India’s SHANTI Act and the Opening Up of Nuclear Power: Promise, Pitfalls, and the Road Ahead

India’s nuclear sector is undergoing its most consequential reform since the Atomic Energy Act of 1962. The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act dismantles six decades of state monopoly, invites private participation, and seeks to align India’s nuclear framework with global norms. While the legislation marks a decisive shift, its success will hinge on how unresolved regulatory, liability, and pricing questions are settled.

Why the SHANTI Act Is Being Seen as a Turning Point

Since independence, India’s nuclear energy programme has been tightly controlled by the State, largely through the Atomic Energy Act of 1962. While this ensured strategic oversight, it also limited scale, innovation, and private capital. The SHANTI Act breaks with this legacy by introducing a licence-based regime that allows private companies to generate nuclear power, subject to regulation.

Equally significant is the move to give the Atomic Energy Regulatory Board a statutory and ostensibly independent footing. For investors and foreign suppliers, regulatory credibility is as important as technology or finance, and the Act attempts to address a long-standing deficit in this area.

Civil Nuclear Liability: The Biggest Structural Shift

The most far-reaching reform lies in the overhaul of civil nuclear liability. The Civil Liability for Nuclear Damage Act, 2010, shaped by the shadow of the Bhopal gas tragedy, had made India an outlier. Section 17(b) allowed plant operators to seek recourse against equipment suppliers, diverging sharply from international conventions and deterring participation by American, French, and Japanese firms.

The SHANTI Act narrows supplier liability to two situations: where recourse is explicitly provided for in a contract, or where damage results from intentional acts. This brings India broadly in line with the Convention on Supplementary Compensation and removes a major stumbling block for stalled projects such as Jaitapur Nuclear Power Project and Kovvada Nuclear Power Project.

The Missing Definition That Still Clouds Liability

One critical gap remains unresolved: the Act does not define who qualifies as a “supplier”. Earlier proposals had suggested distinguishing between manufacturers, designers, and quality assurance providers across the supply chain. Without such statutory clarity, uncertainty persists over how liability will be apportioned, particularly in complex projects involving multiple vendors and advanced technologies.

For overseas suppliers and insurers, this residual ambiguity could still translate into perceived risk, undercutting the confidence the reform is meant to generate.

Regulatory Uncertainty and Investor Confidence

Beyond liability, the Act leaves many substantive details to future rules. Terms such as “sensitive activities”, “strategic nature”, and matters involving “national security implications” are not defined. This matters because activities deemed sensitive may be excluded from patent protection or subjected to alternative regulatory regimes.

For start-ups and firms developing small modular reactors (SMRs), this uncertainty could deter R&D investment. Innovators may hesitate if there is no clarity on whether their intellectual property could ultimately vest with the central government.

Multiple Regulators and the Risk of Fragmentation

Section 25 of the Act allows for the creation of additional regulatory bodies for activities deemed “strategic”. While extra oversight may be justified in certain circumstances, the open-ended nature of this provision raises concerns. Investors may find themselves subject to shifting or parallel regulatory regimes, complicating compliance and increasing project risk.

International experience suggests that predictability, rather than discretionary oversight, is what sustains long-term investment in sensitive sectors like nuclear power.

Is the Nuclear Regulator Truly Independent?

Although the SHANTI Act strengthens the statutory basis of the AERB, questions remain about its autonomy. Member selection is routed through a committee constituted by the Atomic Energy Commission, which itself functions under the Department of Atomic Energy.

In contrast, regulatory best practices in India—such as those recommended by the Financial Sector Legislative Reforms Commission—favour independent search committees with expert and judicial representation. How the rules frame this selection process will be crucial in determining whether the regulator is perceived as genuinely independent or administratively subordinate.

Pricing Power and the Electricity Act Dilemma

Perhaps the most contentious provision is Section 37, which vests pricing authority for nuclear electricity in the central government, overriding the Electricity Act, 2003. This creates an anomaly in India’s power sector, where electricity pricing is otherwise governed by well-established regulatory mechanisms.

There is no technical reason to treat nuclear-generated electricity differently once it enters the grid. Administered pricing risks burdening financially stressed discoms with expensive power, undermining both nuclear expansion and power sector reform.

A Market-Based Alternative for Nuclear Power

Nuclear power’s high cost is precisely why market-based solutions may work better than fixed tariffs. Large industrial consumers, data centres, SEZs, and global capability centres seeking reliable, round-the-clock clean energy are natural buyers, especially for SMRs.

Allowing private nuclear generators to directly contract with such consumers—similar to emerging models in offshore wind—could unlock demand without distorting discom finances. Legislative amendment to Section 37, or at least exemptions for private-to-private transactions, could provide a pragmatic path forward.

The Reform’s True Test Lies Ahead

The SHANTI Act lays down a bold and overdue legislative foundation. But laws alone do not transform sectors. The next phase—rulemaking, regulatory design, and tariff policy—will determine whether India can translate legal reform into operational nuclear capacity.

If uncertainty persists on liability, regulation, and pricing, investor enthusiasm may fade. If addressed with clarity and restraint, the Act could finally allow nuclear energy to play a meaningful role in India’s climate commitments, energy security, and technological advancement.