Fuelling the Future: Why India Must Get its Nuclear Framework Right

In the global push to rapidly achieve net-zero goals, most investments until now have been directed toward renewables like solar and wind. That is now changing.  A revival of interest in nuclear energy is underway worldwide, largely driven by the rise of power-intensive applications such as data centres that support AI and cryptocurrencies.

In India, electricity demand has been growing steadily at 6-7% annually over the past several years – a trend that is expected to continue, with data centres being just one addition to the expanding demand basket. To cater to these increasing requirements, nuclear energy is poised to become a crucial part of the solution.

Under the aegis of its Nuclear Energy Mission, the Union government is working to scale up nuclear power generation twelvefold – to 100 gigawatts by 2047.

India currently operates 24 nuclear power units with a combined capacity of 8.1 gigawatts, contributing less than 2% of the country’s total electricity generation capacity. Despite longstanding ambitions to expand this limited nuclear base – initially through large-scale projects and more recently via smaller installations – progress has been gradual.

The Union Budget 2025-26 marked a significant shift in momentum, announcing plans to operationalise five indigenously developed Small Modular Reactors (SMRs) by 2033, with an investment outlay of Rs 20,000 crore, in 200 MW, 55 MW and 10 MW configurations. The budget also laid out a framework to encourage private sector participation and detailed intentions to repurpose select National Thermal Power Corporation (NTPC) facilities for SMR deployment.

To accelerate the growth of nuclear energy, the Indian government is actively seeking private sector partnerships to develop Bharat Small Reactors (BSRs) – compact versions of the country’s existing Pressurised Heavy Water Reactors (PHWRs) and SMRs. The Nuclear Power Corporation of India Limited (NPCIL) has issued Requests for Proposals to Indian industry players for the deployment of 220 MW BSRs for captive use.

Further reinforcing this momentum, in March a parliamentary standing committee  recommended establishing a ‘robust financial framework’ to attract both domestic and international investment. Crucially, the committee urged the swift passage of legislative amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act, as essential steps to unlocking private participation in nuclear power generation.

In its largely indigenous nuclear power programme, the potential risks associated with nuclear energy led India to establish a comprehensive legal and regulatory framework aimed at ensuring the safe and responsible development of the sector. The Atomic Energy Act of 1962, serves as the backbone of India's nuclear governance. However, one of the key criticisms of the Act had been its failure to include sufficient provisions for civil liability in the event of accidents, and its lack of robust safeguards against potential hazards.

Also read: How India Is Shifting Its Nuclear Power Plans Into High Gear

To address these shortcomings, the Civil Liability for Nuclear Damage Act (CLNDA), 2010, was introduced. This legislation was designed to fill critical gaps in the earlier framework by establishing a clear system of liability and compensation in the event of a nuclear accident. It defines "nuclear damage" broadly, encompassing loss of life, personal injury and property damage resulting from nuclear incidents. CLNDA aligns India’s liability framework with international norms, while placing primary responsibility for damages on the nuclear operator for accidents that occur within or originate from its facilities.

Although not mandated by international law, India’s nuclear liability legislation was key to unlocking US private sector participation. Firms like General Electric and Westinghouse needed liability safeguards to secure insurance in their home countries. The CLNDA was needed to implement the 2008 Indo-US Civil Nuclear Agreement.

To revive stalled foreign investment in its nuclear sector, the Indian government is now considering amendments to the CLNDA, citing it as a significant obstacle to international collaboration and the slow pace of nuclear capacity expansion. In contrast to the existing law, which imposes no ceiling on compensation or liability duration, a draft law prepared by the Department of Atomic Energy proposes capping the compensation that operators can claim from suppliers at the value of the original contract, with a specific time period for such claims also being introduced.

The  increasing use of SMRs and the expansion of nuclear energy in developing countries raises questions about risk allocation, regulatory capacity and financial responsibility.

Addressing the legal challenges associated with compensating for nuclear damage requires a cohesive framework that balances accountability, victim compensation, and environmental protection. At present, in addition to limited liability of operators The CLNDA caps the liability of a nuclear plant operator at Rs 1,500 crore and in case the damage from a nuclear incident exceeds the operator’s  maximum liability the government is liable up to the rupee equivalent of 300 million Special Drawing Rights (SDRs), equivalent to about Rs 3166.97 crore. Whether this amount is adequate, especially in the case of catastrophic incidents, is a matter of conjecture. The Act in itself does not extend liability to suppliers of nuclear equipment and materials, although they form a core part of the nuclear supply chain. They are mentioned in the section on ‘Operator's right of recourse’.

Regulatory reforms are expected to fast-track nuclear energy as a cleaner baseload power option in India, which currently relies on coal for nearly 75% of its electricity. The desirability of amending the Atomic Energy Act to provide for the operation of nuclear power plants by the private sector, needs careful examination. Any amendment to the CLNDA must not erode that it is structured to ensure swift compensation for victims while minimising disputes over causation and fault. The challenge lies in crafting legislation that balances the necessity of nuclear power with the imperative of safety through strict liability.

That said, India must facilitate access to competitive financing for nuclear projects. The exclusion of nuclear power from the 2022 'Framework for Sovereign Green Bonds' could be addressed by adopting a broader 'low-carbon bonds' classification – allowing support for energy technologies that emit below a defined carbon threshold. When it comes to footprint, nuclear energy outperforms many renewables.

Former Atomic Energy Commission chairman Dr Anil Kakodkar has called for more companies like the NPCIL to scale up reactor construction as India now possesses both the technology and industrial capability to build reactors in fleet mode. However, he notes that industry must be assured of long-term policy and mobilisation if it is to invest in capacity and innovation. Concessions like purchase obligations similar to those given to the renewable sector can be considered for the nuclear industry.

France provides a relevant model, where approximately 65% of electricity comes from nuclear plants operated solely by the government-run Électricité de France. As India expands its nuclear programme, it is crucial that the regulatory framework evolves with a strong emphasis on safety, accountability and equitable compensation for victims in the event of nuclear accidents.

Vaishali Basu Sharma is a strategic and economic affairs analyst.

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