India’s latest nuclear energy regulation opens the industry’s development to private and international participation, redefining related liabilities and operational norms
India has recently enacted the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India Act, 2025, commonly known as the SHANTI Act. This law governs the development and operation of nuclear installations in India and sets out the liabilities and responsibilities of the relevant stakeholders.
The SHANTI Act is a critical legislation and may act as a game-changer for private sector participation in the country’s nuclear energy sector and for the expansion of its nuclear energy generation capabilities. The act allows domestic private players to operate nuclear plants, and more importantly, creates a more attractive environment for international players in the supply of nuclear equipment.
The SHANTI Act repeals and supersedes both the Atomic Energy Act, 1962, and the Civil Liability for Nuclear Damage Act, 2010 (CLND) and consolidates India’s nuclear legal and regulatory framework into a single unified statute.
While the above broadly encapsulates the objectives of the SHANTI Act, the nature of the industry and the history revolving around nuclear projects and incidents across the world warrant critical analysis of the liabilities and responsibilities of the relevant stakeholders.
India’s pre-SHANTI nuclear liability regime
Ashish Suman
Partner
JSA
T: +91 124 439 0798
Email: ashish.suman@jsalaw.com
Prior to the SHANTI Act, the Atomic Energy Act regulated the atomic energy industry in India and provided for, among other things, the regulation of responsible nuclear operations and the control over research, development and use of nuclear materials. In addition to the Atomic Energy Act, the CLND Act was enacted to establish the liability framework involving nuclear incidents.
The previous legislative framework had some important facets.
The definition of “operator” was restrictive, being limited to the government and government-owned entities holding a licence to operate nuclear installations. The CLND Act prescribed a maximum liability of 300 million special drawing rights (SDRs) for each nuclear incident. Of this amount, the operator was liable for INR15 billion (USD160.9 million) for each nuclear incident, with the remaining sum to be funded by the government.
The earlier framework also applied a no-fault liability or strict liability principle. While liability for nuclear incidents rested with the operator, the CLND Act provided certain exceptions where the operator would not be held liable, such as incidents arising from grave natural disasters, armed conflict, civil war or terrorism.
Although the government clarified that the provisions of the CLND Act were broadly in conformity with the 1997 Convention on Supplementary Compensation for Nuclear Damage, in respect of the operators’ strict liability, the limitations on cost and timeframe remained a contentious issue among various international stakeholders.
Section 17 of the CLND Act specifically provided for recourse against suppliers where a “nuclear incident has resulted as a consequence of an act of the supplier or his employee, which includes the supply of equipment or material with patent or latent defects or sub-standard services”.
The act also provided avenues for recourse against operators or suppliers beyond the limits set under other laws such as the law of torts and criminal law.
SHANTI Act reshapes nuclear liability
Ashwin Nayar
Partner
JSA
T: +91 124 476 0680
Email: ashwin.nayar@jsalaw.com
While the SHANTI Act carries forward various elements of the atomic energy and the CLND acts – such as the maximum liability of 300 million SDRs for each nuclear incident, the no-fault liability regime, maintenance of liability funds, and insurance and financial security requirements – there are critical changes regarding liabilities and responsibilities for nuclear incidents. The definition of “operator” has been expanded. The SHANTI Act now permits domestic companies to obtain licences and operate nuclear installations.
Liability for operators has been graded. The act’s second schedule sets out a graded maximum liability structure (under the no-fault liability regime) based on the nuclear power generation capacity of the installations, with INR30 billion as the highest liability cap (for reactors generating more than 3,600 megawatts) and INR1 billion as the lowest liability cap (for reactors generating less than 150MW, fuel cycle facilities, reprocessing plants and the transport of nuclear material).
The explicit right of recourse against suppliers has also been eliminated. Unlike section 17(b) of the CLND Act, section 16 of the SHANTI Act does not retain the operator’s right of recourse against suppliers; this must now be determined contractually between the parties.
SHANTI Act: Liability, recourse concerns
Relevant issues have arisen regarding the limited increase in liability caps, the amendment to the right of recourse against suppliers, and contract negotiations to allocate risks between participants.
The participation of the domestic private sector allowed under the SHANTI Act is a welcome move and is reasonably expected to expedite the country’s targets to increase nuclear power generation.
However, the regulation of the private sector and the twofold increase in the operator’s liability cap, though significant, do not appear realistic in respect of lessons learned from nuclear incidents across the globe and experiences from the past industrial incidents in India. Nevertheless, the government’s obligation to fund the differential amounts beyond the liability caps continues to put pressure on public finances.
The right of recourse available to operators against suppliers under the CLND Act has remained a discussion issue among foreign industry players and governments. The amendment in the SHANTI Act (i.e. the removal of this provision) appears to be a step to encourage foreign participation in nuclear power generation. The removal of such an explicit recourse right might disincentivise operators with respect to their obligations.
Although the provision for recourse against suppliers in section 17(b) of the CLND Act does not find a place in the SHANTI Act, section 16(a) of the SHANTI Act carries forward the recourse right captured in section 17(a) of the CLND Act. Section 16(a) of the SHANTI Act allows the operator to exercise its contractual right of recourse after payment of the relevant damages, provided such rights are stipulated in the respective contracts.
This process is further elaborated under the Civil Liability for Nuclear Damage Rules, 2011, which continue to operate under the SHANTI Act. As such, any recourse against suppliers will find a place within section 16(a) of the SHANTI Act, and will be governed by the provisions of the contract, rather than by statutory operation as would have been the case under section 17(b) of the CLND Act. Contract negotiations will therefore be critical to allocate risks between the operator and the supplier, including with respect to defining what construes product liability.
To sum up, the SHANTI Act signals a paradigm shift intending to transform India’s nuclear energy sector from a state-exclusive domain into a tightly regulated but commercially accessible industry. The extent of interest that this new law will generate among private operators, particularly from a risk and liability perspective, remains to be seen. It is nonetheless expected to make the Indian nuclear energy market a lucrative prospect for international suppliers.
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