SHANTI rules spell out liability and lifecycle costs: India has opened nuclear power to private investment under the SHANTI Act. The draft rules issued by the Department of Atomic Energy now set out how operators will cover accident liability and pay for spent fuel and decommissioning. These provisions will decide much of the economics of private nuclear generation.
India has 8.78 GW nuclear capacity, accounting for about 3.1% of its total electricity generation. The government expects the capacity to reach about 22 GW by 2031-32 and has set a target of 100 GW by 2047. Its current plans account for about 54 GW by 2047 through NPCIL and related projects. The remaining capacity is expected from other public sector companies, state governments, private companies and joint ventures.
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The SHANTI Act allows Indian companies and joint ventures to seek licences to build, own, operate and decommission nuclear plants. It replaced the Atomic Energy Act, 1962 and the Civil Liability for Nuclear Damage Act, 2010, subject to the savings provided in the new law. The draft rules now specify the financial obligations that will accompany those licences.
Nuclear liability enters project finance
Operators will face strict, no-fault liability for nuclear damage, including accidents involving nuclear material during transport. They will have to maintain insurance or other financial security against that liability. The cover must remain in force until spent fuel has been removed from the plant’s storage pool.
The Act already sets different liability ceilings for different installations. Operator liability ranges from ₹100 crore to ₹3,000 crore. The maximum liability for a nuclear incident is tied to 300 million Special Drawing Rights unless the Centre notifies a higher amount. The Union government bears liability beyond the operator’s statutory ceiling and can draw on the Convention on Supplementary Compensation for Nuclear Damage.
This arrangement leaves the state carrying losses above the prescribed limit. The commercial question is how much risk should remain with the operator before that state support begins. A low ceiling leaves taxpayers exposed to a larger share of accident costs. A high ceiling raises insurance costs and can weaken the economics of a project before construction starts.
Nuclear accidents can create liabilities long after a reactor has stopped producing electricity. Requiring operators to demonstrate that compensation can be funded is therefore part of the cost of entering the business. It also makes the liability ceiling more than a number written into the statute.
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Nuclear tariffs must include end-of-life costs
The draft rules also deal with costs that arise after electricity generation ends. The proposed composite licence can cover construction, ownership, operation and decommissioning, while the financial provisions require operators to provide for spent-fuel management and the eventual dismantling of the plant.
The spent-fuel fund is to be financed through a levy linked to electricity tariffs during the reactor’s operating life. Decommissioning security will also be accumulated over time and kept apart from the operator’s other assets.
That changes the calculation of nuclear tariffs. A reactor may operate for several decades, but its costs do not end when generation stops. Spent fuel must be managed and the site eventually decommissioned. Leaving those expenses outside the tariff makes electricity appear cheaper during the operating years and pushes part of the bill into the future.
Kudankulam shows how sharply nuclear project costs can move even before decommissioning enters the picture. Units 3 and 4 were sanctioned at ₹39,849 crore and are now estimated at ₹68,893 crore. The estimated cost of Units 5 and 6 has risen from ₹49,621 crore to ₹69,437 crore. Taken together, the four reactors have moved from ₹89,470 crore to ₹1,38,330 crore, an increase of about 55%.
The Comptroller and Auditor General had earlier recorded delays and cost escalation in Kudankulam Units 1 and 2, along with higher interest costs and weaknesses in project execution. For an industry in which construction takes years and capital remains locked up for long periods, such overruns can alter the eventual cost of electricity considerably.
Early clearance can reduce sunk-cost risk
The draft rules allow an applicant to seek pre-licensing consultation and in-principle approval before making the full financial commitment to a project. An in-principle approval can permit further work, including vendor negotiations and land acquisition, without guaranteeing the final licence.
Private investors will pay close attention to this provision. A company that commits large sums to land, design work and equipment before discovering that the project cannot meet a later regulatory requirement may have little chance of recovering that expenditure. Earlier regulatory scrutiny can reduce that risk.
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The value of pre-licensing consultation will depend on how much certainty it provides without turning preliminary approval into an assumption that the final licence will follow. Nuclear regulation cannot work like conventional infrastructure clearance, where an early administrative approval often creates pressure on later regulators to accommodate a project that is already under construction.
SHANTI rules: A composite licence cannot end regulatory scrutiny
The composite licence is meant to reduce duplication across the life of a plant. The draft rules still allow the Atomic Energy Regulatory Board to impose hold points, inspect facilities, examine records and require corrective action before work proceeds.
That distinction should remain clear once private investment enters the sector. A company may hold one licence covering the plant’s lifecycle, but safety approval still has to follow the condition of the facility at each stage. Construction defects, operating failures and weaknesses in spent-fuel handling cannot be dealt with through an approval granted years earlier.
The proposed framework therefore puts more of the cost of nuclear power where it belongs, inside the project from the beginning. Insurance will affect financing costs. Spent-fuel and decommissioning provisions will affect tariffs. Regulatory delays and design changes will affect returns.
India’s 100-GW target depends on whether these costs are priced before construction and whether the regulator continues to enforce safety requirements after licences are granted. Expanding the list of companies allowed to build reactors is only the legal starting point.