firm—killed over 5,000 people and led to prolonged legal and political fallout. In response, India’s 2010 law gave the operator the right to seek unlimited compensation from suppliers if a reactor failed due to a manufacturing defect.
This placed the burden of accountability squarely on companies supplying critical components, especially foreign vendors. While this legal environment made U.S. suppliers reluctant to enter the Indian market, it was designed to ensure that no foreign firm could walk away from a catastrophic accident without consequences.
The proposed changes now seek to remove that protection, as reported by the newswire.
If passed, the operator’s right to recoup damages from a supplier will be capped at the value of the contract and limited to a time period defined within it. That means if a nuclear component fails years after installation, or if the damage caused exceeds the contract amount, the supplier will no longer be held financially responsible.
In practical terms, this lowers the financial risk for foreign companies but shifts the burden of accident compensation more squarely onto Indian operators—most of which, thus far, are public sector entities like the Nuclear Power Corporation of India Limited (NPCIL).
The government maintains that the responsibility for safety lies primarily with the operator, not the supplier—an arrangement that reflects global norms under conventions like the Convention on Supplementary Compensation for Nuclear Damage. However, the real concern is about who bears the cost when an accident occurs, and for that reason, this model has faced widespread criticism.
Critics argue that this model protects multinational corporations at the cost of justice for victims. The fact that suppliers cannot be held liable, even if a reactor design or component is defective, is seen as shielding them from accountability. They argue that immunity for suppliers could encourage cost-cutting or negligence in design and manufacturing.
A supplier freed from liability may not have the same incentive to ensure the highest safety standards in its manufacturing processes, especially if its responsibility ends with delivery. Operators may still run the plants according to strict protocols, but they now bear more financial risk in the event of a failure. If the operator is a government-run company, that cost—ultimately—will fall on taxpayers.
For ordinary citizens, this raises questions about justice and accountability.
If a catastrophic event were to occur, compensation for victims may be harder to secure, especially if damages exceed the capped amounts or happen after the contract-defined period. Moreover, capping liabilities sends a political signal: that the government is willing to compromise legal protections for its citizens in order to attract foreign investment.
For example, the 2011 accident at the Fukushima Daiichi nuclear plant in Japan was triggered by a tsunami, but a subsequent investigation found serious design flaws and underestimation of risks by the plant operator, Tokyo Electric Power Company (TEPCO), and by suppliers, particularly GE, which had designed the reactor.
Under Japanese law, in line with the global norm, liability was placed solely on the operator (TEPCO). Victims could not sue GE or other foreign suppliers. This legal setup became a point of contention. Critics argued that GE, despite being involved in the reactor’s original design and having known about safety concerns decades earlier, was legally untouchable. Lawsuits were filed in the U.S. by victims seeking to hold GE accountable, but they were dismissed because of jurisdiction and treaty protections.
While Japan paid billions in compensation and decommissioning costs, the suppliers walked away without financial consequences. This outcome was seen by many in India as a cautionary tale and a vindication of the original 2010 Indian law that did allow recourse against suppliers.
From an economic perspective, easing the liability regime could lead to increased foreign participation in India’s nuclear sector. This would help the government meet its ambitious target of increasing nuclear power capacity from the current 6.8 gigawatts to 100 gigawatts by 2047. A larger nuclear energy portfolio could reduce dependence on fossil fuels, lower carbon emissions and expand access to reliable electricity. For millions without stable power supply, especially in rural India, this could improve quality of life and create new economic opportunities.
However, the benefits are long-term and conditional. Private Indian firms like Reliance, Tata, Adani and Vedanta are now being encouraged to enter the nuclear sector, with potential investments of over $5 billion each. The sector was previously restricted to government participation for national security reasons.
The entry of private players could bring in efficiency and capital, but it also raises the stakes for regulatory oversight. A diluted liability law combined with private sector involvement means stricter and independent safety regulation will be critical. Without that, the public carries the risk while companies keep the profit.
There is also a geopolitical angle.
The amendments are seen as key to improving trade ties with the United States. U.S. nuclear firms like General Electric and Westinghouse have stayed out of India due to the liability risks. By aligning with international norms and limiting supplier responsibility, India is hoping to finalise a larger trade deal with the U.S., which could help in areas beyond nuclear energy.
However, making domestic legal standards more favourable to foreign corporations just to gain trade concessions may not sit well with citizens, especially when those standards deal with life-and-death risks. The trade-off, as it stands, appears tilted towards attracting investment at the expense of ensuring justice for those who might suffer if things go wrong.
