India limits liability of nuclear power equipment suppliers

The Indian government has formally announced new rules which cap the liability of nuclear equipment suppliers in case of accidents.

This is a move likely to allay the concerns of companies looking to enter the country’s multi-billion-dollar civilian nuclear power market.

The rules, called Civil Liability for Nuclear Damage Rules 2011, were posted late Wednesday by the Department of Atomic Energy on the website of Nuclear Power Corp. of India Ltd., a state-run company which operates civilian nuclear power plants. The operator of a nuclear power plant cannot make claims against an equipment supplier that “exceed the actual amount of compensation paid by him upto the date of filing such claim,” the government notification said.

The Civil Liability for Nuclear Damage Act 2010 caps the liability of an operator in case of nuclear accidents at INR15 billion. The notification effectively limits the amount and the duration for which claims can be made against a supplier of nuclear power plant equipment, and may facilitate the entry of companies such as GE Hitachi Nuclear Energy and Westinghouse Electric Co. into India.

It will also address concerns of local manufacturers like Larsen & Toubro Ltd. (500510.BY) and other smaller equipment suppliers. According to the new notification, the right of recourse of the nuclear plant operator will be limited to the “duration of initial license issued under the Atomic Energy [Radiation Protection] Rules 2004 or the product liability period.”

The product liability period is the period for which the supplier has contractually agreed to be liable for “patent or latent defects or sub-standard services,” the notification added.