CONSULTING

(US$6.6 billion), 546 to as low as Rs. 330 billion (US$5.5 billion). 547 However, in light of the
experience so far, these costs are likely to go up significantly. Even without accounting for such
escalations, these estimates are already much higher than the Rs. 225 billion currently estimated
for the first two units at Kudankulam. 548
The reason for the cost increase is said to be the Indian nuclear liability law. 549 A section in that
law offers NPCIL the “right of recourse”, i.e., the right to claim compensation from suppliers up to
a maximum of Rs. 15 billion (US$240 million) in the event of an accident involving a nuclear
reactor supplied by a multinational supplier. The amount under question is tiny in comparison
with the cost of, say, the Fukushima accident or the total cost of a nuclear reactor. The latter rather
creates a “moral hazard” for reactor suppliers. 550 Despite the small size of the potential amount to
be paid to NPCIL in the event of an accident, reactor vendors, especially U.S. based companies like
General Electric and Westinghouse, have been opposed to taking on any liability. Successive
administrations in India have been under pressure to find a way to let these vendors avoid liability
and have modified the rules for implementation of the legislation in various ways. 551 Over the
course of 2015, the government set up a domestic insurance pool that would provide coverage in
the event of a nuclear accident. 552 In February 2016, the Indian government ratified the
Convention on Supplementary Compensation for Nuclear Damage, also known as the CSC, but
even that has not satisfied companies like Westinghouse and GE. 553
The liability concern has been one factor that has slowed down plans to import reactors from
AREVA & EDF for the Jaitapur site, and from Westinghouse and GE for the Mithi Virdi and Kovvada
sites respectively. GE, in particular, had earlier ruled out selling a nuclear reactor to India as long
as the liability legislation remains. 554 However, on the Indian side, the prospects for high costs of
power from imported reactors have also been a significant concern.
546 The Hindu, “Kudankulam units 3, 4 cost more than doubles over liability issues”, 3 December 2014, see
http://www.thehindu.com/news/national/kudankulam-units-3-4-cost-more-than-doubles-over-liabilityissues/article6658451.ece,
accessed 2 July 2016.
547 The Times of India, “India, Russia Finally Sign Agreement on Kudankulam 3, 4 Units”, 11 April 2014.
548 MoSPI, “78th Report On Mega Projects (Rs. 1000 Crore and Above)”, November 2015.
549 The Hindu, “Kudankulam units 3, 4 cost more than doubles over liability issues”, 3 December 2014, see
http://www.thehindu.com/news/national/kudankulam-units-3-4-cost-more-than-doubles-over-liabilityissues/article6658451.ece,
accessed 2 July 2016.
550 Suvrat Raju, M. V. Ramana, “Moral hazard of indemnifying suppliers”, The Hindu, 20 August 2010.
551 Suvrat Raju, M. V. Ramana, “Strange Love”, OPEN Magazine, 14 May 2011, see
http://www.openthemagazine.com/article/india/strange-love; and M. V. Ramana, Suvrat Raju, “The strange
love for nuclear energy”, The Hindu, 17 December 2015, see http://www.thehindu.com/opinion/lead/onthe-indiajapan-civil-nuclear-deal/article7996972.ece?homepage=true,
both accessed 2 July 2016.
552 Business Standard, “Indian nuclear insurance pool still in unclear waters (News Analysis)”,
15 December 2015, see http://www.business-standard.com/article/news-ians/indian-nuclear-insurance-poolstill-in-unclear-waters-news-analysis-115121500415_1.html,
accessed 2 July 2016.
553 Stephen Stapczynski, Rajesh Kumar Singh, Natalie Obiko Pearson, “Nuclear Liability Concern Lingers
Despite India Signing Treaty”, Bloomberg, 25 February 2016, see
http://www.bloomberg.com/news/articles/2016-02-25/nuclear-liability-concern-lingers-despite-india-signingtreaty,
accessed 17 June 2016.
554 Frank Jack Daniel, “GE’s Immelt rules out India nuclear investment under current law”, Reuters,
21 September 2015, see http://www.reuters.com/article/us-ge-exim-idUSKCN0RL0X220150921, accessed
17 June 2016.
Mycle Schneider, Antony Froggatt et al. 146 World Nuclear Industry Status Report 2016