Nuclear Civil Liability Bill in India

Nuclear Civil Liability Bill in India

UPA government is scheduled to table the bill for Civil Liability for Nuclear Damage 2010 in second half of the current session of the parliament. The bill was to be brought in right away but had to be stalled due to strong opposition. The fact is that the bill has not been cleared by the standing committee of the parliament and is reportedly being rushed to meet the requirements of the US suppliers.

The Issues:

The bill seeks to hold the operator of the nuclear plant solely liable for the claims in the event of any accident with capped limit of liability of Rs. 500 crores. If the claims exceed this cap the government has to step in with additional burden of maximum Rs. 2,200 crores. The time limit for liability is set at 10 years. The arguments against the bill can be grouped in three categories, namely, responsibility of operator v/s supplier of equipment, time limit of 10 years to be longer due to unknown nature of damages to even next generation caused by radiation effects and the limited amount of compensation of Rs. 500 crores.

The Experience:

We should be guided by the past experience on these issues. Fortunately, we have no experience of nuclear accident barring minor leakages etc. However, my mind goes to Bhopal Gas tragedy due to negligence of Union Carbide which is still reverberating for thousands of effected people even after 25 years. The lessons from this tragedy have been well documented. Nevertheless, unpreparedness of the government agencies to deal with the accident, the claims, court procedures, and endless wait for justice for decades are the highlights of this experience. The magnitude of this tragedy is comparable with leakages, failures of components etc. from nuclear plants as the gas leak of Bhopal was not less lethal. However, the nuclear tragedy may unfold even after decades and has that uncertainty of cause effect relationship for much longer duration for speedy accountability and settlement of claims.

Chernobyl nuclear accident has been better known nuclear accident involving people. However, the full facts may not come out due to iron curtain effect of erstwhile Soviet Union. Nevertheless, some experience sharing with Russia is available for factoring in our approach to tackle this issue.

Liability of Equipment Suppliers:

The product liability laws in US, European Union and Japan have been very stringent and all international suppliers are liable to damages for any claims of accidents due to faulty operation or manufacturing defects in any product. In India, there is no statute which deals with product liability claims. Any such claims may be made under Consumer Protection Act, breach of contract etc. These may not be adequate to deal with a nuclear catastrophe. The nuclear equipment suppliers from US, Europe and Japan are well protected with established and evolved laws to deal with product liability claims. It is but natural that the provisions of such existing laws would get dovetailed into any agreement with India. Therefore, time limit of ten years for claims, limited liability and accountability of the operators are the principles directly flowing out of product liability laws in these countries. We should therefore not just try to point out one sided arguments against the US suppliers.

India should simultaneously work on separate comprehensive product liability laws and workers compensation as well as third party liabilities based on the international code as we get integrated with global markets and have access to latest technologies like nuclear or space to deal with.

Options for Claims Settlement:

It is obvious that no business entity can ever undertake unlimited liabilities for any accident for fault of operator in violation of user manuals and guidelines of use provided by the manufacturers. Even in case of manufacturing defect the liability can be limited to free replacement of defective parts.

The unforeseen side effects of a defective part in nuclear plant can be very important in case of an accident. Since the technologies are continuously evolving, the manufacturers may prefer to shirk the responsibility, if possible, under the “Development Risk Defense” clause of product liability. This clause provides the escape route to manufacturers on the pretext that at the time of manufacturing there was no better knowledge or technology in the society to anticipate and prevent the defect which may have shown up at a later date. This is definitely the grey area in the field of nuclear defect liabilities as it will be difficult to pin down the supplier. So India must guard against such possibilities.

While the limit of Rs. 500 crores may not be adequate and the government has to bear the additional burden up to Rs 2,200 crores, we must ensure that the nuclear plant operators have recourse to the suppliers also under product liability laws of their country of origin as well as Indian laws when ready. That is the only way to spread the liability to so called “partners in progress”.

The operators should create and build up a corpus for any eventuality to take care of any claims. It may be desirable to have a mix of insurance of third party liabilities & workers compensation along with a fund of its own so that cash out flow on insurance premium is optimal.

Legal Framework:

The UPA government would do well to develop comprehensive laws to take care of the interests of the Indian operators, the suppliers and the partners with an eye on the common man who should not have to run from pillar to post from one generation to the next for settlement of any claims.


Vijay M. Deshpande
Corporate Advisor,
Strategic Management Initiative,
Pune

March 19, 2010

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Empowering Women in Indian Political Carnival

Empowering Women in Indian Political Carnival

It is said that behind every successful man there is a woman. Yes, this time Sonia Gandhi stood firmly behind Prime Minister Dr. Man Mohan Singh to push the bill for 33% reservation for women in Rajya Sabha. This is definitely a long expected land mark bill with potential to change the face of political India in years to come. The passage of the bill exposed chinks in the armor of the UPA government which has to now fortify its position in Lok Sabha where the bill has to be passed. And with unpredictable Mamata Banerjee, Lalu Prasad Yadav and Mulayam Singh holding the potential veto card, the political strategists have the job cut out for them.

One thing for sure is that now there is no going back on the bill as every political party is bound to be in a catch -22 situation. Damned they will be if they don’t support and doomed they will be if they do! Once Lok Sabha clears the bill, the states have to follow the process before it is sent to the President for approval. Few adjournments of houses, some political bickering and some behind the scene give and take are all that stand between the bill and the presidential signature.

Not a Musical Chair:

Assuming the bill to become Act, what are the repercussions of this important legislation? The political parties have been trying hard to create space for themselves as face savers. Quota within quota is the sticking point. Isn’t it enough to have just reservation of tickets for women to contest election instead of a reserved constituency? The complication is introduced with rotational system for five years for representation by women for a constituency whose turn would come again after 15 years. So there is always a hanging sword and the only thing certain is that after five years the constituency will not have women representative for two consecutive elections or ten years. The political future of women candidates would be always linked to time frame and new constituencies and not performance. It is the political parties who would decide their future and not necessarily the people. Even a musical chair would offer a fair chance to all.

Family Pack:

It is probable that the seats would revolve between husband and wife or father & daughter or brother and sister teams to represent a constituency alternately. That will ensure that the hard work done in the constituency would be protected. Mostly one can expect management by proxy to beat the system. So brace up for Lalu & Rabri combine to steer their constituency. I wonder if Amethi will be ruled by Sonia and Rahul or Priyanka and Rahul if the need be. May be we would say, “Behind every successful woman there is a man!”

Reserving a constituency for women would take away the rights of men to contest elections from these constituencies for that term of five years. Where is the need to have such a complex system? Most of the countries which have reservation for women have done so through the political parties. That would have been easier to implement without trampling on the constitutional rights of millions of men and women also.

Fundamental Rights:

The fundamental rights enshrined in the constitution of India provide for equality for all before law without discrimination by caste, religion, gender etc. By 108^th amendment, a man wishing to contest election as independent candidate, standing in front of the government officer for filing nomination papers, can be told that he is ineligible to file nomination as the constituency is reserved for women only for that particular election and he could try after five years in next election!. This is in direct infringement of his right to equality in matters of opportunities. This will be justified by legal pundits under directive principles of Indian constitution quoted below:-

“ If laws are made to give effect to the Directive Principles of State Policy (DPSP) over Fundamental Rights, they shall not be invalid on the grounds that they take away the Fundamental Rights. In case of a conflict between Fundamental Rights and DPSP's, if the DPSP aims at promoting larger interest of the society, the courts shall have to uphold the case in favour of the DPSP.” This has been the case every time we had reservations on the basis of castes.

Political Subversion:

In the name of social justice, we have the case of political subversion of the constitution. With this amendment, a woman candidate contesting from general constituency may be told to go to reserved constituency with no local base and fail miserably. Rather, in practice, they are likely to be denied their fundamental right of equality of opportunity to contest from any or general constituency also and therefore is restrictive in nature which is against the constitution. So when they are contesting elections, they are representing the political bosses and not the people of their constituency where they are known. Similarly the men would have to vacate their constituencies for five years to let women contest the elections after every ten years. They too would lose their fundamental right to contest from anywhere and represent their own people.

Insecure political space:

In last sixty years, women have had all the opportunities without restrictions of any kind. They have all been there as prime minister, president, speaker, chief minister, police commissioner, chairperson, teacher, engineer, doctor, pilot and nothing could stop them. Only the political parties lacked the will power to handover tickets for contesting elections as a matter of first right of refusal. So in the current exercise Congress seems to be targeting vote bank of women for long term.

This constitutional amendment would result in a social churning with women from the bottom of the pyramid moving to the top for a while before collapsing again and again! And thereafter running helter skelter to search another constituency if possible. Women will be much more insecure of their place in the political space. That is empowering women to bring them up once after every ten years and down after five years. That would be the guaranteed fundamental right of women! And guaranteed deprivation for men! Did some one say social justice?

Vijay M. Deshpande

Corporate Advisor,

Strategic Management Initiative,

Pune

March 12, 2010

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Post Budget Blues and Food Insecurities

Post Budget Blues and Food Insecurities

Pranab Mukherjee, Union Minister for Finance, presented a budget hailed as best budget for fiscal 2010-11 by the industry and the stock markets have given salutary verdict. Opposition walked out of the parliament on the issue of price rise of petroleum products to register their protest and has been still fighting against food inflation and wrong policies on the agricultural front. How can we address this backlash on agricultural front?

Bench Marks of 13^th Finance Commission:

Prima facie the budget seemed to lack any punch for growth. However, later in his interview Pranab Mukherjee revealed the basic strategy of following the recommendations of the 13^th Finance Commission on keeping the bench marks set for fiscal deficit. So in a way it was a reverse engineered budget. To keep the deficit in check it was essential to limit the government expenditure and therefore even in flagship program of NREGA there was nominal increase of Rs. 400 crores in outlay. This represents a commitment to fiscal prudence rather than to populism resorted last year. This was not to please the Indian gallery. It was more for international financial institutions to instill confidence in them about intentions to curb fiscal profligacy. This is good economics as long as it is not bypassed during the year through ad hoc approval beyond the realms of the budget.

The 13^th Finance Commission has put in place the bench marks for fiscal deficit of 5.5% for 2010-11 and down to 4.1% by 2012-13. So if the government is serious about following this benchmark in future it has no options but to increase the revenue income since there would be a ever tightening cap on revenue expenditure. So as the elections are held in states in next couple of years, the popular schemes or the largesse would have to be out of this tight purse. If we revert to compliance with FRBM targets set out by Finance Commission it would encourage states also to fall in line with better monitoring and controls on states’ budgets also.

Stop Leakages & Improve Monitoring:

If the revenue incomes have to increase in future the only way is to improve collections and stop leakages. Better integrated systems would be essential for accuracy of data and information. In my comments on budget for 2009-10, I had suggested the need for prevention of leakages so that the expenditure can be contained within budget. I had also stressed on the need to improve delivery mechanisms to ensure that rupee spent by the government reaches the intended beneficiary in a wholesome manner instead of estimated level of about 10-15 paise. Pranab Mukherjee has assured in his interview that proposed Unique Identity Project would be used to reduce the leakages in different social schemes. I sincerely hope that this would happen, justifying benefits of the Unique ID project. If it does, Pranab Mukherjee would have left a mark on project management & monitoring systems.

Price Increase of Petroleum Products:

In this budget agriculture & petroleum product have stood out for different reasons. The budget was used to increase the prices of petroleum products. Though it is justified, the timing was bad with TMC & DMK joining opposition ranks in protests demanding a roll back. We have been more used to roll backs in the past and the government should stand firm on any decision it takes to show the spine. NDA government had rightly cast away the administered price mechanism for petro-products and now UPA finds it difficult to every time push the prices in line with market realities. It is easy to fall in line with market prices when they are low. UPA should not lose time if it intends to keep up with the fiscal deficit bench marks in future. However, the government would have to manage the inflationary pressures better while doing so.

So far the efforts for taming inflation have not yielded results for any comforts. The prices of commodities were talked up by the politicians and now they are trying to talk down the trend after filling their coffers. While there have been shortages of commodities like sugar, pulses etc. due to poor rains, poor anticipation & planning or rather planned apathy has been a blot on the performance of the UPA government.

Wanted Full Time Agriculture Minister:

While we believe in market forces to take care of demand and supply side economics, the interventions by the government become necessary to protect the interest of masses. Some unscrupulous decision makers have calibrated the interventions to their advantage. To cover these failures, Pranab Mukherjee highlighted, in his interview, the budget allocation of Rs. 400 crores for transfer of agricultural technology from southern & western states to eastern states for better farming techniques. Does it take 60 years to do so or think about it?

Some of the initiatives on micro irrigation and use of plasti culture to conserve water should have been pushed harder for wider coverage for better yield. But, unfortunately, we can’t grow sugar cane or pulses on the cricket pitches. We need a full time agriculture minister of the stature of M.S.Swaminathan for a real boost to the agriculture sector. Agricultural sector has been most neglected one and deserves better governance. What is the point in permitting exports of agro commodities if demand in domestic market is outstripping production? Imports to bridge the gaps should have been initiated well in advance to manage the price front. One year of draught has exposed our vulnerability to vagaries of the monsoon. Our food stocks must take care of two consecutive poor monsoons without creating the situation of 2009.

I am not sure about the role of Environment & Forest Minister, Jairam Ramesh, regarding policy decisions on GM or Bt. foods. It should be in the domain of Agriculture Minister. We have agriculture minister looking after sports, environment minister looking after GM foods, and Chemicals minister deciding on fertilizers resulting in chaotic situations.

Life line of the Nation: Railways or Agriculture?

It is time that we realize that 60% population depends on agriculture and we need to give full focus on this sector to increase its contribution to GDP from currently around 17 % to 25-30% in next five years as it used to be 20 years ago. No doubt the level of GDP has grown to a higher base due to growth of the service sector, but so has the population demanding more agro products for consumption. Before we even realize, we are moving very fast from export led growth model to a consumption led growth. Therefore agriculture, as means of survival for more than half the population, deserves a separately focused budget. Reforms of this sector are overdue and there is an urgent need to facilitate integrated development with better linkages.

I always wonder if Railways are more important than agriculture when it comes to annual budget. Railways budget can be merged with the General Budget since in any case it has become a plank for developing the individual states of the railway minister for last ten years or so.

Integrated Rural Development Budget:

For next ten years, the government needs to focus more on agriculture which today is lagging behind in terms of growth rate compared to its true potential in country’s GDP basket. If we combine agriculture with fertilizers, micro irrigation, rural development, agro processing industries, bio-technology (GM foods) and micro finance, it becomes a very large chunk of national endeavor for betterment of the people. They are all interlinked activities with input-output relationships and need to be well integrated for maximum ripple effect for all round growth of “Rural India” with Integrated Rural Development Budget! May be that will incite our politicians to think differently. I am not advocating an urban- rural divide. I am advocating ICU care of a neglected sector for healthy development of half the country which the industry will not grudge. That is when the union budget will truly do justice to Bharat and not just India.

Vijay M. Deshpande

Corporate Advisor,

Strategic Management Initiative,

Pune

March 5, 2010

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