NUCLEAR INSURANCE POOL TO HELP REVIVE STALLED PROJECTS

By Vikas Khanna

India has announced the launch of an insurance pool of Rs. 1,500 crores which should help clear decks for operationalisation of several projects held up for years. The insurance pool is meant to compensate companies, which have bagged the rights to construct reactors in the country, against liability in the event of a nuclear accident. The insurance pool was a mandatory requirement under the Civil Liability for Nuclear Damage Act.  The idea to form the pool was first mooted in 2013 but was caught in a logjam because of differences among stakeholders and various clauses. It is believed that the long-pending Gorakhpur Haryana Anu Vidyut Pariyojna (GHAVP) will finally see the light of day. The then Prime Minister Dr. Manmohan Singh had laid the foundation stone of 2800 megawatt project in Haryana in 2014 at an estimated cost of Rs. 23,500 crores. But the project has been in a limbo since then as tenders did not get matured due to absence of an insurance pool. The launch of the pool should now enable the concerned parties to come forward for the project.

It can now be hoped that the setting up of the insurance pool will also address the concerns of foreign companies wishing to build nuclear power stations in India but were held by a controversial law. The foreign companies were opposed to the Indian nuclear liability law which was passed by parliament in 2010. The law stipulated that the equipment suppliers would be held responsible for an accident, which was a major bone of contention. The firms considered the law to be against the global practice in which the nuclear operator bears responsibility for an accident, and not the equipment providers. This had held back several firms, including GE-Hitachi, Toshiba's Westinghouse Electric Company and France's Areva from proceeding with the construction of reactors. Both GE and Westinghouse have already been allotted land in Gujarat and Andhra Pradesh to begin construction of reactors, but there has been little progress since then. Similarly, Nuclear Power Corporation of India Ltd and the French supplier have been struggling to reach a contract for the past five years to build a plant in Jaitapur. If completed in full, the Jaitapur project would be the world's largest nuclear power station.

The law also strained ties between India and the US after the two countries signed the landmark civil nuclear agreement six years ago. The civil nuclear agreement itself was historic as the US allowed India access to nuclear technology and fuel without giving up its weapons programme. But since then no progress was made.

In this regard, Prime Minister Narendra Modi must be lauded for his efforts for reaching a breakthrough on the nuclear liability issue with the United States when President Barack Obama visited India early this year. Experts believe the deal, which will not only help inflow of billions of dollars in nuclear trade, will also establish an enduring strategic partnership between the two countries.

The India nuclear insurance pool is basically a risk transfer mechanism which is being formed by GIC Re and eleven other non-life insurers from the public sector undertakings in the general insurance business in India.

While creating the pool, the government has made it clear that it will not amend the liability law as an  understanding has been reached with the US recently under which foreign suppliers of equipment for the nuclear reactors cannot be sued by the victims in case of a mishap. With the world’s deadliest industrial accident, the 1984 Bhopal gas tragedy, in mind, Indian parliament was forced to pass the law which sought to prevent a repeat of the battles for compensation. It has been more than three decades since the tragedy struck, Indian families continue to battle for compensation.

The creation of insurance pool is a win win situation for all. It should help meet Prime Minister Narendra Modi’s vision of tripling energy generation from nuclear sector. According to the World Bank and the International Energy Agency, more than 300 million people in India lack access to electricity. This is compared with fewer than three million in China. India needs billions of dollars and foreign nuclear technology and fuel if it has to increase capacity by a planned 14 times over the next two decades. India has set up an ambitious target to generate 62,000 megawatts from nuclear sources. If India has to meet uninterrupted and affordable power, the nuclear power is the only solution.