This article forms Part II of our nuclear power series where we explore how atomic energy could advance India’s net-zero ambitions alongside other renewables (Part I is available at: https://www.azbpartners.com/bank/realizing-nuclear-powers-role-in-indias-clean-energy-transition/). In this publication we explore: (I) recent industry developments and new pipeline projects; (II) the proposed amendments to the relevant applicable laws; and (III) incentive mechanisms and concessions which could be adapted from other clean-energy sectors to make investment in nuclear energy attractive.

I. Industry developments in recent times

India currently operates 24 (twenty four) nuclear reactors with a combined capacity of 8,180 MW, and several new projects are in the pipeline, including the commissioning of indigenous 700 MW Pressurized Heavy Water Reactors (“PHWRs”) at Kalpakkam. There is an aim to develop at least 5 (five) to 10 (ten) indigenously designed Small Modular Reactors (“SMRs”) by 2033, and commence pre-project work for several additional reactors, the count of which is multiplying on a daily basis. These SMRs, along with Bharat Small Reactors (“BSRs”) based on proven 220 MW PHWR technology, are expected to play a transformative role in meeting India’s growing energy demands, supporting grid stability, and enabling the repurposing of old coal-thermal plants. The nuclear energy sector has been further bolstered by important breakthroughs such as the discovery of new uranium deposits at the Jaduguda mines, which has extended the life of India’s oldest uranium mine by over 50 (fifty) years, and the successful commissioning of new PHWR units at Kakrapar, Gujarat.

Since joint ventures and partnerships emerged as a key model, NPCIL has already formed joint ventures with NTPC and Indian Oil Corporation to build, own, and operate new nuclear plants, and major private players such as Tata Power, Reliance Industries, Adani Power, and Vedanta have been encouraged to invest in the development of BSRs. The Government of India (“GoI”) has also given an in-principle approval for the establishment of a major nuclear power project at Kovvada, located in the Srikakulam district of Andhra Pradesh, in collaboration with the government of United States of America. The project is for a total capacity of 7,284 MW, comprising of 6 (six) reactors and pre-project activities and land acquisition is on its way.

This shift is expected to attract substantial private investment, accelerate project timelines, and foster innovation in advanced nuclear technologies. India is strengthening its nuclear fuel supply chain through the expansion of the Nuclear Fuel Complex (i.e., specialized industrial facility under the department of atomic energy (“DAE”) dedicated to the production and supply of nuclear fuel and related components for the India’s nuclear reactors) and international collaborations, while also focusing on next-generation technologies such as thorium-based reactors, high-temperature gas-cooled reactors for hydrogen co-generation, for enhanced operational efficiency. These developments collectively signal a new era of growth, innovation, and collaboration in India’s nuclear power industry, positioning the country as a future leader in clean and reliable energy.

II. Amendments under consideration:

(a) Atomic Energy Act, 1962 (“Atomic Energy Act”) and the rules framed thereunder:

In recent times, there has been a growing demand from industry stakeholders for certain key amendments to the Atomic Energy Act, and accordingly, GoI may implement the following amendments: (i) an amendment to Section 3 of the Atomic Energy Act to redefine nuclear energy activities as licensable activities, which would permit private companies to participate under government oversight; and (ii) amendments to Section 14 allowing private partnership, while retaining government control over spent fuel (due to waste disposal concerns) and strategic programs (due to national security concerns). However, to truly incentivize private participation in nuclear energy, it is essential that the following amendments/policy changes are also considered: (i) establishment of a single window clearance system, through which a nuclear energy operator may obtain all required clearances, bolstering the licensing regime and making it attractive to private sector players; and (ii) reforms introduced to Section 20 of the Atomic Energy Act to permit ownership of all intellectual property and knowhow of civil nuclear research and developments. Stakeholders are of the view that, if entities developing reactors are allowed to own and commercialize their technology, the sector will become more attractive and receive the required attention for its progress and development, including in terms of foreign investment.

(b) Civil Liability for Nuclear Damage Act, 2010 (“CLNDA”) and the rules framed thereunder:

While the Ministry of External Affairs, GoI has issued clarifications that the CLNDA is consist with international regimes, industry stakeholders and commentators have expressed concerns with certain provisions of the CLNDA, specifically Section 17 (right of recourse against suppliers) and Section 46 (savings clause), due to their potential implications for suppliers’ exposure and third-party claims.

(i) Section 17: The international conventions, including the Convention on Supplementary Compensation for Nuclear Damage signed on October 29, 2010 (“CSC”)^[1], on civil liability for nuclear damages operate on the principle of exclusive liability of the operator of a nuclear installation. The principle of exclusive liability of the operator mandates that, in the event of a nuclear incident, all claims for compensation are to be brought solely against the nuclear operator, irrespective of the cause of the accident. This doctrine of legal channeling effectively insulates suppliers, contractors, and builders of the nuclear installation from direct public litigation arising out of such incidents. It also simplifies and expedites the claims process, as the operator bears strict and absolute liability and serves as the single point of responsibility for compensation. Section 17(b) of the CLNDA represents a deviation from the principle of exclusive operator liability, as it statutorily grants the operator a right of recourse against the supplier where a nuclear incident has resulted from the act of the supplier or its employee, including the supply of equipment or material with latent or patent defects or the provision of sub-standard services. Thus, a removal of Section 17(b) of the CLNDA may be under consideration.

(ii) With respect to the applicability of Section 46 of the CLNDA to suppliers, the DEA has stated in response to Question No. 25 of the FAQs as follows: “… This section applies exclusively to the operator and does not extend to the supplier is confirmed by the Parliamentary debates at the time of the adoption of this Act. It may be noted that the CLND Bill was adopted by a vote. During the course of the vote on various clauses of the Bill, amendments to make Section 46 applicable to Supplier were brought in by Hon’ble Members of Parliament in both the Houses of Indian Parliament viz. Rajya Sabha, the Upper House and the Lok Sabha, the Lower House, which were put for voting and negatived. Hence, no reference is found to the Supplier in the above clause.” According to this interpretation and a plain reading of Section 46 of the CLNDA, the provision appears to apply exclusively to operators and does not extend to suppliers. However, in the absence of a specific prohibition in the CLNDA on claims against suppliers under the general law of torts and on account of the fact that the liability under CLNDA is capped, the possibility of claims being made against negligent suppliers by the victims of nuclear accidents in India under the law of torts cannot be reasonably ruled out. Therefore, amendments to Section 46 restricting its scope to criminal liability are being considered.

Separately, Section 9 of the CLNDA (which provides for compensation for nuclear damage and its adjudication) should also be amended to reflect that civil liability for nuclear damage will be limited to the extent covered under the CLNDA and to explicitly state that all civil liability claims for nuclear damage must be adjudicated solely under the CLNDA, thereby suspending the application of general tort law to such cases. Deliberations in the industry claim that amending Section 9 to clarify exclusive jurisdiction would also bring India’s nuclear liability regime more in line with international best practices, which typically channel all such claims through a specialized mechanism to ensure speedy and uniform compensation. Prospective operators (who intend to enter the industry upon its liberalization) believe this amendment will make India’s upcoming nuclear power sector more attractive to international investors.

Further the proviso of Section 5 (which sets out instances where the nuclear operator would not be held liable) should also be amended to remove the reference ‘under any other law in force’ to ensure that the civil liability of the operator is encompassed within the CLNDA and other criminal liability, and that no other law will govern the civil liabilities. These amendments to the CLNDA would result in a more supplier-friendly liability regime and meet industry demands towards increased access to participation in the nuclear sector.

(c ) Foreign Direct Investment (“FDI”) Policy, 2020 (“FDI Policy”) dated October 15, 2020

The Department for Promotion of Industry and Internal Trade (“DPIIT”) issued the FDI Policy, which provides the rules and regulations governing foreign direct investment in India and lays out the ‘prohibited sectors’ for FDI, which includes atomic/nuclear energy. Thus, presently, no foreign investment is permitted in nuclear energy, through the automatic or the government route. However, given the incoming impetus on nuclear energy to achieve carbon emission goals, the GoI has been considering allowing FDI upto 49% (forty nine percent) through the government approval route. Corresponding amendments may also be required to include the DAE as the competent authority for grant of approval for foreign investment into the nuclear energy sector.

III. Recommendations: Schemes and incentives from other sectors which may be adapted to the nuclear energy sector

• Production-linked incentive (“PLI Scheme”)

The PLI Scheme for solar photovoltaic modules entails the grant of a monetary incentive to a manufacturer upon production or sale of a specified quantum of modules. The PLI Scheme also helps to develop an ecosystem for local procurement, and incentivize cutting edge technology to develop in India. The PLI Scheme has promoted the growth of solar module manufacturing and India’s solar module manufacturing abilities have strengthened to the extent that the ALMM list^[2] (which sets out the approved list of module manufacturers in India) does not contain any foreign module manufacturers. A similar framework can be extended to nuclear power plants, with respect to the components of nuclear plants that are used in the generation of electricity. The local manufacture of such components can be incentivized through the provision of PLI in the nuclear sector.

• Viability gap funding scheme (“VGF Scheme”)

The VGF Scheme consists of the issuance of capital grants to support commercially unviable projects such as solar, onshore wind, and offshore wind projects. The VGF Scheme is typically implemented through a bidding process, where bidders are required to quote (i) the amount of VGF they require per MW of electricity generated; or (ii) the amount of discount they are willing to accept on the VGF amount proposed by the government, as the case may be. Please note that the VGF Scheme became popular soon after the introduction of the National Solar Mission, 2010, at which point solar power generation was at a nascent stage, comparable to the present status of nuclear energy in India. The provision of VGF to nuclear power projects to be implemented under the PPP mode will serve as an alternative means of financing or part-financing the projects and address the high upfront costs that has been a roadblock in development of nuclear energy in the past.

(c ) Custom duty exemption for components required in manufacturing

Solar projects were provided tax benefits in the form of concessional customs duty, and certain components required in the manufacturing of wind turbine generators were provided with customs duty concessions until March 31, 2025. While the recent rescindment of such customs exemptions is due to the rapid progress of solar and wind energy generation in India, such exemptions have been helpful over the past few years in solidifying the progress of renewable energy in India. The import benefit of reduced customs duty can also be extended to nuclear components and other material used in manufacturing parts/equipment for construction of nuclear energy plants, in order to incentivize nuclear power generation.

Endnotes:

[1] The CSC is an international treaty adopted under the auspices of the International Atomic Energy Agency to create a global nuclear liability regime. Its principal objectives are to (i) harmonize the core principles of nuclear liability law by channeling strict and exclusive liability to the operator of a nuclear installation; (ii) ensure the availability of adequate and prompt compensation to victims of nuclear damage through mandatory financial security (insurance or equivalent guarantees) and an international supplementary compensation fund contributed by contracting parties; and (iii) expand participation to both nuclear and non-nuclear states, thereby establishing a worldwide framework for compensation in the event of a transboundary nuclear incident. The CSC is designed to complement and bridge the existing Paris and Vienna Conventions on civil nuclear liability, enabling states that are party to either convention as well as states with domestic nuclear liability laws consistent with CSC requirements to participate in a single, harmonized regime. This framework facilitates cross-border cooperation, reduces conflicts of law, and promotes consistency and predictability in the treatment of nuclear damage claims at the international level.

[2] Approved List of Models and Manufacturers issued by the Ministry of New and Renewable Energy, last updated on October 13, 2025.