Raison d’etre for private sector role in nuclear power generation in India

 Stepping Out

 

India’s Union Cabinet has confirmed two coastal sites as being reserved for nuclear power parks of up to eight US-origin reactors each. These are at Mithi Virdi in the Saurashtra region of Gujarat state, and Kovada in Andhra Pradesh. GE Hitachi and Westinghouse are in the frame to provide a number of their ABWR or AP1000 reactors on each site. The Indian government confirmed that Jaitapur in Maharashtra state were reserved for six French EPR units, while Haripur in West Bengal will house up to eight Russian VVER units. 

The impetus for formally declaring nuclear sites for US supplied reactors must have come following the reported meeting between Hillary Clinton and India’s Foreign Minister S M Krishna at Pittsburg G – 20 Summit on 24 – 25 September 2009. It was also exerted by Hillary Clinton that DAE should address the Nuclear Liability issue with alacrity by suitably amending its Atomic Energy Act of 1962. While the legal issue would take time, declaration of proposed sites were made with dispatch.

I recall that the Mr. Anil Kakodkar, a taciturn but brilliant engineer and Chairman of Atomic Energy Commission (AEC), had recently spoken to the press that private ownership was not contemplated for nuclear power generation in the country. This implied that only way India can add new capacity is through funds generated by Nuclear Power Corporation (NPC) the power generation company under DAE , partnership with other Government owned public sector companies and also from Tax Payers money routed through the Central Government budgetary allocations. Is this a feasible route for substantial capacity addition for DAE and Nuclear Power Corporation on its own? I am afraid it is not good idea to restrict the participation to only government owned companies so far as ownership of nuclear power genration plants are concerned.  The more we delay more we deny this source to remain diminutive in scale and speed. The reasons are many but I would propose only critical ones here.

In case all these sites were to inhabit with respective nuclear power plants as proposed, in next 15 years, from GE, Westinghouse and AREVA supplied plants, the NPC and its partners would collectively invest in establishing about 10,000 MWe from 8 US supplied reactors, 8000 MWe from Russian reactors and 10,000 MWe from 6 French reactors. This totals to 28,000 MWe worth of installed capacity. Even at a very conservative estimate, this would require investments of over 40 billion USD. In India Rupee (INR) terms it is about INR 200, 000 crores. Compare this with typical total budgetary allocation made by Union Government to DAE for 2009 – 2010 at about 6500 crores and for power segment it is only INR about 3800 crores.  Out of INR 3800 crores, NPC gets a small fraction and mainly dedicated for construction of 500 MWe capacity Fast Breeder Reactor (FBR) called Bhavini located near Chennai city. No funds for NPC  towards growth of indigenous nuclear power program at would add a series of 700 Mwe Pressurized Heavy water Reactors (PHWR) in next few years.

There is no way the INR 200,000 crores ($ 40 billion) for importing nuclear reactors from France, US and Russia could come from tax payers money, long term loans from Domestic lenders @ $ 2.5 billion each year. There are possibilities for suppliers credit but it would involve central government guarantees etc and that may not come easily unless Union Government shows special dispensation towards DAE and NPC. Even this may be offered for one or two units at best to kick start the process following Indo-US Civilian Nuclear Cooperation Agreement signed almost two years ago.

Let us examine the NPC revenue base. NPC installed capacity is about 4120 MWe. Due to Natural Uranium ( fuel for PHWR) shortages it could deliver about 15 billion units only in the year 2008-2009. This corresponds to about under 50% of capacity utilisation, may be for reasons beyond fuel shortages as well. NPC the revenue base is directly related to supply and even under the best case scenario like in previous 2 years the supply was under 19 billion units a year. Therefore the yearly revenue for NPCIL will be well under INR 5000 crores for coming few years.

NPC has reserves of about INR 10,000 crores but very little budgetary support for its commercial reactors. Under the circumstances NPC can raise marginal funds through Balance Sheet support. Given the fact that 1000 MWe capacity unit will cost about $1.5 billion (INR 7500 crores) , under traditional route NPC will be able to raise funds for no more than a handful of reactors on its own. Take for example even for Russian supplied nuclear reactors, it is building the 2×1000 MW in Kudamkulam, on supplier’s credit. Though the terms are attractive, the repayment of loan will start in under 5 years from now in Dollar terms.

What DAE and NPC should consider seriously is to allow private sector participation for adding commercial nuclear power generation capacity in the country. This would allow additionality of funds from domestic and international investors for nuclear program. It should resolve the Nuclear Liability issue soon without which the US suppliers may not agree to send in their hardware for Indian reactors and private ( domestic and international) investors would not agree to invest in nuclear business in India. There are larger issues to address before domestic private companies could think of entering into nuclear generation business on their own. They need pool of manpower, institutional sources for training, research and developmentpabilities, operational experience, leadership at senior and middle level, exposure to nuclear  safety culture so far unheard of by Thermal power and Hydro utilities in India and tremendous capital costs investment to build nuclear industry supply chain, support services and experience from scratch etc. This constitutes a separate paradigm for discussion at length. It is for this reason and may be more that perhaps DAE mandarins do not want to incorporate  private investment in the  nuclear industry to distract its cohesive approach for growing Indian nuclear power program at this delicate juncture in this country. However sooner than later the domestic and international investment in nuclear power generation would be imperative else the opportunity would be lost for long time to come.

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