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BW Businessworld

TCS And Union Carbide: A Tale Of Double Standards

While the US continues to speak out against the Indian law on nuclear liability, it continues to slap firms with multibillion dollar fines

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A jury in the US state of Wisconsin has slapped a $940 million fine - $240 million of compensatory damages and $700 million of punitive damages - on one of India’s leading IT firms TCS for alleged violation of intellectual property. This amount is exactly twice the $470 million in compensation that US firm Union Carbide paid for the 1984 Bhopal gas tragedy, which has killed over 5,000 people and continues to kill. Moreover, going by statements of US officials and companies, American firms should enjoy a similar immunity from prosecution and no liability for compensation in case they end up causing a nuclear disaster in India.

India is one of the two large remaining markets for nuclear power – and a tantalizing prospect for Western firms such as Areva and Westinghouse, which are grappling with multibillion dollar losses and bankruptcy. What has kept them out so far is a clause in the Indian Civil Nuclear Liability Law, which holds an equipment supplier responsible for any incident caused either by the supplier or its employees. The Indian law was drafted in 2010, keeping in mind the experience of the Bhopal tragedy, where no-one was held criminally liable.

In 2011, Japan was hit by a devastating earthquake which led to a meltdown in three nuclear reactors at Fukushima. The total cost of the disaster – radiation cleanup and compensation - is expected to be over $100 billion. Cost of a potential disaster can be enormous, which is why the US companies, lobbyists and government officials are all keen to see the Indian law altered. Rather than say so plainly, the argument is couched in legal doublespeak ‘Indian law must be brought in line with international norms’ rather than a more honest ‘US companies must have immunity from prosecution for wrongdoing in India’.

The Indian nuclear liability law differs from the laws in other countries because it was drawn much later. After India tested its first atomic weapon in 1974, the US created nuclear technology/materials control regimes to lock India out of nuclear commerce. Countries such as Japan and Germany built their reactors in that era, at a time when risks of nuclear disasters were not so well understood. India was never a part of this commerce and had no need for such a law. This control regime changed after the 2005 India-US Civil Nuclear Agreement – which opened international nuclear commerce to India.

Post this agreement, the Indian government gave an in-principle approval for setting up six nuclear reactors each at two sites in cooperation with US firms Westinghouse and GE-Hitachi. At this stage, India needed a law governing nuclear commerce – which was drawn up keeping in mind India’s experience, including Bhopal, and hence the liability clause.

While the US continues to speak out against the Indian law on nuclear liability, it continues to slap firms with multibillion dollar fines. British Petroleum has paid penalties of over $20 billion following the oil spill in Gulf of Mexico in 2010. Bank of America has paid penalties of $16.65 billion for its role in the sub-prime crisis. HSBC paid a penalty of $1.9 billion for dealing with Iran, Sudan, Libya, Cuba and Burma – countries under US sanctions. Indian drug maker Ranbaxy paid a fine of $500 million for falsifying data and not following proper manufacturing practices.

Apart from their stand on the liability issue, the Western designed reactors are unviable on the cost front as well. Westinghouse is currently building its new design – the AP1000, which it also wants to sell to India – at a location in the US at a cost of $7.43 million (Rs 49 crore) per megawatt. Against this, the cost of the Russian designed reactors currently under construction at Kudankulam in India is Rs 20 crore per megawatt. India’s indigenously designed heavy water reactors are even cheaper at Rs 14 crore per megawatt. The electricity produced by the three reactors is the same – so there is no commercial logic in going for technology that costs 3 times more than the domestic, ‘make in India’ alternative.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Amit Bhandari

Bhandari is a media, research and finance professional. He holds a B-Tech from IIT-BHU and an MBA from IIM-Ahmedabad.

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