New Build

As India’s energy needs shoot skyward, Prime Minister Manmohan Singh has left little doubt that nuclear energy is considered the key way forward.

By Nick Jones

For decades a nuclear pariah, due to its weapons tests of 1974, India struck a deal with the United States that brings it back to the mainstream of trade in fuel and equipment.

A stream of interest is turning into a flood.

On the heels of visits by the prime ministers of France and Russia, India’s state-run nuclear energy firm, Nuclear Power Corporation of India Limited (NPCIL), has signed deals with Areva, GE Hitachi, Westinghouse and Atomstroiexport this year.

Major engineering firms, such as Larsen & Toubro (L&T) and Bharat Heavy Electricals Limited, have set up joint-ventures with Western counterparts.

Delhi has signed further deals with Canada and Russia over equipment and Namibia, Uzbekistan and Mongolia over fuel.

More deals are in the pipeline - and with due reason.

Addressing an industry audience in November, Singh said that installed capacity could rise from 4,000 megawatts (MW) at present to as much as 470,000MW by 2050.

That would add up to dozens of new reactors and more than half of national power generation.

Grand plans

According to Robert Upton, a South Asia expert at Oxford University, the change dates to US President George Bush’s decision to use nuclear energy as a tool to draw India into a closer ‘strategic embrace’.

“India is an energy-hungry nation still clocking growth of nearly 8% per year,” he says.

“We’re now seeing the results of the 2006 US deal, as fuel and technology flood in from companies globally.”

A series of ‘nuclear parks’ is planned, typically with a cluster of eight reactors, but with flexibility for further expansion.

The key sites include Jaitapur in Maharashtra, Mithi Virdi in Gujarat and Haripur in West Bengal.

While NPCIL has a legal monopoly on owning and maintaining plants, it has invited private bids to help it ramp up capacity, even as the government considers a bill to authorise private ownership.

Powerful interest groups within India have put their weight behind the policy.

In October, the Federation of Indian Chambers of Commerce and Industry (FICCI) called for investment of $100bn over 25 years, urging private sector participation to this end.

Other business groups argue that erratic and expensive power supply is holding back the manufacturing sector, and that India will never meet its environmental goals - which include cutting carbon output per unit of GDP 20-25% by 2025 - without first smoothing the way for nuclear power.

Hidden dangers

The excitement was palpable on November 13-15 when local and foreign officials gathered in Mumbai for the India Nuclear Energy 2009 trade fair.

However, some experts also warn of potential problems ahead.

Siddharth Srivastava, a political analyst in Delhi, points to a growing trend for opposition parties and local protest movements to block the purchase of land for industrial use.

“Given the experience of Tata Group, which had to shelve its plans to build the Nano car in West Bengal, land purchases will need to be handled delicately,” Srivastava says.

“There have been protests at the Haripur and Jaitapur sites in the recent past,” he adds. “In West Bengal, the Trinamool Congress party has spoken against acquisition of ‘fertile agricultural land’.”

Western firms face another potential difficulty in their relations with local partners.

The handful of firms with requisite skills and experience are finding that they have multiple suitors and can demand a high price.

As with joint ventures in other growth sectors - such as the defence industry - Indian firms are seeking guarantees that the partnerships will result in transfer of valuable technology.

Examples are engineering majors L&T and Bharat Forge, which struck agreements with Atomstroiexport and Areva, but with a clear eye to building their own market position.

The two firms are each seeking to tap export markets themselves, selling casings and components for use in smaller countries.

Political climate

Private firms, whether from India or abroad, are also watching the key issue of liability insurance as they size up their prospects for growth.

While the government has drafted a nuclear energy bill, this may not reach parliament until well into 2010, and will face robust questioning from sceptics within the governing Congress party and in opposition.

Of particular controversy is a proposed $450m cap on the damages a firm would have to pay in the event of a nuclear accident.

Private contractors will struggle to get operating insurance without the provision, but some MPs think liability should not be capped at all.

A November 29 leak at a plant in Tamil Nadu, blamed by Atomic Energy Commission Chairman Anil Kakodkar, on a disgruntled employee, only adds to the climate of concern.

According to Srivastava, progress on the government’s plans is likely but not certain.

“Right now the nuclear energy programme has the backing of Prime Minister Singh, due to which things are moving quickly,” he says.

“Yet Western firms need to be careful not to make any mistake when the processes are at infancy.”

“For example, any slip up on safety could change the political climate overnight,” Srivastava adds.

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