India’s Supreme Court is reviewing the legality of the ₹3,000 crore liability cap for nuclear accidents under the new SHANTI Act, 2025. This legal challenge creates uncertainty for the nuclear energy sector, as potential investors evaluate the financial risks of entering the market.
The Supreme Court of India on Monday expressed concerns regarding the legal liability limits for nuclear accidents set by the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act, 2025. A bench led by Chief Justice of India Surya Kant issued a notice to the Union government and the Atomic Energy Regulatory Board (AERB) to clarify provisions that cap operator liability at approximately ₹3,000 crore.
The SHANTI Act, which replaced older regulations, is a cornerstone of India’s push to expand its nuclear power capacity to 100 gigawatts by 2047. The government introduced these liability caps to encourage private companies and foreign entities to enter the nuclear energy sector. The core logic was to provide a predictable financial framework, as unlimited liability is often seen as a significant barrier for companies considering large-scale nuclear projects.
However, the Supreme Court is now examining whether these legislative limits interfere with the ability of constitutional courts to ensure fair and just compensation for victims in the event of an accident. During the hearing, the Court remarked that parliamentary caps do not automatically prevent the judiciary from determining appropriate compensation for legal wrongs, also known as torts. This observation raises questions about whether the current liability framework provides sufficient protection for the public.
The petitioners, including former bureaucrats and scientists, have argued that the ₹3,000 crore limit is too low to cover the massive potential damages caused by a nuclear disaster. They contend that such low caps might lead plant operators to prioritize cost-cutting over safety, thereby increasing the risk of accidents. Additionally, the petitioners raised concerns regarding the independence of the AERB, specifically questioning whether the current appointment process for board members might lead to conflicts of interest.
For investors, the legal challenge introduces a layer of uncertainty for the nuclear energy sector. The success of the government’s 100 gigawatt goal depends heavily on attracting private investment, which requires a clear and stable regulatory environment. If the Supreme Court eventually decides that the liability caps are unconstitutional or requires them to be revised, companies planning to build or supply nuclear power plants could face unpredictable financial liabilities. This would significantly change the risk-to-reward calculation for potential projects.
The immediate next steps for the sector will be to monitor the government’s response to the Supreme Court’s notice. Investors and industry participants will be watching for clarity on whether the liability framework will remain as currently written, or if the government will need to provide further assurances or adjustments to maintain private sector interest in the nuclear expansion plan.