India’s SHANTI Act: Key Legal Considerations

Insurers will need clear liability limits, defined claims procedures, aggregation rules and certainty about when the State steps in where catastrophic loss exceeds available insurance capacity. Without this, nuclear risk will remain largely uninsurable in the private market.

July 03, 2026. By News Bureau

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Economic Laws Practice

Nuclear energy

Foreign capital

Compensation for Nuclear Damage

Intentional misconduct

The enactment of the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India Act, 2025 (SHANTI Act) has significantly changed the legal architecture of India’s nuclear sector. In view of India’s nuclear mission and ambitions, the SHANTI Act introduces a wider, regulated private participation in the nuclear sector. This progressive liberalisation necessitates a careful examination of the liability framework under the SHANTI Act, particularly, with respect to the obligations imposed upon operators and the remedial avenues available to affected parties.

Under Section 3 of SHANTI Act, Indian-incorporated companies, joint ventures, and other authorised entities may participate in specified civil nuclear activities such as construction, ownership, operation, and decommissioning of nuclear installations. This is provided subject to obtaining the requisite licenses. Licensing therefore remains the central legal gateway. A private participant does not acquire a right to enter the nuclear sector merely by satisfying ordinary corporate, financial or technical criteria. It must obtain governmental authorisation, comply with nuclear safety standards, maintain prescribed financial security or insurance, and remain subject to inspection, reporting, suspension and revocation powers. Entry is conditional upon adherence to nuclear safety standards, maintenance of prescribed financial security or insurance, and continuing subjection to inspection, reporting, suspension and revocation powers exercisable, by the statutorily empowered Atomic Energy Regulatory Board under Sections 28–31 of SHANTI Act. However, specific functions like nuclear materials, reprocessing, radioactive waste and security-sensitive technology remain exclusively under control of the State under Section 3 of SHANTI Act.

The position on foreign capital also requires careful attention. The SHANTI Act does not itself provide for foreign direct investment; existing Indian law continues to prohibit FDI in atomic energy. As of 10 December 2025, the Department of Atomic Energy stated during the Winter Session of Parliament that no change has been made to the extant FDI rules.

On the liability side, the SHANTI Act adopts exclusive operator liability with an overall ceiling of rupees equivalent to 300 million SDRs per nuclear incident, or such amount as the State may specify under Section 13(1) of SHANTI Act, with graded operator liability caps linked to reactor capacity set out in the Second Schedule of the SHANTI Act. The operator's right of recourse is narrowly circumscribed to situations involving express contractual provisions or intentional misconduct under Section 16, effectively aligning India's nuclear liability framework with the 1997 Convention on Supplementary Compensation for Nuclear Damage (CSC) and dispensing with the expansive supplier recourse introduced by Section 17(b) of the Civil Liability for Nuclear Damage Act, 2010.

Insurers will need clear liability limits, defined claims procedures, aggregation rules and certainty about when the State steps in where catastrophic loss exceeds available insurance capacity. Without this, nuclear risk will remain largely uninsurable in the private market. It becomes critical for transaction documents to draw a clear line between economic rights and operational control. Drafting considerations will include a close review of encompassing licensing approvals, foreign investment clearances, security clearances, environmental consents and grid access. Similarly, EPC and supply contracts must be structured to incorporate nuclear-grade quality standards, alongside robust provisions for audit rights, component traceability, defect reporting, and long-term warranty protection.