India's Nuclear Energy Expansion and the Role of Private Capital

India's nuclear energy sector is undergoing a seismic transformation, driven by the passage of the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act, 2025. This landmark legislation, which replaces the Atomic Energy Act of 1962 and the Civil Liability for Nuclear Damage Act of 2010, marks the first time in decades that private and foreign entities can legally participate in India's civil nuclear sector. With ambitions to scale nuclear capacity from 8.8 gigawatts (GW) to 100 GW by 2047, the reforms aim to position nuclear energy as a cornerstone of India's net-zero strategy while reducing reliance on coal. However, the viability of private and foreign capital in this sector hinges on navigating regulatory clarity, geopolitical risks, and the financial realities of capital-intensive projects.

Regulatory Reforms and Private Sector Access

The SHANTI Act introduces a calibrated liberalization of India's nuclear framework, permitting private firms to build, operate, and decommission nuclear power plants, as well as engage in nuclear fuel fabrication and technology exports. Foreign participation is allowed through joint ventures, with up to 49% foreign equity, though foreign-owned companies cannot operate directly. Strategic functions such as uranium enrichment and spent fuel reprocessing remain under government control, ensuring sovereign oversight of critical nuclear materials.

A pivotal change is the restructuring of liability rules. Under the previous regime, operators faced strict no-fault liability with caps tied to reactor thermal capacity. The SHANTI Act replaces this with a tiered liability cap ranging from ₹100 crore to ₹3,000 crore, depending on reactor size, and shields suppliers from liability unless explicitly stated in contracts. This aligns India with international norms, such as the Paris and Vienna conventions, and addresses a major barrier to foreign investment. For instance, U.S. firms like Holtec International have already expressed interest in supplying Small Modular Reactors (SMRs) to India, with the U.S. Department of Energy authorizing technical collaboration.

The Act also establishes the Nuclear Damage Claims Commission, a non-adversarial body to expedite compensation claims, and grants the Atomic Energy Regulatory Board (AERB) statutory authority to enforce safety standards. These measures aim to build investor confidence by providing a predictable regulatory environment.

Geopolitical Risks and Foreign Investment Challenges

Despite these reforms, geopolitical dynamics pose significant risks. India's nuclear expansion relies heavily on imported uranium and reactor components, making it vulnerable to supply chain disruptions. For example, tensions between the U.S. and China have indirectly influenced India's energy partnerships. The U.S. has positioned itself as a key ally, with reports indicating its readiness to collaborate on nuclear innovation and R&D. Conversely, China's restrictive investment policies and strategic competition in South Asia have pushed India to diversify its energy partnerships.

Global geopolitical shifts, such as tariffs and competition for rare earth minerals, further complicate the landscape. A KPMG report highlights that energy sectors are particularly susceptible to these trends, requiring India to balance its strategic alliances while securing long-term supply chains. Additionally, India must navigate its relationship with China, a major player in renewable energy manufacturing, to avoid overreliance on Western technologies.

Private Capital Viability: Opportunities and Hurdles

The SHANTI Act's reforms have already spurred interest from international players. U.S. companies like Holtec and Westinghouse, as well as European firms such as EDF, are exploring partnerships with Indian entities. For example, Holtec International has received authorization to share technical data for its SMR-300 reactor design, signaling a potential collaboration. Meanwhile, India's government has identified 16 sites for SMR deployment, with private firms like Tata Power and Reliance Industries entering the sector.

However, challenges persist. Nuclear projects require massive upfront investments, with construction costs estimated at ₹16–20 crore per megawatt. Private firms, many of which lack experience in nuclear operations, must develop technical expertise to manage these projects. Critics also argue that liability caps-while aligned with international standards-may still be insufficient for large-scale accidents, such as those seen in Fukushima or Chernobyl. Establishing a Nuclear Liability Fund to cover claims exceeding operator caps could mitigate this risk, but such mechanisms remain untested.

Conclusion: A Calculated Path Forward

India's nuclear energy ambitions present a compelling opportunity for private and foreign capital, particularly as the SHANTI Act aligns the sector with global regulatory norms. The U.S.-India strategic partnership, coupled with India's push for SMRs and energy security, creates a favorable environment for investment. Yet, geopolitical uncertainties, high capital costs, and operational complexities necessitate a cautious approach. For investors, success will depend on navigating India's evolving regulatory framework, securing long-term partnerships, and addressing the sector's inherent risks. As India moves toward its 100 GW target, the interplay between regulatory innovation and geopolitical strategy will define the viability of private capital in this transformative energy sector.