Subject: Economics

Why in the News

A three judge Bench of the Supreme Court issued notice to the Union government and the Atomic Energy Regulatory Board (AERB) on whether the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act, 2025 can bar constitutional courts from awarding fair compensation to victims of a nuclear accident. The Act caps operator and government liability and exempts suppliers, which sets a statutory ceiling against the constitutional power to award damages for a legal wrong. The Bench also asked whether Section 17(4), which lets the government appoint the AERB Chairperson and Members, creates a conflict of interest.

What is the SHANTI Act, 2025?

1. About: The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act, 2025 is the statute that replaced the Civil Liability for Nuclear Damage Act, 2010 as the law governing liability for nuclear damage in India.
2. Core function: It fixes who pays for a nuclear accident, how much they pay, and the outer financial limit of that obligation.
3. Operator ceiling: Liability of the largest plant operator in India is capped at Rs 3,000 crore.
4. Government residual liability: The Union government’s residual liability is capped at 300 million Special Drawing Rights, stated in the proceedings as about Rs 4,500 crore.
5. Supplier position: Suppliers, manufacturers and similar entities are exempted from liability under the Act.
6. Regulatory provision: Section 17(4) vests in the government the power to appoint the Chairperson and Members of the AERB.

What are Special Drawing Rights (SDRs)?

1. About: Special Drawing Rights are an international reserve asset created by the International Monetary Fund (IMF), whose value is set by a basket of major currencies.
2. Use here: Nuclear liability ceilings are expressed in SDRs because international nuclear liability conventions use the unit, which keeps the ceiling insulated from movement in any single national currency.

What is the doctrine of absolute liability?

1. About: Absolute liability holds an enterprise carrying on a hazardous activity fully liable for harm caused by that activity, with no exceptions and no ceiling on the amount.
2. Origin: The Supreme Court laid it down in the oleum gas leak case, M.C. Mehta v Union of India (1987), rejecting the older English rule that allowed defences such as an act of a stranger.
3. Relevance to the case: The petitioners argue that capping the liability of a nuclear operator directly contradicts this settled principle.

What is channelling of liability?

1. About: Channelling means directing all legal liability for a nuclear accident to one named party, the operator, so that victims sue a single identified entity instead of tracing fault across the supply chain.
2. The trade off: Channelling gives victims a quick and certain defendant, and it simultaneously insulates equipment suppliers from any claim for a defective part.

Who is the Atomic Energy Regulatory Board (AERB)?

1. About: The AERB is the national regulator for radiation and nuclear safety, constituted in 1983 under the powers of the Atomic Energy Act, 1962.
2. Mandate: It frames safety codes, licenses nuclear installations and enforces radiation safety across nuclear and non nuclear users of radioactive material.
3. Structural feature: It is a body created by executive notification rather than by a standalone statute, and it reports to the Atomic Energy Commission.

What exactly did the Supreme Court ask?

1. The compensation question: The Bench asked whether the statutory thresholds in the SHANTI Act preclude constitutional courts from determining a fair and just compensation after a nuclear mishap.
2. The reasoning offered: The Chief Justice of India observed that a constitutional court can always grant suitable compensation against a legal tort, and that a cap imposed by Parliament does not by itself bar the courts.
3. The regulator question: The Bench separately asked whether the power under Section 17(4) to appoint the AERB Chairperson and Members creates a conflict of interest.
4. Parties noticed: Notice was issued to the Union government and the AERB on both issues.
5. The petition: The challenge is to the provisions limiting the liability of operators, suppliers and manufacturers of nuclear installations.

Why do the petitioners say the caps are inadequate?

1. The Chernobyl comparison: The loss from the Chernobyl nuclear disaster has been estimated at between $235 billion and $700 billion.
2. The Fukushima comparison: Cleanup costs at the Fukushima Daiichi nuclear power plant accident of 2011 in Japan have been estimated at approximately $400 billion to $445 billion.
3. The mismatch: Against these magnitudes, the Act caps the largest Indian operator’s liability at Rs 3,000 crore.
4. The residual cap: The government’s residual liability of 300 million Special Drawing Rights was described as ensuring that victims of death, injury or property damage cannot recover even a small fraction of actual losses.
5. The supplier exemption: Exempting suppliers from any liability is argued to encourage manufacturers and suppliers to maximise profit without bearing accident risk.

How does a liability cap change operator behaviour?

1. The moral hazard argument: A known ceiling converts an unlimited risk into a budgeted cost, so the incentive to spend beyond that ceiling on safety falls away.
2. The submission made: Petitioners argued that unless the court states that the liability of operators, suppliers and the government will be judicially determined regardless of the cap, operators and suppliers will cut corners that endanger lives.
3. The precedent invoked: Indian law has held that a person running a hazardous industry bears absolute and unlimited liability for an accident arising from it.
4. The claimed violation: Petitioners submitted that this principle has been clearly violated by the statutory ceiling.
5. Concentration of exposure: With suppliers exempt and the operator capped, the residual cost of a large accident falls on the exchequer and on victims.

Why is the regulator’s independence in question?

1. Appointment power: Section 17(4) gives the government the power to appoint the Chairperson and Members of the AERB, and the government is also the promoter of nuclear power in India.
2. Operator and regulator overlap: The AERB itself has a role connected to nuclear plants while also playing a significant role in regulating them.
3. International benchmark: Petitioners submitted that this arrangement violates the principle of independence of the regulatory body laid down in international conventions.
4. Long standing criticism: The absence of a statutorily independent nuclear regulator has been flagged in India for over a decade, including by the Comptroller and Auditor General.
5. Consequence: A regulator dependent on the promoter for appointments has weaker authority to halt or penalise a plant it supervises.

Does a liability cap serve investment or does it shift risk to victims?

1. The investment rationale: The court observed that the limit may exist only to make the nuclear project more attractive to foreign investors.
2. The counter position: Petitioners argued that investment should not come at the cost of the safety of thousands of lives.
3. The design logic of caps: Nuclear vendors demand a liability ceiling because unlimited exposure makes an insurance market for the risk impossible to build.
4. The distributional effect: A cap does not reduce the cost of an accident, it decides who absorbs the part of the cost above the ceiling.
5. The constitutional question this raises: The dispute is whether Parliament can, by fixing a financial ceiling, foreclose the remedy a constitutional court can grant under Article 32 or Article 226.

What alternative did the petitioners place before the court?

1. Solar potential: The government’s own assessment puts India’s solar power potential at 3,343 gigawatts (GW) using 6 per cent of wasteland.
2. Scale comparison: That potential is 14 times India’s peak power demand of 256 GW.
3. Build time: Solar capacity can be built in about three months, against the multi year construction cycle of a nuclear plant.
4. Cost comparison: The per unit cost of solar power was stated as one fifth that of nuclear energy.
5. Risk comparison: Solar generation carries no comparable accident hazard, so it raises no liability question at all.

Challenges to the SHANTI Act, 2025 framework

1. Insurance market depth: The Indian Nuclear Insurance Pool has limited capacity, so even the capped liability may not be fully insurable domestically. e.g. the pool set up in 2015 was capitalised at only about Rs 1,500 crore at inception.
2. Supplier exemption and quality control: Removing supplier liability weakens the commercial incentive to guarantee component quality. e.g. the supplier recourse clause of the 2010 law was the reason foreign vendors stayed away from Jaitapur and Kovvada for over a decade.
3. Claims administration capacity: A nuclear claims process needs medical registries and long term follow up that India has struggled to sustain. e.g. Bhopal gas leak claims took decades of adjudication and revision of the settlement figure.
4. Absence of a statutory regulator: The AERB derives authority from executive notification rather than its own Act. e.g. the Nuclear Safety Regulatory Authority Bill, 2011 lapsed and was never re enacted.
5. Land acquisition and local consent: New reactor sites face sustained local opposition that liability caps do not address. e.g. the protests at Kudankulam delayed commissioning of the first unit by several years.
6. Radioactive waste management: India has no operating deep geological repository for high level waste. e.g. spent fuel from operating reactors is stored on site in pools and in away from reactor storage facilities.
7. Private entry and accountability: Opening the sector to private operators multiplies the number of entities whose safety culture the regulator must supervise. e.g. the sector so far has been run almost entirely by the Nuclear Power Corporation of India Limited and its joint ventures.

Conclusion

The dispute is whether a statutory financial ceiling can displace the constitutional power of a court to award compensation for a legal wrong. The Act does not reduce the cost of a nuclear accident, it decides who bears the part of that cost above the ceiling, and at present that is the victim and the exchequer. The measure has reached the stage of an enacted and operating law facing a constitutional challenge, having already replaced the Civil Liability for Nuclear Damage Act, 2010. The next milestone is the response of the Union government and the AERB to the notice issued on the compensation and Section 17(4) questions.

Nuclear Energy in India

1. About: Nuclear energy is generated by fission of heavy nuclei such as uranium 235 and plutonium 239, releasing heat that raises steam to drive a turbine.
2. Three stage programme: India follows a three stage programme designed by the founder of its atomic energy programme, moving from pressurised heavy water reactors, to fast breeder reactors, to thorium based reactors.
3. Resource logic: The design exists because India has modest uranium reserves and among the world’s largest thorium reserves, concentrated in the monazite sands of Kerala, Tamil Nadu and Odisha.
4. Installed base: India operates around 24 nuclear power reactors with an installed capacity of about 8.18 GW, contributing roughly 3 per cent of total electricity generation.
5. Stated target: The government has set a target of 100 GW of nuclear capacity by 2047 as part of the energy transition plan.
6. Institutional structure: The Department of Atomic Energy administers the sector, NPCIL builds and operates plants, and the AERB regulates safety.
7. Global position: India is among the few countries operating a closed fuel cycle with reprocessing, and it operates outside the Nuclear Non Proliferation Treaty while holding a safeguards agreement with the International Atomic Energy Agency.

Constitutional and Statutory Framework Governing Nuclear Liability

1. Entry 6 of the Union List: Places atomic energy and mineral resources necessary for its production exclusively with Parliament.
2. Article 21: Guarantees the right to life, read to include a right to compensation for violation caused by a hazardous activity.
3. Article 32: Empowers the Supreme Court to issue writs and award compensation for violation of fundamental rights.
4. Article 226: Gives High Courts a parallel and wider writ power, including the award of compensation in public law.
5. Article 48A and Article 51A(g): Direct the State and citizens respectively to protect and improve the environment.
6. Article 253: Enables Parliament to legislate to implement international conventions, the basis for aligning Indian liability law with the Convention on Supplementary Compensation.
7. Article 246 with Entry 13 of the Union List: Covers participation in international conferences and implementation of decisions taken there.

Laws and Rules Governing Nuclear Energy in India

1. Atomic Energy Act, 1962: Gives the Union exclusive control over atomic minerals, production and use of atomic energy, and the licensing of nuclear installations.
2. Atomic Energy (Radiation Protection) Rules, 2004: Set radiation dose limits and licensing conditions for radiation facilities.
3. Atomic Energy (Factories) Rules, 1996: Govern safety in factories handling radioactive material.
4. Civil Liability for Nuclear Damage Act, 2010: Created a no fault liability regime channelled to the operator, with a right of recourse against the supplier.
5. Section 17(b): Allowed the operator recourse against a supplier for a patent or latent defect, the clause foreign vendors objected to.
6. Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act, 2025: Replaced the 2010 Act, capped operator and government liability and exempted suppliers.
7. Draft rules under the Act: Released by the Department of Atomic Energy for public comment, with the comment window closing on 4 September 2026.
8. Environment (Protection) Act, 1986: Provides the environmental clearance and pollution control regime applicable to nuclear installations.
9. Disaster Management Act, 2005: Places nuclear and radiological emergencies within the national disaster response framework.
10. Convention on Supplementary Compensation for Nuclear Damage: Ratified by India in 2016, providing a tier of international funds after national compensation is exhausted.

Back2Basics: Atomic Energy Regulatory Board (AERB)

1. Governing Act: Constituted under the powers conferred by the Atomic Energy Act, 1962.
2. Year established: 1983, by an executive order of the Government of India.
3. Headquarters: Mumbai.
4. Reporting line: Reports to the Atomic Energy Commission, and its Chairperson is appointed by the government.
5. Jurisdiction: Covers nuclear power plants, research reactors, fuel cycle facilities, and every industrial and medical user of radiation sources in India.
6. Mandate: Frames safety codes and standards, grants consent at each stage from siting to decommissioning, conducts regulatory inspections and enforces compliance.
7. Enforcement powers: Can suspend or cancel authorisation and direct shutdown of a facility that violates safety conditions.

Government Initiatives in the Nuclear Sector

1. Nuclear Energy Mission for Viksit Bharat: Announced with an outlay of about Rs 20,000 crore for research and development of small modular reactors, targeting five indigenously designed reactors by 2033.
2. Bharat Small Reactors: Compact reactors planned for captive use by energy intensive industry, to be set up in partnership with private players on their own land.
3. Three Stage Nuclear Programme: The long term plan to use natural uranium, then plutonium in fast breeder reactors, and finally the domestic thorium reserve.
4. Prototype Fast Breeder Reactor at Kalpakkam: The stage two demonstration project built by Bharatiya Nabhikiya Vidyut Nigam Limited.
5. Joint venture route: ASHVINI, the joint venture of NPCIL and NTPC, was created to add nuclear capacity using public sector balance sheets.
6. Indian Nuclear Insurance Pool: Formed by general insurers with GIC Re to provide insurance cover for operator and supplier liability.
7. Fleet mode construction: Bulk approval of ten pressurised heavy water reactors of 700 MW each to build in series and cut per unit cost.

Key Facts about Nuclear Energy in India

1. First reactor: Apsara, commissioned in 1956 at Trombay, was Asia’s first research reactor.
2. First power station: The Tarapur Atomic Power Station in Maharashtra, commissioned in 1969, is India’s oldest nuclear power plant.
3. Largest station: Kudankulam in Tamil Nadu, built with Russian cooperation, is India’s largest nuclear power station by capacity.
4. Indigenous workhorse: The 700 MW pressurised heavy water reactor, first at Kakrapar in Gujarat, is the indigenous standard design.
5. Fuel type: Indian pressurised heavy water reactors use natural uranium as fuel and heavy water as moderator and coolant.
6. Safeguards status: India signed a safeguards agreement with the International Atomic Energy Agency in 2009 after the civil nuclear cooperation waiver.
7. Sector regulator: AERB, with the Directorate of Radiation Safety in some States handling medical radiation sources.

Challenges in India’s Nuclear Energy Sector

1. Slow capacity addition: Nuclear capacity has grown far slower than the targets repeatedly announced. e.g. installed capacity remains near 8 GW against a 2047 target of 100 GW.
2. Fuel supply constraint: Domestic uranium is limited and of low grade, forcing dependence on imports. e.g. India imports uranium from Kazakhstan, Russia, Canada, France and Uzbekistan under bilateral agreements.
3. Cost and time overruns: Long gestation and heavy civil works push project costs well beyond estimates. e.g. the Prototype Fast Breeder Reactor at Kalpakkam has slipped many years past its original commissioning date.
4. Public opposition and land acquisition: Communities near proposed sites resist acquisition and fear radiation exposure. e.g. the Jaitapur project in Maharashtra has faced sustained local opposition since 2010.
5. Waste management gap: No permanent disposal route exists for high level radioactive waste. e.g. spent fuel remains in interim storage rather than a deep geological repository.
6. Regulatory independence: The safety regulator lacks statutory autonomy from the promoter of the sector. e.g. the Comptroller and Auditor General flagged the AERB’s dependence on the Department of Atomic Energy in a 2012 performance audit.
7. Liability and vendor hesitation: Uncertainty over the liability regime has stalled foreign built projects. e.g. the Kovvada and Jaitapur projects agreed with United States and French vendors have not reached financial close.
8. Human resource pipeline: Reactor operations need specialised health physicists and reactor engineers trained over years. e.g. a fleet mode expansion to 100 GW would require a multiple of the current trained workforce.

Way Forward

1. Enact a statutory nuclear regulator: Replace the executive constituted AERB with an authority created by its own Act, with fixed tenure and financial autonomy.
2. Index and review the liability ceiling: Provide a statutory mechanism to revise the operator and government caps periodically, so the figures do not lose meaning with inflation.
3. Preserve judicial remedy expressly: Clarify that the statutory ceiling governs the no fault claim route and does not oust the writ jurisdiction of constitutional courts.
4. Deepen the insurance pool: Expand the Indian Nuclear Insurance Pool with reinsurance support so the capped liability is genuinely backed by paid capacity.
5. Build a claims administration system: Establish standing medical registries and a claims commissioner framework in advance rather than after an accident.
6. Commit to a waste repository programme: Begin site characterisation for a deep geological repository with a published timeline.
7. Balance the energy mix: Pair nuclear expansion with the far faster and cheaper solar build out, treating nuclear as firm baseload rather than the primary route to the clean energy target.

Matching Previous Year Question

“[2018, GS3, 15 marks] With growing energy needs should India keep on expanding its nuclear energy programme? Discuss the facts and fears associated with nuclear energy.”