The Indian nuclear energy landscape has undergone its most significant structural transformation in over six decades. Following its passage by both Houses of Parliament, the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India Bill, 2025 received Presidential assent, officially transitioning into the SHANTI Act, 2025 (SHANTI Act).

The SHANTI Act effects a comprehensive consolidation of India's nuclear legal framework by repealing the Atomic Energy Act, 1962 and the Civil Liability for Nuclear Damage Act, 2010 (CLND Act) while representing a paradigm shift from a sovereign-controlled model to a regulated commercial market.

We set out below our views on the key reforms, with a particular focus on private sector participation and liability allocation.

Opening the Sector for Private Participation

The SHANTI Act allows private Indian companies to apply for:

1. licences to build, own, and operate nuclear power plants,

2. licences for fuel fabrication, and

3. safety authorisations.

This marks a departure from the earlier regime, under which only Central Government entities could own and operate such assets.

Foreign players still cannot apply for licences directly. However, foreign participation could be structured through Indian-incorporated companies and/or permitted partnership models, subject to approval from the Central Government.

Spent Fuel and Backend Control Retained with Government

While private licensees are now allowed in front-end activities such as generation and fuel fabrication, ownership and control of spent fuel, reprocessing, enrichment, and heavy water production is reserved to the Central Government (subject to any notified exceptions).

Similarly, uranium and thorium mining remains restricted to the Government and Government-controlled corporations. Private parties discovering such resources must report and surrender them.

Amendment to Liability Regime for Nuclear Damage

The SHANTI Act preserves the principle of "strict liability" of the operator but replaces the flat cap under the CLND Act, 2010 with a tiered liability structure. This calibrated approach is designed to encourage diverse project scales, particularly Small Modular Reactors (SMRs):

1. Reactors > 3600 MW (thermal): Liability capped at INR 3,000 crore (a 100% increase from the INR 1,500 crore limit under the previous regime);

2. Reactors > 1500 MW and up to 3600 MW (thermal): Liability capped at INR 1,500 crore;

3. Reactors > 750 MW and up to 1500 MW (thermal): Liability capped at INR 750 crore;

4. Reactors > 150 MW and up to 750 MW (thermal): Liability capped at INR 300 crore;

5. Reactors up to 150 MW (thermal) and certain fuel-cycle facilities (excluding spent fuel reprocessing plants) and transport of nuclear materials:  Liability capped at INR 100 crore.

The Central Government is also empowered to exempt certain facilities or materials from liability obligations if the risk involved is deemed “insignificant”. This could enable flexibility for experimental R&D setups or fusion labs.

Clarification of Operator’s Right to Recourse (Section 17)

The SHANTI Act addresses a primary concern for global OEMs by narrowing the expansive "Right to Recourse" granted to the operator of a nuclear installation under Section 17(b) of the CLND Act, 2010.

Previously, a supplier could be held liable for "sub-standard services" or "latent defects" without any requirement of intent or wilful misconduct: a provision that deviated from international standards and hindered foreign participation. This expansive exposure was widely viewed as a departure from international channeling practice that materially impacted bankability and supplier risk appetite for Indian nuclear projects.

The SHANTI Act restores the principle of liability channeling by narrowing the operator’s right to recourse to only two exhaustive scenarios: (i) where a right of recourse is expressly incorporated into the written contract between the operator and the supplier; (ii) where the incident results from an act of commission or omission performed with the specific intent to cause nuclear damage.

By removing the vague "sub-standard services" threshold, the SHANTI Act aligns Indian law with the Convention on Supplementary Compensation. This amendment provides the necessary legal certainty for technology providers to participate in the Indian market without the threat of open-ended statutory indemnity claims.

Fusion – No Separate Regime Carved Out

While the SHANTI Act is a landmark for the fission industry, it does not expressly carve out a fusion-specific licensing pathway distinct from fission.

Globally, the regulatory tide has already turned. In 2023, the United States Nuclear Regulatory Commission made the decision to regulate fusion energy not as a "utilization facility" (like high-risk fission plants), but under a lighter touch "byproduct materials" framework, essentially treating fusion devices with the same risk profile as medical particle accelerators. Similarly, the UK Energy Act 2023 legally carved out fusion from the restrictive licensing requirements of the Nuclear Installations Act, with a proportionately relaxed regulatory approach proposed through alternative frameworks.

Allowing patents for inventions – promoting R&D

The SHANTI Act now expressly permits patents for peaceful applications of atomic energy, subject to national security/sensitivity exclusions. This is a shift from the Atomic Energy Act, 1962 which barred patent protection for any invention related to atomic energy, thereby discouraging private sector R&D and investment.  Private investors can now seek protection for proprietary reactor designs, SMR components, and fuel fabrication techniques, providing the necessary incentive for domestic innovation.

Electricity Supply from Private Nuclear Plants

The SHANTI Act recognises private licensees for nuclear power generation but does not specify the modalities through which electricity generated by such licensees can be supplied.

However, key design choices signal an intent to align certain institutional features with the broader power sector framework:

1. The Atomic Energy Redressal Advisory Council constituted to review any applications under the SHANTI Act will include the Chairperson of CEA (aligning nuclear with power sector planning), and

2. Appeals from such Council’s decisions will lie before APTEL, placing nuclear disputes in the same hands as the rest of the Indian power sector.

At the same time, the Act contemplates Central Government-notified tariff mechanisms for nuclear power, notwithstanding the Electricity Act, 2003. Accordingly, while operational integration with the power sector is evident, the extent of merchant/market participation (if any) will depend on the notified tariff and offtake frameworks.

This update has been contributed by Ankur Arora (Partner).

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