The Supplier Who Need Not Care: The SHANTI Act and the Economics of Forgetting

Every liability law is quietly a theory of who should take care. The SHANTI Act, 2025 opens India's nuclear power sector to private operators, repeals the Atomic Energy Act, 1962 and the Civil Liability for Nuclear Damage Act, 2010, and in doing so answers that question differently. The operator remains strictly liable. The supplier, for practical purposes, steps out of the frame: the operator may now seek recourse only where a written contract expressly provides for it, or where the incident was intentionally caused.

The change is defended as alignment with international practice and as a cure for the wariness of foreign vendors that kept India's nuclear deals on paper for fifteen years. Both claims are true. Neither engages with what the old provision was actually for.

Channelling was never the problem

Liability channelling, the rule that victims sue only the operator, was designed in the 1960s to make reactors insurable and compensation quick: one defendant, one insurance pool, no litigation across supply chains. India kept that rule under the 2010 Act. Victims never had a direct claim against suppliers.

What India added, through Section 17(b), was something narrower and deliberate: the operator's statutory right to recover from a supplier whose defective equipment or services caused the accident. It was written in the long shadow of Bhopal, where questions of design and corporate responsibility took decades to litigate. Its target was not compensation but conduct. It kept the person who designs the reactor financially present at the moment the design fails.

The cheapest cost avoider has left the room

Law and economics has a blunt test for allocating accident costs: place them on the party who can prevent the harm most cheaply. For a latent design or manufacturing defect, that party is the supplier. The operator can inspect, maintain and run the plant well, but it cannot re-engineer a pressure vessel or audit a vendor's metallurgy.

Statutory recourse was the channel through which design risk flowed back to the designer. Under the new regime it flows back only if the operator negotiates it into the contract. That converts a safety question into a procurement question, decided by bargaining power. A first-time private Indian operator buying from an established global vendor is not well placed to win that clause, as commentators have noted in tracing the shift away from the 2010 framework. The law has not removed design risk; it has made its allocation depend on who negotiates better.

Insurance does not close the gap. An operator's policy and the national insurance pool price the operator's exposure. They cannot reach, and therefore cannot discipline, the supplier's choices on the factory floor.

Where the risk goes instead

Risk that leaves the supplier does not disappear. It lands, within the new tiered caps, on the operator; above them, on the Central Government; and beyond both, on victims and taxpayers.

That last step has a constitutional edge. In M.C. Mehta v. Union of India, the Supreme Court held enterprises engaged in hazardous activity absolutely liable and tied compensation to their capacity to pay. Whether a statutory cap can confine what a constitutional court awards under Article 21 is now a live question before the Supreme Court. The answer will decide whether the cap is a ceiling on victims or merely a ceiling on insurers.

There is a further irony. The Act has been criticised for overriding the Right to Information Act. Accountability for suppliers now lives almost entirely in private contracts, and those contracts sit behind a wall the public cannot see through. Recourse has moved to the one place scrutiny cannot follow.

A narrower fix

None of this requires reviving the old provision wholesale, which genuinely chilled investment. A middle path exists: a statutory default right of recourse for latent design and manufacturing defects, capped at a multiple of the supply contract's value and insurable on the vendor side. Suppliers would gain a known, priced exposure in place of open-ended risk; the law would regain a deterrent aimed at the party best placed to prevent failure; and contracts could still allocate risk above the default, but not below it. Channeling should tell victims whom to sue. It should never tell suppliers that they need not care.

Author: Ishanvi Prabhu

Maharashtra National Law University (MNLU), Nagpur