L&T expects reactor building orders in India from foreign suppliers: M V Kotwal

Interview with board member & heavy engineering president, L&T

In the wake of renewed push for the nuclear sector, Larsen & Toubro targets an annual business of about Rs 6,000 crore.  It hopes to bag orders from pressurised heavy water reactors (PHWRs) and fast breeder reactors (FBRs) and light water reactors (LWRs) of foreign design. L&T board member and heavy engineering president M V Kotwal tells Sanjay Jog about the company's strategy for the nuclear sector.. Edited excerpts: 

What is L&T's estimate for annual business in the nuclear segment?

After a few years, we target an annual business of around Rs 6,000 crore. We hope to get orders from the Nuclear Power Corporation of India Ltd and foreign companies. The projection that we had four years ago remains the same in volume, but has got delayed due to several hurdles, which bogged the progress down. I would expect order inflow from foreign nuclear reactor companies offering reactors in India to begin 18 to 24 months from now. L&T has signed a teaming agreement with Westinghouse and a pact with Areva, whereby maximum localisation of their reactors can be achieved.

In the case of India's indigenous programme for 700 Mw PHWRs for Gorakhpur, order placement should be over by the first half of next year, followed by orders for FBRs subsequently. Although the earlier expectations have not been materialised, we now don’t see any negative signs in the nuclear sector, as the government has supported the capacity addition plan.

What were the major hurdles that impacted your growth plan? Have those roadblocks now been removed?

First, one of the hurdles was the civil nuclear liability but now it seems to have been resolved with the rolling out of an insurance pool. We expect the final documents to be issued soon. Second, domestic and foreign companies had serious concerns about a clause in the Civil Nuclear Liability Act with regard to the application of provisions of other Indian laws. However, the government has clarified that the concerned clause will be applicable only to the operator and not to suppliers.

The other crucial issue was with regard to the cost of light water reactors (LWRs) designed by foreign countries. One of the important aspects is the cost of financing. If NPCIL and foreign suppliers are able to evolve good financing models, corresponding impact will result in lower tariffs. Russia has offered a concessional interest rate while supplying reactors for the Kudankulam project. However, it is applicable for equipment coming from Russia and that is the condition that needs to be dealt with when it comes to enhanced indigenisation.

Next is the question of how the contracting takes place since the number of plants negotiated simultaneously with any foreign company will have an impact on distribution of the technology costs. This will certainly be addressed suitably by NPCIL. One thing is clear, India has a huge requirement for nuclear power and since the major constraints have been more or less addressed, the country can move forward in a big way.

How is L&T placed to take advantage of the changed environment?

We are very well-placed, especially now, that we have established a joint venture with NPCIL at Hazira, to produce heavy forgings, which is a key requirement for nuclear plants. We have the capability to indigenously produce most of the heavy forgings required for nuclear plants. Combining this with L&T’s established strength in engineering, construction, control and automation, manufacturing and project management, we can play a very major role in the nuclear sector.

Although L&T would not be setting up nuclear plants, we will take up larger packages on the engineering-procurement-construction basis.

Besides India, which are the other countries that offer business opportunities?

We have made a beginning by becoming the first Indian company to get qualified as per the US and European requirements to supply nuclear grade canisters and casks for storage of radioactive waste. We have been supplying these units for utilities in the US and Europe.

We are in the process of manufacturing International Thermonuclear Experimental Reactor Cryostat, which will be one of the largest vacuum vessels in the world.  Going further, we should be able to play a major role in supply of critical equipment and possibly remote handling equipment too, for countries putting up nuclear plants.