Having private participation in India’s nuclear energy

• In July 2024, during the Union Budget presentation for FY 2024-25, the Government of India announced ambitious plans to expand the nuclear energy sector by proposing partnerships with the private sector for the development of Bharat Small Reactors (BSR), Bharat Small Modular Reactors (BSMR), and other advanced nuclear technologies.
• This move aligns with India's broader commitment to decarbonizing energy generation and achieving 500 GW of non-fossil fuel-based energy by 2030, as pledged at the COP26 Summit in Glasgow in 2021.

Legal Framework Governing Nuclear Energy

The Atomic Energy Act, 1962:

• The Atomic Energy Act, 1962 (AEA), amended in 1987, vests exclusive control over nuclear energy with the central government, limiting the scope for private sector participation.
• Section 3(a) of the AEA empowers only the government to engage in nuclear energy activities, making private sector involvement in research and development (R&D) and licensing practically non-existent.

Supreme Court Rulings:

• The Supreme Court of India recently upheld these restrictions, dismissing a petition challenging the AEA on grounds that stringent safeguards must govern the exploitation of atomic energy. This ruling reinforces the government's position and further complicates private sector engagement in nuclear energy.

Regulatory Challenges

The Civil Liability for Nuclear Damage Act, 2010:

• The Civil Liability for Nuclear Damage Act, 2010 (CLNDA) addresses compensation for nuclear accidents and has faced legal challenges questioning its constitutionality. Ongoing litigation adds to the regulatory uncertainty, leaving private investors hesitant about entering the nuclear energy sector.

Concerns Over Regulatory Independence:

• While the Atomic Energy Regulatory Board (AERB) oversees radioactive technology, concerns about its lack of independence persist. Efforts to enhance the regulatory framework, such as the Nuclear Safety Regulatory Authority Bill 2011, have not been enacted, leaving significant gaps in oversight.

Recent Developments and Potential Reforms

Government Initiatives to Involve Private Sector:

• The government's move to involve the private sector in nuclear energy is not without precedent. Last year, the DAE and NITI Aayog released a report advocating for a Small Modular Reactors (SMRs) regulatory framework and a clear liability framework to enable private participation. While private entities have historically been involved in infrastructure development for nuclear plants, research and reactor operation have remained firmly under government control.

Need for Legislative Changes:

• For private sector participation to be realized, significant changes would need to be made to the AEA. The current restrictions on R&D must be lifted to allow for innovation and collaboration with private firms.

Proposed Public-Private Partnership Model

Structure of Partnerships:

• A potential model for private sector involvement could be through public-private partnerships, where the government maintains majority ownership (at least 51%) of nuclear plants. This structure could attract private capital while ensuring accountability remains with the government.

Ensuring Transparency and Accountability:

• Entities with a majority government stake would be subject to the Right to Information Act (RTI), ensuring transparency. This framework would require public disclosures and responses to inquiries, thereby enhancing public accountability.

Liability Standards and Safety Concerns

Historical Context of Nuclear Disasters:

• The Chernobyl (1986) and Fukushima (2011) disasters underscore the risks inherent in nuclear energy, highlighting the importance of strict safeguards and clear liability frameworks.

Current Liability Framework:

• In India, the CLNDA aims to provide compensation for nuclear disasters through no-fault liability for operators. However, its constitutionality is under challenge, creating uncertainty for potential investors concerned about liability risks.

Financing and Future Outlook

Investment Requirements:

• India's nuclear energy expansion will require substantial investments, with estimates suggesting that $26 billion will be needed to meet targets for BSR and BSMR projects. The NITI Aayog report emphasizes the importance of creating a conducive regulatory environment for private sector investment, particularly in the R&D and construction phases of nuclear projects.

Ongoing Legal Challenges:

• The ongoing litigation regarding the CLNDA and other regulatory issues contribute to uncertainty around private investments. Addressing these challenges is crucial for attracting capital into the nuclear energy sector.

Conclusion:

• India's nuclear energy goals are essential for its energy security and decarbonization objectives. Achieving these will require significant legislative reforms, particularly concerning the AEA and the AERB.