The Indemnity and the Accident, SHANTI Act, Supplier Protection, and the Unlearned Lessons of Fukushima, Chernobyl, and Three Mile Island
On a March afternoon in 2011, a tsunami overwhelmed the seawalls of the Fukushima Daiichi nuclear power plant, knocking out backup power systems and triggering a cascade of reactor meltdowns, hydrogen explosions, and radioactive releases. The disaster, which forced the evacuation of over 150,000 residents and rendered large areas uninhabitable for decades, was not an act of God alone. It was also an act of design. Safety experts had long warned of a critical vulnerability in the Mark-I containment structure of the General Electric reactors at Fukushima. That vulnerability, unaddressed by the supplier and unmitigated by the operator, turned a natural disaster into a nuclear catastrophe.
Thirty-five years earlier, at Chernobyl, a flawed reactor design—a “positive power coefficient” that caused power to surge uncontrollably under certain conditions—combined with deficient shutdown systems and operator error to produce the world’s worst nuclear accident. The International Nuclear Safety Advisory Group’s report identified these design defects as primary causes.
Six years before Chernobyl, at Three Mile Island, the U.S. Presidential Commission investigating the accident documented serious flaws in the control room’s design and criticised the reactor supplier, Babcock & Wilcox, for failing to communicate known vulnerabilities to the operator.
In each of these defining accidents of the nuclear age, design defects played a central role. The suppliers were not innocent bystanders; they were implicated in the very mechanisms that turned routine operations into catastrophic failures.
It is against this historical backdrop that India’s SHANTI Act, passed in the Winter Session of Parliament, must be assessed. The Act opens the nuclear power sector to private entities, alters the liability framework under the Civil Liability for Nuclear Damage Act (CLNDA), and—most controversially—indemnifies nuclear suppliers from civil and criminal consequences, even if accidents arise from defects in the equipment they supply. The operator’s right of recourse against suppliers has been removed. Liability is capped at levels that are, by any reasonable comparison with the costs of major accidents, grotesquely inadequate. The Atomic Energy Regulatory Board’s independence has been compromised by stipulating that its members will be selected by a committee “constituted by the Atomic Energy Commission”—the very body it is supposed to regulate.
The accompanying analysis, by physicist Suvrat Raju, lays out the case against the SHANTI Act with devastating clarity. It demonstrates that the Act’s provisions have no scientific basis, that they contradict the lessons of every major nuclear accident, and that they create a moral hazard of extraordinary proportions. It shows that the liability caps—approximately ₹3,900 crore for a major accident—are about one thousand times smaller than the estimated costs of Fukushima (₹46 lakh crore) and Chernobyl (₹21 lakh crore for Belarus alone). It argues that the Act ensures that “private corporations in India and multinational suppliers can profit from these opportunities without being constrained by regulatory bodies or having to face consequences for an accident.”
This is not regulation; it is deregulation in the service of commercial interests. It is not public safety; it is supplier protection. It is not a balanced assessment of risks and benefits; it is a one-sided transfer of risk from corporations to victims.
The Liability Framework: Indemnity, Recourse, and the Lessons of History
The Civil Liability for Nuclear Damage Act, 2010, was itself a compromise. It established a framework for allocating liability in the event of a nuclear accident, including a right of recourse that allowed operators to sue suppliers for accidents caused by defective equipment. This provision was not an afterthought; it was a direct response to the historical record. The suppliers whose design flaws contributed to Fukushima, Chernobyl, and Three Mile Island would, under this framework, have faced financial consequences for their failures.
The SHANTI Act eliminates this right of recourse. Operators are now fully indemnified against supplier liability; the entire burden falls on them. And operators’ liability is capped at between ₹100 crore and ₹3,000 crore, depending on plant size. The total liability for an accident, including that of the central government, is capped at 300 million Special Drawing Rights—approximately ₹3,900 crore.
The contrast with the actual costs of major nuclear accidents is so stark as to be almost absurd. The Japan Centre for Economic Research estimated that the Fukushima accident could ultimately cost 80 trillion yen—approximately ₹46 lakh crore. A joint UN agencies report on Chernobyl noted that Belarus alone estimated its losses at $235 billion—approximately ₹21 lakh crore. In addition, the Chernobyl Exclusion Zone, an area comparable in size to Goa, has been uninhabitable for four decades.
A ₹3,900 crore liability cap against potential losses of ₹46 lakh crore is not a cap; it is a waiver. It ensures that even in the event of a catastrophic accident, victims will receive a tiny fraction of their losses. It ensures that operators and suppliers face no meaningful financial consequences for failures that could devastate entire regions for generations. It ensures that the costs of nuclear accidents are socialised while the profits are privatised.
The Moral Hazard: Why Indemnity Encourages Recklessness
The concept of moral hazard is well understood in economics and insurance: when agents are protected from the consequences of their actions, they have less incentive to exercise care. The SHANTI Act creates a moral hazard of extraordinary proportions.
Consider the incentives facing a multinational supplier. Under the Act, it can sell reactors to India without any fear of liability for design defects. Even if its equipment fails catastrophically, even if its designs contain the kind of vulnerabilities that contributed to Fukushima and Chernobyl, it will face no civil or criminal consequences. The operator—and ultimately the victims—will bear the entire burden.
Consider the incentives facing a private operator. Its liability is capped at a tiny fraction of the potential damage. It is also indemnified for accidents caused by “grave natural disasters”—a provision that reverses India’s “absolute liability” framework for hazardous industries and directly contradicts the lesson of Fukushima, which was triggered by a tsunami but exacerbated by design flaws. The operator has little financial reason to invest in the extra margins of safety that could prevent a catastrophe.
This is not hypothetical. The Fukushima disaster was caused by a tsunami that exceeded the plant’s design basis, but it was worsened by design defects that safety experts had identified years earlier. If the reactor had been located in India, under the SHANTI Act, the supplier would have faced no liability for those defects, and the operator’s liability would have been capped at a tiny fraction of the actual damage. The moral hazard is not a theoretical concern; it is a predictable consequence of the Act’s provisions.
The Regulatory Capture: Independence Undermined
The SHANTI Act also establishes a legislative framework for the Atomic Energy Regulatory Board, but it does so in a manner that fatally compromises the Board’s independence. The Act stipulates that its members will be selected by a committee “constituted by the Atomic Energy Commission.”
The Atomic Energy Commission is not an independent body; it is the promotional and developmental arm of India’s nuclear establishment. Its mission is to advance nuclear technology, not to regulate it. To place the regulatory board under the selection authority of the promotional agency is to create a built-in conflict of interest that violates every principle of effective regulation.
The result is predictable: a regulatory body that is unlikely to challenge the industry it is supposed to oversee. A regulatory body whose members owe their positions to the very entities they are supposed to regulate. A regulatory body that will be, at best, a rubber stamp for industry proposals and, at worst, an active participant in the suppression of safety concerns.
This is not speculation; it is the pattern of regulatory capture that has been documented in industries from finance to pharmaceuticals to nuclear power. When regulators are appointed by the regulated, when they share the industry’s culture and assumptions, when their careers depend on maintaining good relations with industry leaders, they systematically under-enforce safety standards and overlook emerging risks. The SHANTI Act institutionalises this dynamic.
The Economic Fantasy: 100 GW by 2047
The government’s stated rationale for the SHANTI Act is to expand India’s nuclear power capacity. The current target is an ambitious 100 GW by 2047, up from the current 6.78 GW. The analysis questions the viability of this target on multiple grounds.
First, historical performance: India’s nuclear capacity has consistently fallen short of official targets. In the 1980s, the government announced a programme to reach 10 GW by 2000; actual capacity in 2000 was 2.86 GW. In 2006, it set a target of 20 GW by 2020; actual capacity in 2020 was 6.78 GW. These failures were not due to bad luck; they were due to systemic factors—high capital costs, safety concerns, and the inherent complexity of nuclear projects.
Second, economics: Nuclear power is among the most capital-intensive forms of electricity generation. The two Westinghouse AP1000 reactors recently completed in Georgia, U.S., cost approximately $18 billion each. At that rate, achieving 100 GW would require an investment of roughly $1.8 trillion—a sum that exceeds India’s entire annual GDP. The “small modular reactors” that the government touts as a solution have even higher estimated capital costs per unit of power, making them economically even less viable.
Third, the real purpose: The analysis suggests that the Act’s primary purpose is not to expand nuclear capacity—which has contributed only about 3 per cent of India’s electricity for decades—but to open up commercial opportunities for private corporations and multinational suppliers. The liability protections and regulatory capture provisions are not incidental; they are the core of the legislative bargain. They ensure that private entities can profit from nuclear projects without bearing the risks.
Conclusion: The Unlearned Lessons
The SHANTI Act represents a profound and dangerous shift in India’s approach to nuclear regulation. It indemnifies suppliers whose design flaws have contributed to every major nuclear accident. It caps liability at levels that are grotesquely inadequate compared to the potential damage. It creates a moral hazard that will systematically under-incentivise safety investments. It captures the regulatory process by placing the watchdog under the control of the industry it is supposed to oversee.
All of this is done in the name of expanding nuclear capacity—a goal that is economically dubious and historically unrealised. The real beneficiaries are not the Indian public, who will bear the risks, but the private corporations and multinational suppliers who will pocket the profits.
The lessons of Fukushima, Chernobyl, and Three Mile Island are not obscure. They have been documented in exhaustive detail by official commissions, scientific bodies, and investigative journalists. They are taught in engineering schools and cited in safety manuals. They are the accumulated wisdom of decades of painful experience.
The SHANTI Act ignores all of it. It chooses, instead, to bet the safety of millions of Indians on the hope that design defects will not matter, that suppliers can be trusted to do the right thing without liability, that a captured regulator will ensure safety, and that a catastrophic accident will not occur on Indian soil.
It is a bet that history suggests is foolish. And it is a bet that the Indian people did not authorise. Parliament passed the Act, but there is no evidence that it considered the evidence that Suvrat Raju marshals—the costs of Fukushima, the design flaws at Chernobyl, the moral hazard of indemnity, the lessons of Three Mile Island. The debate, if it occurred at all, was not about safety; it was about commerce.
The SHANTI Act will be remembered, if its worst consequences are avoided, as a missed opportunity to learn from history. If its worst consequences are realised, it will be remembered as a catastrophe that was entirely foreseeable and entirely preventable. The choice is not yet made; the Act can still be amended, the provisions reconsidered, the lessons absorbed. But the clock is ticking, and the unlearned lessons are waiting.
Q&A Section
Q1: What are the key provisions of the SHANTI Act regarding nuclear liability, and how do they differ from the previous framework under the Civil Liability for Nuclear Damage Act (CLNDA)?
A1: The SHANTI Act introduces three major changes to the liability framework. First, supplier indemnity: it eliminates the operator’s “right of recourse” against suppliers, meaning operators cannot sue suppliers for accidents caused by defective equipment. Suppliers are now fully indemnified from civil and criminal consequences, even if design defects contribute to a disaster. Second, liability caps: operator liability is capped between ₹100 crore for small plants and ₹3,000 crore for the largest plants. Total liability, including central government contribution, is capped at 300 million Special Drawing Rights (approximately ₹3,900 crore). The Act also removes Clause 46 of the CLNDA, which allowed victims to invoke other laws, including criminal laws, to seek remedies. Third, operator indemnity for natural disasters: operators are indemnified for accidents caused by “grave natural disasters,” reversing India’s “absolute liability” framework for hazardous industries and directly contradicting the lesson of Fukushima, which was triggered by a tsunami but worsened by design flaws.
These provisions differ fundamentally from the CLNDA framework, which included the right of recourse and did not cap liability at levels grotesquely inadequate compared to potential damage. The analysis notes that estimated costs of Fukushima (₹46 lakh crore) and Chernobyl (₹21 lakh crore for Belarus alone) are approximately one thousand times larger than the SHANTI Act’s liability cap.
Q2: What evidence from major nuclear accidents—Fukushima, Chernobyl, and Three Mile Island—does the analysis cite to argue that supplier indemnity lacks a scientific basis?
A2: The analysis cites specific findings from official investigations of each accident. Fukushima (2011) : Safety experts had long warned of a critical vulnerability in the Mark-I containment structure of the GE reactors at Fukushima. That unaddressed design flaw exacerbated the disaster caused by the tsunami. Chernobyl (1986) : The International Nuclear Safety Advisory Group’s report identified the reactor’s “positive power coefficient” (causing uncontrollable power surges) and its “deficient system for emergency shutdown” as two primary causes. Three Mile Island (1979) : The U.S. Presidential Commission documented serious flaws in the control room’s design and criticised the supplier, Babcock & Wilcox, for failing to communicate known vulnerabilities to the operator.
In each case, design defects played a central role. Suppliers were not innocent bystanders; they were implicated in the very mechanisms that turned routine operations into catastrophic failures. The SHANTI Act’s indemnity for suppliers thus contradicts the historical record. The analysis argues that the Act’s provisions were not driven by scientific evidence but by complaints from multinational suppliers, especially from the U.S., who had “complained vociferously” about potential liability in India. The 2026 U.S. National Defense Authorization Act explicitly sought that India align its nuclear liability rules with “international norms” favourable to suppliers.
Q3: What is “moral hazard,” and how does the SHANTI Act create it in the context of nuclear safety?
A3: Moral hazard is the phenomenon where agents protected from the consequences of their actions have reduced incentive to exercise care. The SHANTI Act creates moral hazard at multiple levels. Suppliers: knowing they face no liability for design defects, even those that could contribute to catastrophic accidents, suppliers have less incentive to invest in rigorous safety testing, quality control, and design improvement. Operators: with liability capped at a tiny fraction of potential damage (₹3,900 crore against potential losses of ₹46 lakh crore) and indemnified for natural disasters, operators have little financial reason to invest in the extra margins of safety that could prevent a catastrophe. The operator’s incentive is to minimise costs and maximise profits, knowing that even a worst-case accident will not threaten its financial viability.
This is not theoretical. The Fukushima disaster was caused by a tsunami that exceeded the plant’s design basis, but it was worsened by design defects that safety experts had identified years earlier. Under the SHANTI Act, the supplier of such defective equipment would face no liability, and the operator’s liability would be capped at a tiny fraction of the actual damage. The moral hazard is a predictable consequence of the Act’s provisions, systematically under-incentivising the very investments in safety that could prevent future disasters.
Q4: How does the SHANTI Act compromise the independence of the Atomic Energy Regulatory Board, and why is this significant for safety?
A4: The Act provides a legislative framework for the Atomic Energy Regulatory Board but stipulates that its members will be selected by a committee “constituted by the Atomic Energy Commission.” The Atomic Energy Commission is not an independent body; it is the promotional and developmental arm of India’s nuclear establishment, responsible for advancing nuclear technology, not regulating it. Placing the regulatory board under the selection authority of the promotional agency creates a built-in conflict of interest that violates every principle of effective regulation.
This is significant because regulatory capture—where the regulator becomes the agent of the regulated rather than the guardian of the public interest—is a well-documented phenomenon. When regulators are appointed by the regulated, when they share the industry’s culture and assumptions, when their careers depend on maintaining good relations with industry leaders, they systematically under-enforce safety standards and overlook emerging risks. The SHANTI Act institutionalises this dynamic, ensuring that the regulatory body is unlikely to challenge the industry it is supposed to oversee. The result will be, at best, a rubber stamp for industry proposals and, at worst, an active participant in the suppression of safety concerns.
Q5: Why does the analysis argue that the government’s target of 100 GW of nuclear capacity by 2047 is economically unviable, and what does it suggest is the Act’s real purpose?
A5: The analysis offers three arguments against the target’s viability. First, historical performance: India’s nuclear capacity has consistently fallen short of official targets. The 1980s target of 10 GW by 2000 was missed (actual: 2.86 GW); the 2006 target of 20 GW by 2020 was missed (actual: 6.78 GW). These failures reflect systemic factors—high capital costs, safety concerns, and project complexity—not bad luck. Second, economics: Nuclear power is extraordinarily capital-intensive. The two Westinghouse AP1000 reactors recently completed in Georgia, U.S., cost approximately $18 billion each. Achieving 100 GW would require roughly $1.8 trillion—exceeding India’s annual GDP. “Small modular reactors,” touted as a solution, have even higher estimated capital costs per unit of power, making them economically less viable. Third, limited contribution: Nuclear has accounted for only about 3 per cent of India’s electricity for decades; even significant capacity expansion would make little difference to the overall energy mix.
The analysis suggests the Act’s real purpose is not capacity expansion but commercial opportunity. By opening the sector to private entities, indemnifying suppliers, capping liability, and capturing the regulator, the Act ensures that “private corporations in India and multinational suppliers can profit from these opportunities without being constrained by regulatory bodies or having to face consequences for an accident.” The liability protections and regulatory capture provisions are not incidental; they are the core of the legislative bargain, transferring risk from corporations to victims while allowing profits to be privatised.
