The 'best' is not yet here

Prime Minister Manmohan Singh described the signing of the Indo-US nuclear deal as his 'best moment'. Five years later, his dream of atomic energy fuelling Indian growth is yet to be realised

On January 3, addressing what is believed to be his last press conference while in office, Prime Minister Manmohan Singh said, "My best moment as PM was when we struck a nuclear deal with the US". So convinced was the prime minister about the benefits of nuclear power to deal with the country's growing energy needs that he risked the collapse of his government as he went ahead and signed India's first commercial nuclear deal in October 2008. His detractors mocked him. The Left pulled out of the government. But the prime minister stuck to his conviction.

Five years later, the government is struggling to effectively sell the nuclear story to the people, investors, manufacturers and suppliers. On Monday, the crowd that had gathered at the foundation laying ceremony for the 2,800-mega watt nuclear power plant at Gorakhpur village in Congress-ruled Harayana did not appear enthused by the prime minister's statement that nuclear energy is crucial for sustaining growth.

In 2008, when the Indo-US nuclear deal was signed, the government had announced that the country's nuclear capacity would increase to 63,000 Mw by 2032. From then to now, the capacity has increased from 4,129 Mw to 4,780 Mw. Despite the scepticism and opposition, the Atomic Energy Commission, or AEC, has clarified that there is no shift in India's policy on nuclear power and that it is still possible to achieve the 2032 target.

The performance of the 19 operational nuclear power plants and of several fuel cycle facilities reached their highest in 2012-13. The plants started running at 80 per cent capacity and in the future, their output is expected to improve further.

Meanwhile, four indigenously designed reactors of 700 Mw each - two each at the existing plants at Kakrapar in Gujarat and Rawatbhata in Rajasthan - are expected to be ready by 2016-17. In addition to these, 16 reactors of 700 Mw each will be constructed at five inland sites which have already been identified. India is also planning to set up more indigenously designed reactors of the same capacity by mid-2020.

These are all being built by Nuclear Power Corporation using both in-house and imported technology. Fuel for 10 reactors is being supplied by the state-run Uranium Corporation of India, while the remaining nine reactors are under International Atomic Energy Agency (IAEA) safeguards and are, thus, getting powered through imported fuel.

The plants based on imported reactors include Jaitapur in Maharashtra (9,900 Mw) to be built in partnership with French company Areva; Mithi Virdi in Gujarat (6,000 Mw) coming up in partnership with American atomic major Westinghouse; Kowada in Andhra Pradesh (6,000 Mw) in tie-up with US-based GE-Hitachi; and two units of 1,000 Mw each at Kudankulam in partnership with Russia.

* * *

Nuclear power generation, however, continues to face three problems: lack of clarity over liability in case of an accident, high land cost and increased fears after the Fukushima nuclear accident in Japan in March 2011.

Manufacturers and suppliers of nuclear equipment, both from India and abroad, have expressed serious doubts over the implementation of the Civil Liability for Nuclear Damage Act 2010 and its associated rules. Industry players reveal that no major contracts are being signed with the Nuclear Power Corporation for want of clarity in the Act and the rules.

S K Jain, chairman, Indian Atomic Industrial Forum, which represents both Indian and foreign companies, says confusion still prevails over the definition of 'supplier' under the civil nuclear liability regime. "'Foreign vendors, including Areva (which entered into an early works contract with Nuclear Power Corporation for the initial supply of two evolutionary pressurised reactors of 1,650 MW each for the Jaitapur project), are not in a position to decide how much additional expenditure they will have to incur to cover their liability arising out of the provisions in the civil nuclear liability Act." He adds, "There is no instrument available in the country to cover recourse risks (to claim damages from suppliers when a nuclear accident happens owing to the fault of a supplier), especially when the project is executed in a hybrid scenario with the involvement of a large number of agencies, contractors and organisations."

While the nuclear liability act seems to have effectively addressed the issue of expeditious payment of compensation to victims in the event of an accident, the provisions for liability of suppliers are not in conformance with the practice followed internationally, feels Madhukar Kotwal, whole-time director and president (heavy engineering), Larsen & Toubro. "After all, it must be recognised that more than 400 reactors are in operation across the globe and suppliers, no matter from which country, are subject to similar conditions. After equipment or systems meeting the quality and workmanship requirements are supplied to the customer or utility, suppliers have no control over preservation, storage, erection, commissioning, operation and maintenance of the equipment. It is important, therefore, that the policies applied for Indian plants should conform to international practices, failing which suppliers, both Indian and foreign, would be at a serious disadvantage," he adds. Kotwal says both Indian and foreign suppliers have sought a review of the policy keeping these concerns in mind. No contracts under the current conditions have been signed so far.

Sinha admits that suppliers of nuclear equipment are apprehensive about the implications of the law and the liability of Rs 1,500 crore which has to be paid in the event of any serious nuclear accident. The law has another provision that states that the figure of Rs 1,500 crore could be increased in the future. This matter can, however, be settled through discussions, he adds. The insurance premium for paying the liability of Rs 1,500 crore is being worked out and it would not be very high, Sinha says. Kotwal, however, maintains that "the consequence of suppliers covering liabilities through insurance would only increase the total cost of the projects."

According to the Department of Atomic Energy (DAE), all contracts have to be approved by a competent government authority and have to be consistent with Indian law. The projects, states DAE, will have to meet the highest standards of safety and the power generated will have to be competitive with other sources of nuclear as well as alternative forms of power. This will apply to projects with Russia, France and the United States. However, because of lack of clarity on the issue of supplier's liability, the Jaitapur, Mithi Virdi and Kowada plants have been stuck since December 2010.

* * *

In addition to this, the provisions of the land acquisition bill are increasing the cost of power generation. Villagers affected by the projects are demanding higher compensation, including more civic amenities, jobs and development funds. The cost has also surged due to the incorporation of additional safety applications causing the per unit tariff to go up from what was projected earlier.

The Fukushima nuclear accident too has hampered the capacity addition plans by raising serious questions about the safety of nuclear power. Though the safety applications at the 19 nuclear power plants have been upgraded and similar changes are recommended for the upcoming projects, DAE and Nuclear Power Corporation are finding it difficult to allay the fears concerning the issue. This is despite massive outreach and awareness programmes launched by the two organisations across the country.

SA Bhardwaj, former director (technical) of Nuclear Power Corporation, says that since the atomic bombings of Hiroshima and Nagasaki in Japan, nuclear power has always been looked upon with fear and suspicion. Apart from procedural and implementation issues over the supply of fuel from Russia, this has been one of the major reasons for the delay at the Kudankulam plant in Tamil Nadu. At Kudankulam, the first unit of 1,000 Mw was to be operational in March 2011, but took off only in October 2013.

* * *
 

Such delays are threatening to push up project cost and, hence, the power tariff. In November last year, Sinha announced that the per unit tariff of the proposed 9,900 MW nuclear plant at Jaitapur will be projected at Rs 6.50 against the Rs 3.50 to Rs 4 projected in 2011.

The delay increased the cost of the Kudankulam project by more than Rs 4,000 crore. The cost of units 1 and 2 went up from Rs 13,171 crore to Rs 17,270 crore. The second unit of 1,000 Mw will be connected to the grid by June this year. Currently, Kudankulam is generating 430 MW of infirm power at Rs 1.22 per unit. When the operation gets commercialised, then the per unit tariff is estimated to be Rs 3.50 to Rs 4, which is comparable to coal-based projects.

Similar revision in per unit tariff in other projects is inevitable. Sinha clarifies that even so, per unit cost of nuclear power will be less than that of power generated through conventional sources which are affected by adverse economic scenario and exchange rate fluctuations.