Wednesday, August 25, 2010

A Question of Liability

The Civil Nuclear Liability Bill has been a major source of worry for the Government in the last few days and has given the Opposition ample firing power.

However, if you objectively analyse the bill, you find that it tries to strike a balance between two diametrically opposite issues: that of adequate compensation to the victims and fixing liability without a protracted court case(s).

However, in doing this, the bill makes some fundamental mistakes. The most significant of these is the fact that private players have been explicitly banned from operating nuclear power plants. While as a dogma this may seem good, it is disastrous for consumers, private competition alone can lower the bill of nuclear energy that consumers will have to foot; by giving the government a monopoly it has ensured that the dream of a nuclear-powered Indian economy will never materialize.

There is also the liability cap of the supplier. Now, this has been the issue that has been grabbing the headlines. The original cap of Rs. 500 crore is absolutely paltry while the enhanced cap of Rs. 1500 is also a small about if you think of the devastation that a nuclear accident could cause. However, the liability of the operator (the Government) will now be infinite. In effect, we pay for the reactors and also pay if the reactors fail. Heads I win, tails you lose.

But a serious problem in fixing a massive liability to the suppliers is that suppliers simply won't supply! And if they don't supply reactors, where do we get the nuclear power from?

Overall, it is a complex question. Parliament, under its powers, has made several amendments to the bill. Yet these amendments should not be so stiff as to close out the suppliers altogether. Overall, we must have better regulators in India for the power plants and private players must be allowed to participate in operating the plants. These two measures will go a long way in ending the stalemate.

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