Nuke Deal to Benefit India Business

The lifting of the ban on nuclear trade with India by the 45-nation Nuclear Supplier’s Group last week appears likely to open business opportunities worth as much as US$100 billon for companies around the world and within India itself – if the agreement can get by the US Congress.

Defying domestic political opposition by the left parties and a reported attempt by China to derail the waiver at the NSG, India’s nuclear exemption is a victory for New Delhi’s diplomatic and strategic initiatives, helped along by its new post-cold war partner, the United States. India’s eligibility to access nuclear power technology and fuel from the international market has come about despite the country not being a signatory of the nuclear non-proliferation treaty.

The pact, if it passes, would perhaps be the one standout achievement of the Congress-led government headed by Prime Manister Manmohan Singh, amid failures to check inflation, revamp the social sector and improve infrastructure, which is impacting growth. The Congress government has been accused of mishandling India’s soaring need for energy. China’s per-capita energy consumption, for instance, is three times India’s. Power shortages have long hampered the fast growing Indian economy, with nuclear power now being seen as an important component of an energy mix comprising thermal, gas and alternate energy sources. Rolling blackouts are endemic in Mumbai and New Delhi, a threat to the country’s high-tech industries.

Business of nuclear power

The Indian industry body the Confederation of Indian Industry (CII) has said that 18-20 new nuclear power plants are likely to be set up in India over the next 15 years at a cost of more than over Rs1.2 trillion (US$26.27 billion). Companies such as France's Areva SA, Electricite de France, Japan’s Hitachi, Russia’s Rosatom and American General Electric (GE) and Westinghouse Electric Co (WEC) are expected to benefit, though US-based companies will need to await final ratification of the Indo-US nuclear pact, hopefully this month.

Although officials on both the US and Indian sides profess optimism, there is very little time for the Bush administration to overcome the resistance of Congressional critics of the pact. It took years of effort by the Bush administration to secure the cooperation of the countries in the NSG in the wake of India’s refusal to sign the Nuclear Non-Proliferation Treaty. Some Democrats, who control both houses of Congress, remain skeptical, saying that giving India an exemption to the treaty sets a dangerous precedent for other countries wishing to go nuclear but fearing sanctions. Also, with less than two months to go before US presidential elections, the Congress is preoccupied with both campaigning and with not doing anything that might conceivably alienate any voters.

The Democrats, however, are under pressure from the Bush administration, which argues that delaying Congressional ratification could allow other nuclear countries such as Russia and France to elbow aside US companies.

Assuming Congressional passage, the Federation of Indian Chambers of Commerce and Industry has said the NSG waiver will enable India to get nuclear fuel for all its nuclear reactors, which have been running at almost half capacity in the wake of a ban instituted after the country exploded a nuclear weapon.`

``The nuclear deal will also enable addition of new capacity and help fulfill the target of adding 63,000 MW by 2030,’’ it said.

Observers say that India’s nuclear power generation should involve private, public and foreign players. In order to realize plans of additional 60 gigawatts (GW) of nuclear power (to current capacity of 3 GW), investment of more than Rs6 trillion will be needed.

Earlier, the US Chamber of Commerce, US-India Business Council (USIBC) has estimated: ``India's nuclear-energy market - estimated to require $100 billion in foreign direct investment – if open for US companies can create a potential 270,000 American jobs in high-technology engineering over the next decade.’’

Large trade missions of US business leaders representing top companies have been visiting India over the last couple of years to study the nuclear prospects.

They have been seeking out the Mumbai-based, state-run Nuclear Power Corporation India Ltd (NPCIL) that builds and operates India's nuclear power plants.

``Interest has been shown by companies, including French nuclear power major Areva NP, Atlanta-based GE and Russian nuclear-plant manufacturer Atomstroyexport,’’ a director at NPCIL has been quoted to say.

The French, Canadians, Russians and the Japanese have been in talks with the NPCIL, apart from the Americans.

France has been steadfast in backing India at the NSG and signed a nuclear pact in February 2006, which, crucially, did not exclude the transfer of vital fuel reprocessing technology. India and France can start civilian nuclear trade almost immediately.

Areva has been lobbying hard for nuclear related contracts. The Asia-Pacific region has accounted for significant portion of Areva's sales. The company has erected plants in as many as 15 countries, including India.

Projects include construction of two power units (2,000MW total) in China and one power unit of 1,000MW in Iran.

Long-time ally Russia is already helping India build two 1000 Mwe (megawatt electric) light water reactors at Kundakulum in Tamil Nadu. The two countries have negotiated a bilateral agreement to pave the way for focused nuclear cooperation.

Reports suggest that New Delhi and Moscow have ‘informally’ agreed build 5-6 nuclear reactors, which will now be on fast track.

According to federal minister of state for power and commerce, Jairam Ramesh, ``the NSG waiver paves the way for foreign players players. Besides the Russians, we can now also look at Areva more seriously.

The increasingly larger US delegations to India in the recent past have included the Nuclear Energy Institute, the policy arm of the US nuclear-energy industry, the USIBC, GE, Thorium Power, WM Mining Co and the WEC that supplies technology to almost half of the world's operational nuclear power plants.

The chief of the nuclear-power division of GE has met with NPCIL officials and the state controlled Indian Atomic Energy Commission chairman Anil Kakodkar to discuss the possibilities of setting up light-water reactors in India.

New Delhi is also working on amending the Atomic Energy Act to facilitate private-sector participation in nuclear-power production that has so far been the sole fief of government agencies.

Domestic engineering players in India such as Reliance, JSW, Bharat Heavy Electricals Limited (BHEL) and Larsen & Toubro (L&T) are expected to pour in over Rs 1 trillion into the nuclear sector.

Reliance Energy Ltd (REL) has approached the NPCIL with a proposal to set up nuclear-based power projects.

L&T, India’s biggest engineering company, is reportedly planning a-Rs 20 billion venture with NPCIL.

L&T’s senior vice president, MV Kotwal has been quoted to say: “We have the capability to manufacture the main pressure vessels and core equipment for those reactors. But we don’t design those reactors. It is only here that we may need a tie-up.”

L&T has been talking to leading foreign firms for making reactors and nuclear equipment. BHEL is reportedly in talks with Siemens, Alstom, GE and Areva.

Infrastructure group GMR’s Energy head, Raaj Kumar has been quoted to say that the group is in talks with companies in USA, Canada, France and Korea.

(Siddharth Srivastava is a New Delhi-based journalist. He can be reached at sidsri@yahoo.com)