Indian nuclear liability rules make SNC Lavalin wary

A Royal Canadian Mounted Police (RCMP) officer looks at a receptionist at the headquarters of SNC Lavalin in Montreal April 13, 2012.

BANGALORE, India (Reuters) - Despite the high-profile nuclear agreement this week between Canada and India, Canadian engineering firm SNC Lavalin Group Inc (SNC.TO) will not be rushing to build reactors in India until its concerns over liability are addressed.

SNC Lavalin International President Ronald Denom told Reuters on Thursday that his company would proceed cautiously in light of Indian liability rules, which have so far sidelined U.S. companies such as General Electric Co (GE.N).

"SNC Lavalin takes a very conservative approach to such issues and will proceed with caution until such time that we are satisfied that the matter has been clarified and our concerns have been addressed," Denom said.

Indian nuclear liability rules oblige firms rather than the Indian state to pay for the damage from an industrial accident, making some companies question whether it is worth it.

The issue involves legalese but could be critical to India's ambitious plans to expand vastly its nuclear energy production to fuel a fast-growing economy and expanding middle class.

India aims to lift its nuclear capacity to 63,000 megawatts in the next 20 years by adding nearly 30 reactors. The country currently operates 20 mostly small reactors at six sites with a capacity of 4,780 MW, or 2 percent of its total power capacity, according to the Nuclear Power Corporation of India Limited.

India had been isolated for years over its atomic programme following nuclear weapons tests in 1974 and 1998.

A landmark nuclear energy deal signed in 2008 between Washington and Prime Minister Manmohan Singh's government set the pace for Canada and others.

Canada reached a nuclear cooperation deal in 2010, and this week Singh and Canadian Prime Minister Stephen Harper announced the conclusion of negotiations on rules that should soon enable the supply to India of uranium and reactors.

Denom accompanied Harper's delegation for part of his November 4-9 visit to India, and told Reuters soon after the Canadian-Indian announcement on Tuesday that SNC Lavalin would normally now request that Canada be accorded the same treatment as the Russians, the French and the Americans and that a site be designated in India for the implementation of at least a twin-unit nuclear power station.

SNC Lavalin has a division that produces Candu reactors, which were once made by the Canadian government and which have been sold around the world.

In an email exchange on Thursday, Denom said the company was "seeking further clarification as to the application and reach of the Indian Civil Liability for Nuclear Damages Act" and associated rules.

"This law and rules have never been tested in court and there is some difference of opinion among legal experts as to the limits of liability of companies that were suppliers to the plant operator, in the case of a nuclear accident," he said.

He said Canada's government trade promotion agency Export Development Canada would not take on the liability for SNC Lavalin.

"Certain risks may be covered by instruments such as errors and omissions insurance but a detailed study is necessary to determine that all risks have been properly identified and, where possible, mitigated," he said.

General Electric is also clear it will not engage in nuclear activity in India until the liability rules are brought up to international standards.

(Reporting by Randall Palmer; Editing by Dale Hudson)