Introduction

India’s commitment to decarbonization, driven by international conventions like the Paris Agreement, the UNFCCC, and the Conference of Parties 29, necessitates a transition from conventional energy sources to cleaner alternatives. While renewable energy sources like wind and solar have become staples to the energy mix of India, nuclear power stands out as a reliable, dispatchable energy source capable of meeting large-scale electricity demands. Unlike intermittent renewable sources of power, nuclear energy has the capability to provide consistent power without the support of additional infrastructure such as energy storage or backup systems.

Regulatory Framework for Nuclear Power in India

The governance framework for nuclear power generation primarily comprises of the Atomic Energy Act, 1962 (Atomic Energy Act), the Civil Liability for Nuclear Damage Act, 2010 (Civil Liability Act), and the export and import controls enforced by the Directorate General of Foreign Trade (DGFT). The Department of Atomic Energy (DAE) has been established under the Atomic Energy Act, with one of its primary functions being the administrative control of Nuclear Power Corporation of India (NPCIL). NPCIL serves as the public sector undertaking responsible for the design, construction, commissioning, and operation of nuclear power reactors. We have set out below a snapshot of the regulatory regime:

i.) Atomic Energy Act, 1962: The Atomic Energy Act grants exclusive control over nuclear resources to the Government of India including control over patents and innovation in this sector, in the interest of public safety and national security. The government is authorised to produce, develop, and utilise nuclear power through authorities or corporations established by it.

The Atomic Energy Act prohibits private sector participation and direct foreign investment in nuclear power generation. Similarly, the mining and disposal of uranium and other material used in nuclear reactors is regulated by the central government through the enforcement of licensing and reporting requirements.

By way of an amendment to the Atomic Energy Act in 2015, joint ventures between the NPCIL and public sector undertakings were permitted to undertake nuclear power generation to increase the viability of nuclear projects, by supplementing the resources of the NPCIL with those of other public sector undertakings.

The Government of India, while presenting the union budget for FY 2025-2026 (Budget), has proposed an amendment to the Atomic Energy Act. The proposed amendment intends to transfer the regulatory power for civil nuclear power generation from the DAE to the Ministry of Power. While the DAE will continue to be responsible for fuel supply and management, the Ministry of Power will be tasked with project implementation, consents, and the management of private sector participants in the sector.

ii.) Civil Liability for Nuclear Damage Act, 2010: The Civil Liability Act provides for monetary compensation for damage caused by nuclear incidents, to be paid by operators of nuclear plants. It also regulates the individual liabilities of operators and suppliers of components used in nuclear plants, by providing operators with a right of indemnification against suppliers for nuclear damage in case such damage was caused as a result of an act or omission of the supplier, and where such right has been expressly provided for in contract.

Under the Civil Liability Act and the Civil Liability for Nuclear Damage Rules, 2011, nuclear operators are required to maintain insurance and financial security to cover their potential liabilities. Insurance for nuclear damage was subsequently extended to suppliers as well, as a part of the India Nuclear Insurance Pool (INIP). The INIP was formed by General Insurance Corporation, India as a risk transfer mechanism for nuclear damage. The total financial capacity of the pool is INR 1,500 crore, which can be availed by nuclear operators and suppliers facing liability.

iii.) DGFT Restrictions: The export and import of nuclear material, i.e., prescribed equipment used in nuclear reactors, technology, and software involved in the operation of nuclear plants, is restricted under the provisions of the Atomic Energy Act. Foreign trade in such items can only be undertaken pursuant to a license granted by the DGFT.

Nuclear material is included within the Special Chemicals, Organisms, Materials, Equipment, and Technologies List (SCOMET List) under India’s Foreign Trade Policy, which signifies that export of specified nuclear material is restricted and is subject to the approval of the central government. The DAE enforces an express prohibition on the export of substances, equipment, and technology used for the development of nuclear explosive devices. Such export is only permitted for specific purposes and is subject to a legally binding undertaking between India and the recipient state, which will specify the terms of transfer and the end-use of the material exported.

Incumbent Challenges to the Nuclear Sector

i.) Regulatory barriers: The Atomic Energy Act only permits NPCIL, its joint ventures, and other state-owned entities to operate nuclear projects in India. Further, the liability regime under the Civil Liability Act has deterred foreign suppliers from participating in Indian markets due to apprehensions of incurring uncapped future liability. and the government also intends to revise the liability regime under the Civil Liability Act. As an initiative to promote new projects, the Ministry of Power is working with state governments to monitor nuclear power projects, in order to expedite land acquisition and expedite the pre-project stages through supervision and follow-up with manufacturers of reactor components.

ii.) Bankability of nuclear power generation projects: Nuclear power generation in India is hindered by the inadequacy of financial resources, due to the high upfront costs involved in the establishment of nuclear power plants and the acquisition of land for this purpose. The NPCIL is required to rely on internal and external financial resources and face heavy interest payments on project components and raw material.

iii.) Resource limitations: The quality of domestically-produced reactors and the lack of reliable access to fuel to operate nuclear power plants is an additional hurdle to nuclear power generation.

Union Budget 2025: Push for Nuclear Power

The Budget introduced the Nuclear Energy Mission (Mission), aiming to achieve 100 GW of nuclear capacity by 2047. An outlay of INR 20,000 crore has been apportioned for the Mission, which has the following initiatives: (i) research and development of indigenous small modular reactors; (ii) amendments to the regulatory framework governing nuclear power, specifically the framework governing nuclear liability, to introduce investments by private players into the sector; and (iii) enhancing the capacities of existing nuclear plants.

The Budget also proposes an amendment to the Atomic Energy Act which will allow private operators to enter the sector. In addition, the government intends to revise the liability regime under the Civil Liability Act, proposing a shared liability structure that reduces risks for private suppliers and nuclear operators.

Way Forward

In addition to the much-needed reforms announced by the Government of India, Niti Aayog has recommended that prohibition on foreign investment should be removed and private sector participation should be promoted. The growth of the sector will also be positively impacted by public-private partnerships between the NPCIL and private participants for reactor construction, land acquisition, and financing of projects. However, the Government of India should ensure that the non-proliferation terms and safeguards of foreign countries are taken into account while implementing the reforms in the nuclear sector.

The enhancement of nuclear power’s share in the clean energy mix and the expansion of this sector requires significant financial expenditure by the government, in order to increase the viability of nuclear power projects. The government’s recent initiatives signal progress, but achieving the long-term goals of private sector participation and commercialisation of nuclear power will demand sustained efforts at both policy and operational levels.