Indo-Japanese agreement on civil nuclear cooperation

Once the deal is signed by both countries (beyond the MOU that is signed between the two head of the states on Saturday at New Delhi) GE – Hitachi (for ESBWR Type NPPs) and Westinghouse Electric Company – Toshiba (AP 1000 Type NPPs) could look forward to sourcing of critical hardware, particularly Reactor Vessels, Turbines, Generators, SS pipes and Special alloy blades & tubes etc. manufactured in Japan for the Indian Nuclear Power Plants (NPPs). While to conclude civil nuclear cooperation has taken many years, it augurs well for Indian nuclear power program.

Nevertheless one should keep in view the following key points:

(i) This deal provides no answers to resolve all the outstanding concerns about the Civil Liability for Nuclear Damages (CLND of 2010) recoverable from suppliers to NPCIL, in case of extremely unlikely reactor accident causing damage to life and property in public domain. CLND will remain a thorny issue between French AREVA, US based GE & WEC. The Indian nuclear insurance pool (INIP) may provide only part solution to the foreign suppliers concern.

(ii)  One way to extricate itself from the clutches of CLND , Japanese manufacturers should not enter into direct contract with NPCIL.  They should supply their hardware, technology to the main reactor vendor only, AREVA, WEC and GE. This way the Japanese companies will most likely be excluded from the definition of Supplier (Refer to Chapter 5, Section 24 of the Civil Liability Rules, of November 11, 2011) and hence the Right of Recovery shall not be available to NPCIL against such indirect vendors to main contractors. This is legally safer route for component manufacturing companies located in India and abroad to de-risk them when working for NPCIL projects.

(iii) On the other hand, whether AREVA, GE and WEC will succeed to sell their reactor(s) to NPCIL is a moot question. The key challenges will include among other factors the Capex and cost of generation of electricity form these NPPs to the grid. NPCIL has often publicly declared their target generation cost of INR 6.5 per unit in 2022-23 from imported Light Water Reactors (LWRs).

(iv) The Russian public sector reactor vendor M/s Rosatom with its industrial partners have already created a benchmark for Capex and Tariff in Indian context through their Kudamkulam reactors 1&2 and the next in line viz., KK 3&4 ( Capex is INR 20 crores per MW). This benchmark will be hard to match for US NPP supplier’s viz., GE & WEC and French AREVA, to NPCIL as client.

(v) On the technology front, there is no doubt that Russian VVER has matured into a very safe plus well equipped with state of art nuclear reactor, even from European point of view. VVERs are sold to Finland, Turkey, Egypt and Bangladesh.

Family DinnerIt will be indeed a tough call to succeed with NPCIL for French and US companies, with or without Japanese technology support.

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