The Nuclear Liability Fund (NLF) established under the Civil Liability for Nuclear Damage (CLND) Act of 2010, and rules thereof, reached the stipulated limit of Rs 2,000 crore in the second quarter of financial year (FY) 2025-26. With that, the levy on sale of nuclear electricity by the Nuclear Power Corporation of India Limited (NPCIL) to nuclear power consuming entities – the instrument by which the fund had been built since 2015-16 – has ended, according to reliable sources that are familiar with the issue. Under the CLND Act, which now stands repealed, the maximum prescribed liability in case of a nuclear accident was 300 million Special Drawing Rights (SDRs). The liability on the operator of the nuclear power plant was fixed at Rs 1,500 crore, for which the operator is required to maintain financial security by taking an insurance policy with assured compensation payout through a ‘Nuclear Insurance Pool’ mechanism backed by a consortium of re-insurers. How the fund was createdThe NLF was created to meet any situation where the central government is rendered liable under the CLND Act for nuclear damage, where the compensation amount exceeds the operator liability of Rs 1,500 crore, including any nuclear incident occurring due to a natural disaster or armed conflict. The modality of creating the fund, and its target amount, were prescribed under Section 3 of the NLF Rule, notified on December 8, 2015. The NLF Rule flowed from Section 7(2) of the CLND Act. Clauses 3-5 of Section 3 specified the following modus operandi:The operator [of the nuclear installation, namely the NPCIL] shall pay to the fund, a levy at the rate of Rs 0.05 (five paise), or a levy at such rate between Rs 0.05 to 0.10 (five paise to ten paise), for every unit of electricity sold to its customers.The levy shall be collected and paid to the fund till the total amount reaches Rs 2,000 crore and thereafter, the process shall resume in the event of any withdrawals from the fund so as to ensure that the Fund balance remains at Rs 2,000 crore at any given time.The levy shall be payable on quarterly basis and the levy amount for every quarter of the year shall be credited to the fund within the 15th day of the month succeeding the quarter.Work completed in less than ten yearsThe instrument, with a levy of five paise per unit sold, became operational in the last quarter of FY 2015-16, with quarterly payments credited to the Consolidated Fund of India (CFI) and then transferred to, and maintained as, a public account. The total amount paid into the fund at the end of FY 2024-25, as per my calculations, was Rs 1,875.63 crore. The contribution during 2024-25 alone was Rs 258.72 crore. With 700 MWe Unit-7 of Rajasthan Atomic Power Plant (RAPP) going commercial in March 2025, nuclear electricity generation during the current year would have only increased and clearly the remaining balance of about Rs 125 crore needed to reach the cap would have been met in the first half of FY 2025-26. According to the FAQ issued by the centre on the CLND Act, the fund was envisaged to be built up over a ten-year period; this target has been achieved in 39 quarters. The rate of levy, too, must have been arrived at with the projected rate of new build over these ten years in mind. In December 2015, when the NLF Rule was notified, one SDR was equivalent to about Rs 94, placing the maximum liability at that time at about Rs 2820 crore, a gap of Rs 1,320 crore beyond the operator liability. That was perhaps the underlying reason for setting a cap on the NLF at Rs 2,000 crore as a bridge amount. However, a lacuna in the provision is that while the maximum liability is predicated in SDRs, the NLF limit is predicated in rupees. Given the constant appreciation of the SDR due to the ever-weakening rupee, evident in 2015 itself, such a rupee-predicated cap leads to an increasing government liability over time. Also read: Nuclear Power from Thorium: No Hallelujah Moment Yet for HALEU as FuelThe current rupee equivalent of one SDR is Rs 136.60, which means that the maximum liability under the CLND Act would now stand at Rs 4,010 crore. With the NLF providing Rs 2,000 crore and assuming the operator liability of Rs 1,500 crore is met through the pool mechanism, there would still be a shortfall of over Rs 500 crore to meet the maximum liability, a gap the government would be forced to bridge.The SDR concernAs we shall presently see, the new Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act, 2025, which has replaced the Atomic Energy Act of 1962 and the CLND Act under one omnibus legislation, may make the situation worse. Given that the maximum liability for a nuclear incident remains pegged at 300 million SDRs, significantly reducing operator’s liability for most currently operational reactors as well as new-built Small Modular Reactors (SMRs) and Micro Modular Reactors (MMRs) by private players, increases the government’s liability due to the wider gap between the two. In 2010, when the CLND Act was passed, there were 19 operational reactors, and one about to go on stream, with three different thermal power ratings: 530 MWt BWRs (TAPS 1&2), 1700 MWt PHWRs (TAPS 3&4) and the rest at 754.5 MWt PHWRs, along with two 3000 MWt (KKPP 1&2) under construction. Despite this mix, the operator liability was pegged uniformly at Rs 1,500 crore, irrespective of the reactor capacity.A wider gapHowever, under the SHANTI Act, the operator liability is graded according to the nuclear plant’s thermal rating, a practice not followed globally. While there may be some logic to such a gradation, though it has not been spelt out in technical terms, slashing the operator liability for the same 220 MWe (754.5 MWt) PHWRs – which currently constitute the mainstay and bulk of the Indian nuclear power plants – by half from the Rs 1,500 crore prescribed under the CLND Act would seem to defy all logic. Only the 540 MWe PHWRs (of which there are only two), the 700 MWe PHWRs (likely to become the mainstay in coming years) and the 1000 MWe Russian VVERs/LWRs at Kudankulam attract the earlier operator liability of Rs 1,500 crore. The Indian nuclear establishment is, nevertheless, likely to argue that all Indian PHWRs have undergone major safety upgrades in the aftermath of Fukushima nuclear accident in 2011.Thus, under the SHANTI Act, the gap between the operator liability for a 220 MWe PHWR and the maximum liability widens to about Rs 3,250 crore, increasing the government’s liability, after accounting for NLF, to Rs 1,250 crore, unless the NLF is revived and more money is pumped into it. Also read: India’s Fast Breeder Reactor Goes Critical, Ready for Next Stage of Nuclear ProgrammeJust as Section 7(2) of the CLND Act, Section 14(2) of the SHANTI Act provides for an NLF to be established, but with a significant omission. Section 7(2) of the former read, “the central government may establish a fund to be called the Nuclear Liability Fund by charging such amount of levy from the operators, in such manner, as may be prescribed.” In the latter, however, the phrase italicised here is omitted, with an obvious view to improving the profitability of operators, especially new private players. What needs to be doneThe rules for the SHANTI Act are yet to be notified, which may happen during the monsoon session, according to sources. Whether they also include an appropriate rule to re-establish and shore up the NLF corpus remains to be seen.From the above discussion, it is clear that renewing the NLF is necessary, at least at the same cess rate if not higher. Moreover, the limit should be predicated in SDRs rather than in rupees. In fact, with multiple potential operators in the picture, as against only the government-owned NPCIL under the CLND Act, whether there should be any cap at all warrants a fresh look. If the limit is reached before a new operator enters, the latter does not have to bear any levy burden unlike earlier operators who did. Lastly, if the fund is exhausted following one accident, there would be no contingency amount to meet the liability in the event of another accident soon thereafter, notwithstanding the low probability for such an eventuality. R. Ramachandran is a science writer.