Will uranium supply chain issues hinder nuclear power adoption in Indian industries?

India’s nuclear energy journey began in 1969 with the commissioning of its first plant at Tarapur, Maharashtra. It was a significant step towards harnessing nuclear technology for meeting the nation’s energy needs. More than five decades later, the country’s nuclear power sector is poised to enter a new era.

The trigger? The Indian government’s move to facilitate private sector participation in the sector. In a significant move, it allocated Rs 20,000 crore for the Nuclear Energy Mission in Union Budget 2025-26 to facilitate the development of Bharat Small Reactors(BSRs). While the Nuclear Power Corporation of India Ltd (NPCIL) will continue to operate nuclear plants, private companies have been allowed to invest in BSRs for captive use.

The opening up of the atomic energy sector to private sector investments comes 20 years after the stalled India-US deal aimed at promoting nuclear power and energy security. India has set an ambitious goal of reaching 100 GW nuclear capacity by 2047, and nuclear power is also set to play a key role in the nation’s decarbonisation strategy, as companies look to replace their fossil fuel-based captive power plants.

In mid-February this year, the country’s top nuclear scientists met over 30 industry leaders. The meeting was attended by executives from Adani Group, Reliance, Tata, JSW, Jindal Steel, Vedanta, Hindalco Industries, as well as some renewable energy companies. As part of the discussions, which focused on investment opportunities in the nuclear sector, several operational issues were flagged.

ON THE TABLE

The nearly three-hour meeting at the NPCIL headquarters in Mumbai saw a free-wheeling discussion between industry players and nuclear scientists led by NPCIL Chairman and Managing Director Bhuwan Chandra Pathak. This was the first meeting after Finance Minister Nirmala Sitharaman launched the Nuclear Energy Mission and announced that the government will amend laws to open doors for private sector participation in the sector.

NPCIL briefed the companies on the steps it’s taking to make it easier for private players to invest in the sector. Private players, on their part, pointed out the roadblocks. One of the biggest issues that they raised was the civil liability law related to financial responsibility in case of a nuclear accident. Another concern was the high operation and maintenance costs that could eat into their profitability.

The companies also sought more control over the nuclear plants they will invest in; at present, the control rests with NPCIL. The corporation operates 25 nuclear power reactors at seven sites across the nation with an installed capacity of 8.8 GW. It is set to add another 15 GW by 2032. Since the sector has strict safety regulations to protect public health, environment and the integrity of the plants, while keeping India in line with international standards, industry felt the need for viability gap funding (VGF) and power purchase agreements (PPAs). Industry wants PPAs for nuclear power to be on the lines of agreements for renewable power so that they can cover the high upfront costs of nuclear plants.

There’s the also the issue of uranium availability. India imports uranium for nuclear plants due to the poor quality of the ore found domestically. The government has assured adequate availablity of the metal. “As we understand, there are adequate fuel provisions, both through indigenous as well as imported means, to support the existing and planned nuclear power programme,” Pathak tells Business Today. Anil Kakodar, Chancellor, Homi Bhabha National Institute, tells BT that India should focus on using a combination of uranium and thorium due to the abundance of the latter in the country. The used fuel from the reactors could be recycled to set up additional power generation power capacity.

The government needs to address these concerns for private investments to flow in and India’s nuclear energy efforts to take off.

AMBITIOUS GOALS

The government’s decision to allow private capital in the nuclear sector has generated huge interest. The NPCIL floated a request for proposal (RFP) on December 31, 2024, inviting Indian companies to participate in setting up 220 MW BSRs with upgraded pressurised heavy water reactors (PHWR) technology for captive power generation. It is a proven technology that can be scaled up at a faster pace compared to the newer technologies under development.

The fact that PHWRs have been operating in India for decades is a big advantage. Unlike newer reactor designs, which are still under development or need more regulatory approvals, the 220 MW BSRs work on a tried-and-tested framework. That means implementation is quicker. That’s a big plus compared to the more complex reactor types that are still under development. “There has been an overwhelming response to the RFP, and we look forward to a great engagement with our industry partners to meet the shared goal of decarbonisation,” says Pathak.

The bidding process is nearing completion, and the government will announce the successful bidders on May 2. NPCIL will build, own, and operate the plants, with companies putting in the capital investment. The companies will have the right to use the nuclear power generated for their captive use. They may sell excess power at a pre-agreed tariff. Nearly 50% of the 100 GW nuclear capacity is expected to come from private players, according to the Department of Atomic Energy.

This is a huge opportunity for private players, both in terms of capacity addition and investments. Also, nuclear power tariff is competitive with renewables at around Rs 5 per MW, especially when considering the added costs of storing renewable energy for use when the sun isn’t shining or the wind isn’t blowing.

In November 2021, during the COP26 summit in Glasgow, Prime Minister Narendra Modi had announced that India was committed to achieving net-zero carbon emissions by 2070 and that nuclear energy would play a key part in that transition. This fits with India’s broader energy and climate goals—expanding non-fossil fuel energy sources and reducing the dependence on polluting fuels such as coal.

Need for stable energy sources

Renewables such as solar and wind have limited capacity due to dependence on weather. This makes it difficult to ensure a consistent supply of energy. Storage technology such as batteries are required to offset this, but the available storage is costly, has low capacity, and degrades fast. The integration of renewable energy sources into the power grid is not without challenges either as the variability of power generation requires utilities to build advanced grids to ensure stability. In addition, renewable energy infrastructure is highly capital- and location-specific in terms of efficiency. These constraints point towards the importance of having secure, consistent sources of energy such as nuclear.

The companies have already started preparatory work on captive nuclear capacity. Tata Power has set up a dedicated team on nuclear power that is looking at global technology options, regulatory approvals, water/fuel requirement and sourcing, technology for fuel reprocessing and storage.

“We have looked at numerous locations that are good for nuclear power plants in terms of support from local governments and people because there should not be any resistance to this type of project,” Tata Power CMD Praveer Sinha tells BT.

Naveen Jindal group has announced a new company—Jindal Nuclear Power Private Ltd—with Rs 1.80 lakh crore investment over the next two decades and a planned nuclear capacity of 18 GW. Anil Agarwal-led Vedanta Group has floated an expression of interest seeking bids from global firms to build 5 GW nuclear power capacity in India. Adani Group Chairman Gautam Adani recently visited Tarapur Atomic Power Station. The company is reportedly looking at a 30-GW nuclear power capacity in the long term. Reliance Industries Chairman Mukesh Ambani has also announced that the company will invest in nuclear power.

Aditya Birla-led Hindalco is exploring the sites for setting up captive nuclear power to decarbonise its aluminium and copper manufacturing operations. State-run power producer NTPC Ltd is also going big with a target of adding 30GW nuclear power by 2034. It recently invited tenders seeking global partners to establish large nuclear reactors with a combined capacity of 15GW.

Some of the renewables players were also part of the discussion as they are exploring nuclear power for integration with renewables to meet peak power demand. ACME Solar Holdings has also announced its interest in nuclear power. The Indian Railways is also venturing into the sector.

Globally, data centre players are also exploring captive nuclear power to fuel their energy-intensive operations through clean sources. Google, for instance, is collaborating with utilities in the US and other nations to explore the use of nuclear for powering its data centres, citing the need for clean and reliable power to drive artificial intelligence efforts. Amazon, too, has spent over $500 million on nuclear technology, including the building of small modular reactors in partnership with companies like Dominion Energy, to generate at least 300 Mw in Virginia. Microsoft, too, has signed a significant agreement with Constellation Energy to reopen the Three Mile Island nuclear plant, purchasing carbon-free electricity for its data centres for the next 20 years.

COST COMPETITIVENESS

Going by the official numbers, the cost of building a BSR is around Rs 15 crore per MW, depending on the mode of financing. A Parliamentary Standing Committee, in its latest report, acknowledged the high upfront costs and recommended a robust financial model that would include government incentives, VGF and sovereign guarantees to attract both domestic and foreign investments in the nuclear power sector.

During the meeting, the industry raised the question of high operation and maintenance (O&M) costs and challenges in raising money from the market. However, they were told that the government would sign the guarantee to facilitate capital lending.

As per the RFP criteria, O&M expenditure is around Rs 75.65 lakh per MW electric/annum for the year 2025-26, with an annual escalation of 6% per annum for every subsequent year and water charges, cess, levies and insurance charges at actuals.

However, NPCIL says that the O&M and fuel costs of nuclear power are lower, and the significant component is the investment cost. “Our latest 700 MW PHWRs have been set up at a cost of about Rs 16 crore/MW, which is highly competitive on a global scale. However, the actual tariffs of nuclear power plants to be set up in future would depend on factors like cost of financing, gestation period, and extent of localisation in respect of imported technologies,” it said.

Nikhil Dhingra, CEO, Acme Solar, highlights that for any of this to take off, the key thing should be the cost competitiveness of this source of power. “The cost competitiveness needs to be there, and the commercial construct needs to be solid in terms of the economics and the safety of the investment, and also in terms of the viability of the investment,” he tells BT.

The NPCIL, in its RFP, has said that BSR is for captive use, but the industry can sell the excess power at a tariff decided by them. Dhingra suggests that the power sale price should be disclosed so that investors can assess the potential return on their investment.

According to analysts, project risks are higher in case of nuclear power plants vis-a-vis other power plants due to high upfront capital costs (Rs 15- 17 crore per MW compared to less than Rs 10 crore per MW in other types of power plants), as well as the higher gestation period (five-six years v/s

At the same time, the operational phase risks are reduced because of more reliable plant load factors than when using renewable energy and cheaper power generation than with thermal power. Additionally, with the asset life being 60 years, this can spread the high upfront capital expenditure over the project lifespan.

Sehul Bhatt, Director- Research, Crisil Intelligence, says that the introduction of a public-private partnership model, coupled with the allocation of Rs 20,000 crore for indigenous reactors, should attract private investments, improve capital deployment and accelerate capacity addition. “To further develop this segment, the industry should ensure reliable supply chains for the fuel (a rare mineral), implement stringent safety protocols and effective waste disposal mechanisms, and use small reactors for commercial applications,” Bhatt tells BT.

The industry is expecting more clarity on costs, tariffs and operational parts in the coming months.

LEGAL AMENDMENTS

Nuclear power in India is regulated under the Atomic Energy Act and the Civil Liability for Nuclear Damage Act. To facilitate private participation in the nuclear sector, amendments to these legislations is being undertaken. Presently, all nuclear power reactors are under state control due to security and safety issues.

The industry is also awaiting the finer details of the amendments that must be cleared in the Parliament. The Parliamentary Committee also observed that ensuring strict compliance with nuclear safety protocols, waste management regulations, and radiation protection measures is crucial to avoid potential hazards.

“We need to wait for things (amendment) to happen and then take a call. What I can tell you is that we are fully geared up for this transition,” says Sinha.

Meanwhile, a task force has been constituted in the Department of Atomic Energy to study the amendments required in the Atomic Energy Act. It will also be looking into various aspects like whether private players can build, own, and operate nuclear power plants, nuclear safety, security, safeguards, fuel procurement, fabrication, waste management and reprocessing of used fuel. In addition, a separate task force is also looking into the Civil Liability for Nuclear Damage Act to address the concerns raised by the private suppliers. The liability Act outlines the legal framework for handling liability in the event of a nuclear accident and channelises operators’ liability to equipment suppliers.

Enhanced safety features are identified for incorporation in nuclear power plants deploying the BSR. These features are expected to reduce the mandatory exclusion zone radius to about 500m from the existing one km. The Parliamentary Committee suggested that a clear contractual framework should be developed, ensuring transparent agreements that prioritise safety, security, and accountability in nuclear energy projects.

For now, the role of private players is limited to smaller reactors but there is a possibility for industry being involved in higher capacity reactors in the years to come. 

Future is Nuclear

India is already cooperating with the US and France on newer technologies like small modular reactors (SMR) and advanced modular reactors. Nearly 18 years ago, India inked a historic nuclear deal with the US, ending India’s nuclear apartheid. However, it remained a non-starter due to operational hurdles.

Recently, a breakthrough was achieved when the US administration cleared decks for US-based Holtec International’s SMR technology to three Indian firms, namely Holtec Asia, Tata Consulting Engineers Ltd and Larsen & Toubro Ltd.

India is also working on setting up five indigenous SMRs by 2033.

Globally, there are 80 SMR designs under various phases of research, development and approval. SMR is essentially a term used for a nuclear power reactor which has a capacity of up to 300 MW and employs a modular design.

And what makes SMRs a scalable technology?

There are modules which are prepared at the manufacturing base of the respective industries and are brought to the site for assembly. The exclusion zone of SMRs is not beyond the plant boundary and can be of a capacity as small as 55 MW, effectively reducing the time required to set up a project. It is similar to a plug-and-play setup, designed to work immediately after being connected, without needing any complex installation or configuration. Bharat Small Modular Reactor (BSMR) is the indigenous SMR that India is developing.

The concept design of the lead unit of BSMR 200 MW has been completed, which includes deciding on the sizing of the nuclear reactor along with the primary heat transport system.

The demonstration unit of BSMR 200 is expected to be completed in six years after financial approval. Plant commissioning, followed by regular operation, will be feasible at the end of the 7th year. The estimated cost of the lead unit is Rs 5,700 crore.

@richajourno