The SHANTI Act and India’s Nuclear Liability Reforms

Source: The post “The SHANTI Act and India’s Nuclear Liability Reforms” has been created, based on “A case against the SHANTI Act | Explained” published in “The Hindu” on  14th February 2026.

UPSC Syllabus: GS Paper-3- Science and Technology

Context: The SHANTI Act introduces major reforms in India’s nuclear power sector by allowing private participation and modifying liability provisions under the Civil Liability for Nuclear Damage Act. While the Act aims to increase nuclear capacity and attract investment, it has raised serious concerns regarding safety, accountability, and victim compensation.

Key Features of the SHANTI Act

1. The Act allows private companies to operate nuclear power plants, thereby ending the Union government’s monopoly in nuclear plant operations.
2. The Act indemnifies nuclear suppliers by shifting liability entirely to operators, even if defective equipment supplied by vendors causes an accident.
3. The Act removes the operator’s “right of recourse,” which earlier allowed operators to sue suppliers responsible for faulty equipment.
4. The Act caps operator liability between ₹100 crore and ₹3,000 crore depending on plant size and caps total liability, including government liability, at 300 million SDR (about ₹3,900 crore).
5. The Act removes Clause 46 of the CLNDA, which earlier allowed victims to seek remedies under other civil or criminal laws.
6. The Act provides statutory backing to the Atomic Energy Regulatory Board but restricts its independence because appointments are influenced by the Atomic Energy Commission.

Rationale and Critique of Supplier Indemnity

1. The government argues that supplier indemnity is necessary to attract foreign suppliers who were reluctant to enter India due to strict liability provisions.
2. International pressure also played a role, as provisions in the National Defense Authorization Act encouraged India to align its nuclear liability regime with global norms.
3. However, historical nuclear accidents show that supplier design defects often contributed significantly.
4. The accident at the Fukushima Daiichi Nuclear Power Plant revealed containment design flaws.
5. The disaster at the Chernobyl Nuclear Power Plant was linked to reactor design weaknesses.
6. The accident at the Three Mile Island Nuclear Generating Station involved control room design issues.
7. Therefore, supplier indemnity reduces accountability despite evidence of supplier responsibility in past accidents.

Liability Caps and the Risk of Moral Hazard

1. Capping liability creates moral hazard because firms protected from financial consequences may reduce investments in safety.
2. The liability cap of about ₹3,900 crore is extremely small compared to actual accident costs.
3. The Fukushima disaster is estimated to cost about ₹46 lakh crore, and the Chernobyl disaster caused losses of around ₹21 lakh crore.
4. Because compensation would cover only a small portion of real damages, victims may bear losses themselves.
5. The Act also indemnifies operators for accidents caused by natural disasters, weakening India’s earlier principle of absolute liability for hazardous industries.

Significance of Nuclear Energy in India

1. Nuclear power contributes only about 3% of India’s electricity generation.
2. India’s target of 10 GW by 2000 resulted in only 2.86 GW of installed capacity.
3. India’s target of 20 GW by 2020 resulted in only 6.78 GW of capacity.
4. These shortfalls were caused by high capital costs, technological delays, safety concerns, and public opposition.
5. Small modular reactors are still experimental and may be more expensive per unit of power.
6. Therefore, the new target of 100 GW by 2047 appears difficult to achieve.

Challenges Posed by the SHANTI Act

1. The Act may weaken nuclear safety because supplier indemnity reduces accountability for defective reactor designs and equipment.
2. The Act may reduce compensation for victims because liability caps are far below realistic accident damage estimates.
3. The Act may create regulatory capture because the Atomic Energy Regulatory Board lacks full independence from the Atomic Energy Commission.
4. The Act may increase public opposition to nuclear projects because communities fear inadequate compensation in case of accidents.
5. The Act may discourage safety innovation because companies facing limited liability have fewer incentives to invest in advanced safety technologies.
6. The Act may lead to fiscal burden on the government because taxpayers may ultimately bear costs beyond liability caps.
7. The Act may not significantly increase nuclear capacity because structural problems like high costs, land acquisition issues, and technological dependence remain unresolved.

Economic Implications

1. Nuclear projects create large commercial opportunities for private firms and multinational suppliers.
2. The Act ensures companies can profit from nuclear projects while facing limited liability in case of accidents.
3. Weak regulatory oversight may also lead to cost overruns and inefficient project execution.

Way Forward

1. The government should restore supplier liability in cases involving defective designs.
2. The liability cap should be increased and linked to realistic accident cost estimates.
3. The independence of the nuclear regulator should be strengthened.
4. Transparent safety audits and public disclosure of risks should be ensured.
5. Nuclear expansion should be balanced with renewable energy development.

Conclusion: The SHANTI Act aims to expand nuclear energy and attract investment, but its provisions on supplier indemnity and liability caps create safety, accountability, and compensation concerns. A balanced policy that prioritises public safety, regulatory independence, and realistic energy planning is essential for sustainable nuclear development.

Question: Critically examine the SHANTI Act in the context of nuclear liability, safety regulation, and India’s energy policy. Does capping liability create moral hazard?

Source: The Hindu