Finding the Silver Lining in the Bhopal Verdict

You may wonder how anything as shameful as the recent Bhopal verdict can have a silver lining.

25 years after the world’s most ghastly industrial accident, an Indian court this month charged seven people with negligence, fined them $2,200 each and sentenced them to two years in prison. The convicted are now out on bail.

Where is the good news you ask?

The verdict (coupled with the ongoing Gulf oil spill) has put an uncomfortable spotlight on the Indian government’s efforts to pass a civil nuclear liability law. The controversial law is a requirement if India hopes to get American companies to build nuclear reactors in the country. The furor from the verdict is forcing the government to make much needed changes to the bill (and back away from provisions that would have weakened it.)

In an ironic twist of fate, the ghost of Bhopal is now ensuring that this time around, the government gets it right.

The bill

What happens if there is a nuclear accident? Who is liable to compensate victims for loss of life, limb or property resulting from such a mass tragedy? Should it be the supplier of the equipment, the operator of the plant or the government?

The Civil Nuclear Liability Bill allows India to have a legal framework to resolve these questions.  India is one of only two nuclear powers (the other being Pakistan) without such a nuclear liability statute in place.

The bill, in accordance with international nuclear practices, limits the liability of any event to the the operator of the facility – in this case, the state-run Nuclear Power Corporation of India Limited (NPCL). This means that victims will not be allowed to sue international nuclear vendors for possible damages.

Beyond the liability issue, what has really earned the ire of activists is the compensation cap for any damages involving a nuclear accident. The bill caps the responsibility of Indian nuclear operators (the state-run NPCL) for damages at $100 million:

“If offsite damages exceeded $100 million, Indian taxpayers would then pay out the next $400 million to cover these damages before any injured Indian could gain access to roughly another $100 million in coverage in an international nuclear insurance pool.”

Supporters and critics

The law has its share of important backers. India’s civilian nuclear energy market, potentially worth about $150 billion dollars, is a tremendous business opportunity for both Indian and foreign companies. There is also considerable support from India’s business community, which sees nuclear power as being essential to solving India’s erratic power supply problems. The Indian government, which has portrayed the nuclear deal as imperative to meeting the country’s growing energy demand, is hoping the law will lead to improved relations with the U.S.

Unfortunately for the government, the bill also has environmental groups and opposition parties crying foul. Critics allege that the government is compromising the well being of its citizens to curry favor with foreign corporations and the US government. Chief among their complaints are the provisions in the bill that absolve suppliers of liability and limit compensation to $450 million per accident.

Is the government opening the doors to another Bhopal in its eagerness to appease corporate interests? Or are the activists’ dire warnings too far fetched to take seriously?

Desperate for energy

If there is one issue no one is disagreeing on, it is that India faces an acute energy shortage that will only get worse.  The Finance Ministry estimates that India produces 10 percent less electricity than it needs. An op-ed in the Deccan Chronicle characterized India’s power woes this way:

“Should we make up our minds to catch up with China’s present — not future — rate of consumption of electricity per head in, say, the next 20 years, we would have to triple our production. This would require building up and making operational at least one major power station every month over that period”

The country will have to make use of every energy source it can get, and nuclear energy presents an attractive alternative to the more ubiquitous dirty coal. The chief of the country’s nuclear body estimates that nuclear power could end up supplying 50 percent of the country’s energy needs by 2050.

Do we need a bill?

The specter of Bhopal continues to haunt the country, with the understanding that a nuclear accident could be more deadly. 25 years later, Bhopal is still a raw wound that epitomizes government indifference and corporate neglect. This is why India cannot pursue nuclear energy without first resolving all the “what-ifs” and “hows” in the event of an accident. A nuclear liability bill will help the country address the sticky questions on who compensates victims and by how much, without leaving it to the vagaries of India’s overburdened court system.

What of the charge that America is the only country insisting on such a law before it allows its companies to enter the Indian market, while France and Russia have been perfectly willing to build reactors in India without any such conditions? As pointed out in this highly detailed blog on the issue, a uniform law applicable to all parties is better for victims seeking compensation than simply relying on bilateral treaty guarantees. According to the author:

“ [in the event of an accident]….it would be naive to expect French or Russian companies to simply roll over, accept huge liabilities and fork over any compensation we demand. Their governments will surely step in and ask for an agreement in line with international practice which almost universally shields suppliers from liabilities and India, faced with pressure from a ‘friendly’ government with veto power in the U.N. Security Council, will have limited room to maneuver. Rather than go for bilateral treaty arrangements which may be uneven and contain clauses hidden from the public, it might make things more straightforward and transparent to have a uniform law applying to all parties.”

There is considerable debate on whether liability should be extended to the supplier of nuclear technology. The Hindu’s Siddharth Varadarajan, who finds fault with the entire international regime on civil nuclear liability, convincingly argues that “excluding the supplier, channelling liability for a nuclear accident to the operator and capping this liability” leads to “underinvestment in safety.”  As true as this may be, the point remains that excluding the supplier from liability is a staple feature of the international civil nuclear regime. Right or wrong, without that provision, no foreign (or domestic) supplier will agree to building reactors in India. Even countries like France and Russia will push to shield their suppliers from liability if an accident occurs.

The bottom line is that while the system may be flawed and biased to suit the nuclear lobby, India has to work within this system if it hopes to build a viable nuclear power industry.

Poor handling

Given the need for such a uniform law, the Indian Government has done a shoddy job of communicating its salient points to the public. Instead of assuring the public that, unlike Bhopal, this law will help potential victims get speedy access to compensation, the government has only added to the confusion.

In a move that can only be described as mind-boggling, the government recently attempted to pass amendments to the bill that sought to remove all liability from the supplier, even if the accident resulted from a willful act or gross negligence on the part of the supplier. There were reports that the US had lobbied hard to remove this clause from the bill. Most likely, these amendments would have  passed relatively unnoticed, except these were introduced in the wake of the Bhopal verdict.

The move caused an uproar among the opposition parties and activists. The government quickly backtracked, calling the amendment a “mistake.” This foolhardy attempt to dilute the bill has further inflamed the suspicions of the public and weakened the public case of the government.

Another sticking point is the meager compensation limit, which is extremely low compared to international standards. The bill provides for a total cap of $450 million per accident. A critic of the bill points out –

“By comparison, the full costs of the world’s most famous nuclear accident –Chernobyl -has been pegged at well over $100 billion. Even the cleanup at Pennsylvania’s Three Mile Island cost roughly $1 billion.”

The US limits liability from a nuclear accident at $11 billion; Japan and China are “in the process of raising the caps in their domestic legislation above $1 billion.” In an op-ed, an expert laments that the “$110 million cap for the operator, or even higher $450 million total cap, would not cover even one-tenth of one paisa per rupee of damage in a worst case accident.”

The low cap amounts have critics asking if “an Indian life is worth only one one-hundredth of an American life?” Even the Bhopal tragedy settlement, negotiated 20 years ago, was $470 million. What made the government think a $450 million cap would be adequate in the event of a nuclear accident?

Damage control

The outrage over the Bhopal verdict has pushed the government into damage control mode. Besides backpedaling on the amendment discussed above, there are now indications that the cap may be raised to somewhere between $750 million to $1 billion. Experts believe that more changes may be needed to make the law palatable to the public. Regardless of the constraints of having to operate within the nuclear liability regime, the least the government can do is ensure that its citizens are afforded the same protections received by their American and European counterparts.

India’s rapid growth and energy needs make nuclear power a vital component of its energy mix. Ultimately, given the stakes involved, I don’t doubt that the country will pass this law. It is regrettable though that it has taken the memory of the world’s worst industrial accident to force the government’s hand to make the necessary changes to this flawed bill.