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Let private sector set up nuclear power plants

Prime Minister Manmohan Singh is an old hand in the nuclear energy establishment, having served as Member (Finance) of the Atomic Energy Commission in 1983-84. He had an insider view of the working of the Commission during those trying days when the commission was attempting to set up the first fully indigenous nuclear power plant at Kalpakkam, 60 km south of Chennai. It was an exercise that was both arduous and long-drawn — it took almost 14 years to build the first unit at the station and get it to generate electricity, when not more than six years was the norm — and the principal reason for the delay was that it had to be built indigenously because the peaceful nuclear explosion of 1974 had brought international sanctions in its wake. There was none overseas willing to help either with equipment or advice. The cost of international isolation was reflected in the time overrun.

But that is not just an old story: now a shortage of indigenous uranium with no recourse to imports has left the nuclear energy sector operating at about 60 per cent of its capacity of 4,120 MW, which itself is way below the 10,000 MW capacity that the commission once said it would build up by the year 2000. That would have been a respectable 10 per cent share of overall national grid capacity. Today it is less than 3 per cent, and even that tiny share may well shrink further over the next five years as coal and hydroelectric plants get commissioned rapidly. The spectre of nuclear power being marginalised looms more starkly when one views the astounding progress made in wind energy, whose capacity at 7,082 MW as of March 31, 2007 is twice as much as that of nuclear.

So two years ago when President George W. Bush popped the proposition that the United States would help India boost its nuclear capacity by ending its international isolation, Dr. Singh was indeed an interested man, and his efforts at pushing the 123 agreement in the face of sharp opposition from various quarters are now history.

Yet the problems ahead could be just as tricky, bound as the issues are with the nation’s sovereignty in decision making, especially with regard to nuclear policy. What will happen to the deal should India test a nuclear device? What will India do should there be a break in supplies of nuclear fuel?

Obviously, these are weighty questions for which there are no clear answers today. Central to the problem is the fact that on this issue the Government of India has pitched itself right in the middle of the frame, as a nice shooting target for all its opponents who believe that the deal will compromise India’s sovereignty, that it will severely compromise its independence on nuclear policy and bring to bear undue influence over many other lines of foreign policy. Continuity in fuel supplies and therefore of this very programme would therefore be contingent on continued good behaviour on the part of the Indian government in the eyes of the U.S. Any transgression of the lakshman rekha would leave the nuclear power stations set up under this agreement stuck without fuel, and call for a costly repatriation of imported equipment and supplies. That is the dire perspective the opponents are painting.

It need not necessarily pan out that way. First, it may not be the government’s Nuclear Power Corporation that will set up these plants; indeed it should not be. The government would do well to invite companies from the influential countries that comprise the Nuclear Suppliers Group (NSG) to invest in the upcoming stations under the accord. These companies can be asked to come on their own or with a domestic partner.

Indeed, Tata Power recently announced it might partner with Areva of France, one of the largest companies in the world building nuclear power plants. These power plants must function under the oversight of the Atomic Energy Regulatory Board, as do the units of the Nuclear Power Corporation. They should be free to sell the energy either to the local grid or to one of the power trading outfits for sale to consumers farther afield.

Pricing of the energy must be left to the market; the mistake of Enron, where the Maharashtra government signed on to a sky-high price, must serve as a warning not to enter into cosy financial terms with investors in these nuclear plants. Unlike the government on which foreign policy issues weigh unduly — and power stations set up under this agreement will carry a special aura — the market is likely to be agnostic to the source of the energy; it does not matter whether the energy flows from coal or hydro or wind. What matters to it more would be the price and stability of supply. Profits are not guaranteed to investors; in any case, not by government.

It must be up to these investors to secure long-term contracts with suppliers — the ‘123’ agreement and the subsequent understanding with the NSG merely enabling the service — to take the risks associated with continuity in supplies, and if need be, to manage the policy responses of their own governments. The risks of investing in India must be entirely on these companies. Then the pressures on Indian government policy to bend to U.S. dictates will not be quite as overbearing.

What would be the risks for the country if there should be disruption in uranium fuel supplies? Of course, power generation at these nuclear plants would be halted, but since the share of nuclear power, even in the most optimistic scenario, may not rise to more than 10-15 per cent of all the electricity produced, the effect of the denial, though unsettling, would not be catastrophic. In any case, that would not be any greater than the chaos that might be caused if crude oil imports, for instance, were denied for any reason — 70 per cent of the country’s petroleum needs are imported.

Indian officials have not sketched out such a private-sector-led framework for nuclear capacity expansion in public but one cannot rule out the possibility that they have mapped it out quietly. The Chairman of the Atomic Energy Commission, Anil Kakodkar, has often let it be known that the government intends to amend the Atomic Energy Act to enable private companies to enter the arena of nuclear energy, which so far has been the preserve of government entities. Who knows, Dr. Singh and his government may yet inveigle their way out of the firing line.

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