By Satyadarshi Kunal, Partner, Projects, Project Finance and Banking & Finance, CMS INDUSLAW
The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act, 2025, marks a historic shift in India’s nuclear power policy. For the first time in over six decades, private Indian companies and joint ventures can participate in building, owning, operating and decommissioning nuclear power plants, subject to licensing and continuing regulatory control.
Now, the question is how the implementing framework can give developers, suppliers and lenders the confidence to commit capital.
Implementation has begun
The Department of Atomic Energy has placed the draft SHANTI Rules and draft SHANTI Regulations in the public domain for consultation.
The SHANTI Act consolidates the earlier atomic energy and civil nuclear liability framework into one statute. Commercially, it does four important things: creates a licensing route for eligible private Indian entities and joint ventures; gives statutory recognition to AERB; restructures operator and supplier liability; and preserves sovereign control over sensitive functions such as enrichment, spent fuel management, heavy water production and isotopic separation. Foreign companies cannot directly hold nuclear licenses; participation by overseas technology providers will therefore have to be routed through Indian-incorporated structures or contractual supply and technology arrangements.
For project developers, the remaining questions are about approval processes and timelines.
Liability is clearer, and still evolving
The most significant legal reform involves nuclear liability. The earlier supplier recourse risk under the Civil Liability for Nuclear Damage Act, 2010 was a material investor and supplier concern. The SHANTI Act narrows the operator’s right of recourse against suppliers to two situations: where recourse is expressly agreed upon in writing, or where nuclear damage results from an individual’s intentional act. In commercial terms, supplier exposure moves from a broad statutory risk to a negotiated contractual allocation.
The Act also replaces the earlier flat liability cap with a tiered, capacity-linked structure, which is particularly relevant for small modular reactors. Private operators must carry insurance, while liability beyond the scheduled amount is to be backed by the Central Government and the Nuclear Liability Fund. This should support bankability. At the same time, a writ petition before the Supreme Court has challenged several provisions of the SHANTI Act, including liability provisions, and the Court’s consideration of compensation thresholds and supplier liability will be relevant for future risk allocation.
FDI: Still awaiting formal notification
As of now, foreign investment in atomic energy remains prohibited under the existing FDI framework, and the SHANTI Act does not itself amend that position. A Press Note and a corresponding notification under the Foreign Exchange Management (Non Debt Instruments) Rules, 2019 will be needed before foreign investors can subscribe to equity in an Indian nuclear project company.
The reported policy direction is to permit foreign investment of up to 49 per cent in specified nuclear activities. However, that permission is not law until formally notified.
Bankability will decide the first project
For lenders, financing will depend on whether the final framework answers six bankability questions: predictable licensing timelines; insurable and stable liability exposure; credible tariff setting or tariff discovery arrangements; bankable long-term offtake; clarity on foreign ownership and technology support; and coordinated approvals.
Bankability will also turn on how risk is shared over the life of the project. Lenders will look for clear milestones that allow debt to be drawn in stages, realistic provisions for construction delay, access to insurance at workable premiums, and a dependable liability fund or government backstop for risks that the private market cannot efficiently absorb. They will also assess track record of chosen reactor technology, reliability of fuel supply, and continuity of foreign technology.
Tariff and offtake will be equally important commercial pillars. The Act gives the Central Government the power to fix nuclear electricity tariffs, notwithstanding the Electricity Act, 2003.
All in all, the first private project will be enabled not only by legislation, but by the final rules, a notified FDI framework, a legally durable liability regime, workable insurance, transparent tariff and off-take arrangements, and a coordinated approval pathway.