Manmohan selling India short By: Varun Gupta In an epic charade, Manmohan Singh staked his political career on the India-US nuclear pact in 2008. It was always known he would be able to gather the required votes, notwithstanding the fierce opposition. He had the Central Bureau of Investigation at his disposal to both threaten and reward opposition with and stash of cash to buy votes. One does not need to go back in history to see how it works — CBI announced on September 19 that the agency would close the investigation against Mulayam Singh Yadav in the disproportionate assets case as it failed to gather enough evidence. Mulayam had very recently supported the Food Security Bill after leading a fierce campaign against the same Bill earlier. I am sorry but I digress — lets come back to the nuclear pact. The nuclear deal was formally signed with the US in October 2008. Five years later, the Government has no progress to show. Just like we are yet to see a single dollar of FDI in retail after the Government made that a cornerstone of its reform package. Clause regards the liability of suppliers in the event of a disaster remains controversial. US suppliers prefer they are not held liable or at least their liability be limited in a disaster while the nation demands suppliers to be joint and severally liable for the claims without any limits. It would be useful to review the context in which this disagreement exists: The standard global rule is that in a disaster, the operator of the plant is liable for damages. For example, Tokyo Electric Power Co. (TEPCO), operator of the Fukushima nuclear plant subject of the 2011 disaster, is currently the sole liable party and holding compensation for the victims. Japanese law limits the liability of a nuclear disaster to the operator. Most often, the liability of an operator is limited to the extent of insurance coverage or at a certain amount (I am not aware of any operator made liable for more than $2 billion) implying the taxpayers end up picking the tab for damages beyond insurance coverage. Truth is, even if the liability of an operator is made unlimited, the operator could never be expected to have the financial capacity to pay all the costs. The cost of the Fukushima disaster is estimated at $250 billion which TEPCO clearly can’t pay, leaving the Government to pick up the bulk of costs. It is in this context that Russia, India and South Korea have legislation in place holding the suppliers liable. Argument against suppliers to be made liable are solely around their inability to control a plant’s operations once it is commissioned. A poor operator or an error in judgement by the operator can cause or aggravate a disaster even if the plant has the best of equipment and design. It’s difficult to argue in favour of or against the two positions. Both have their merits and flaws. Howsoever complex the situation may sound, the solution, as always, is fairly simple and rooted in a common sense approach. In the event of an accident, the party which is at fault, pays for the damages. If an accident occurs due to faulty equipment or defective design, the suppliers must be held accountable. If the accident is as a result of operator’s negligence, the operator should be held liable. Government, on its part, should not be trying to take sides one way or the other. Of course, if the cost of a disaster is so huge that all parties at fault can’t pay for the damages, the taxpayers would end up paying for the balance. But at least those at fault would be held accountable under such an approach. Any legislation that limits the liability of one party is bound to incentivise the protected party not to exercise the requisite caution. The Fukushima reactor was built by all the three leading suppliers — GE, Hitachi and Toshiba. The reactors were built on GE’s Mark I reactor design which was known to have concerns that the reactor containment may fail during a major accident. The concern proved correct in 2011. However, the Japanese law ensures the three escape liability for their negligence. When Prime Minister Singh visits President Obama next month, it should not be all that difficult for him to hold his ground and persuade the Americans to accept this common sense solution rooted within the American Law. In the 2011 Deepwater Horizon oil-rig disaster, Transocean agreed to its fault and contributed $1.2 billion into the settlement. Transocean built and staffed the rig which was leased by BP. While BP is the main culprit and is picking up a huge bill for rebuilding the gulf and compensating victims, it is making sure other parties at fault are held accountable as well. BP is separately pursuing claims against Haliburton. Another example: Firestone tyre company had to contribute to settlements involving Ford Explorer rollovers for they supplied the faulty tyres responsible for the rollover of vehicles. Just like Firestone as a supplier was held liable with Ford for settlements, a supplier of reactor be held liable with the operator if the equipment or design is found lacking. Let us all hope Manmohan Singh would not sell the nation short to pursue a deal. If he does, we all know he would gather enough votes to railroad it through the Parliament — CBI is still at his disposal.
Posted on: Sat, 28 Sep 2013 05:22:38 +0000
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