High costs, expert fees hurdles to India Inc’s nuclear ambitions

In 2005, India and the US announced a decision to go ahead with the Civil Nuclear Cooperation Initiative. That the then Prime Minister, Manmohan Singh, decided to risk his government’s survival to get the deal passed in Parliament showed the importance he attached to the development of nuclear power for India’s energy security. Have those hopes materialised? Not really. Twenty years later, nuclear accounts for around 8.8 GW of India’s 476 GW power capacity. The country added just 2.9 GW nuclear capacity between 2015 and 2024. China, in contrast, added 32.8 GW. With the goal of reaching 100 GW nuclear power capacity by 2047, India’s 100th year of Independence, nowhere in sight, Union Budget 2025-26 came up with a radical solution—allow private players to build nuclear power plants, ending the age-old monopoly of government-owned Nuclear Power Corporation of India (NPCIL). It announced a Nuclear Energy Mission, focused on research and development of small modular reactors, and allocated Rs 20,000 crore for the initiative to develop at least five indigenously designed and operated small modular reactors by 2033. It also announced the development of Bharat Small Reactors (BSRs). But the initial euphoria over the move—top industrial groups such as Adani, Reliance, Tata, Aditya Birla and JSW showed interest—has mellowed. The reason? The conditions imposed by NPCIL on private players in its request for proposal for 220 Mw pressurised heavy water reactor (PHWR) Bharat Small Reactors (BSRs). The companies have flagged the high operation and maintenance cost cited by NPCIL for setting up BSRs, levy of an exorbitant expertise fee at 60 paiseKWH of nuclear power generated, which translates into Rs 150 crore per project, lack of financing guarantee with assets remaining under NPCIL’s control, and challenges of land availability. They have also sought single window clearances and freedom to decide tariffs. India’s nuclear dreams now hinge on the government’s response to these concerns. There have been a series of consultations at various levels in the government. The NITI Aayog has also been holding talks with the industry players who will help India achieve its 2047 power goals. The question is: How far is it willing to go? Is It Viable? According to documents accessed by Business Today, the industry players have sought a number of changes to the RFP, floated on December 31, 2024, saying conditions make nuclear projects unviable. Though the government is engaging with the industry to ease some of these conditions and looking at the qualifying criteria for companies which will operate nuclear power plants, experts who track the sector say not all demands can be met due to the safety and security aspects of operating nuclear reactors. In a change in stance, India is mulling to allow private players to mine, import, and process uranium, while reprocessing for fuel usage in nuclear power plants will remain with the government. Vivek Jain, Director, India Ratings &amp; ResearchVivek Jain, Director, India Ratings &amp; Research, says a nuclear reactor cannot be a private asset in the true sense of the word. “In India, the model where you set up the asset, own it, and then transfer it, is unlikely to be adopted. The ownership will rest with a government agency or some other body, may be a joint venture. It (the asset) will never be under the direct control of private hands,” he says. The companies say this will prevent them from raising funds from financial institutions. Only a few countries allow private players to own nuclear assets. That is not all. The industry is looking at permission to set up latest reactors. It wants foreign technology—Gen III and Gen IV small modular reactors. It has also requested that the civil nuclear liability and insurance cost be managed by NPCIL as it is well-equipped to handle the complexities of nuclear liability and insurance. The government is already looking at easing the Civil Liability for Nuclear Damage Act, 2010, which had a mechanism for compensating victims of a nuclear accident. The law was criticised by a number of foreign companies as an impediment to setting up nuclear power plants in the country. India has 25 reactors with a capacity of 8.8 GW. Eighteen reactors, with a total capacity of 13.6 GW, including the 500 MW prototype fast breeder reactor, are at different stages of development. These will take the installed nuclear power capacity to 22 GW by 2032. However, this is not enough. For the 2047 target, the government will have to get the private sector on board, which is turning out to be a bit of a challenge. Nuts &amp; Bolts NPCIL has received nearly 700 queries from dozens of companies, including Adani Energy Solutions, Aditya Birla Renewables, Paperboards Specialty Papers Division, ITC, Jindal Nuclear Power Pvt Ltd, JSW Energy, Reliance Industries and Tata Power Company. Adani Energy Solutions has said the operational expenditure cited by NPCIL is too high and will make the project unviable. “The operational expenditure of thermal power plants is Rs 20-22 crore per MW, and the same has reduced over a period. It is also noted that the operational expenditure of nuclear power plants, in a report by the Danish Energy Agency and the Central Electricity Authority, is around Rs 43 lakhMW, likely to fall further. Hence, operational expenditure of Rs 47.47 lakhMW (as per 2017-18 estimates) as given in the RFP is significantly on the higher side and makes the overall project unviable,” Adani Energy Solutions has said. In response, NPCIL has said that the operating and maintenance (O&amp;M) expenditure indicated in the RFP has been taken from plants operating under similar conditions. Naveen Ahlawat, Head of the Power to X vertical, Green Hydrogen, Green Steel and CCUS at Jindal Steel, says consultations are on with the government to make the plants viable. “The O&amp;M cost proposed by NPCIL is very high. Our calculations show it should be 40-50% lower, Rs 15-20 lakhMW, as with the involvement of private players, it will be all about volumes,” he says. Another concern is the proposed expertise fee of 60 paise per unit. The industry wants it reduced to 5-7 paise per unit. The companies say such a high cost will have a negative impact on the company’s commercial viability, make tariffs uncompetitive, and hinder development of the sector. The annual energy produced from a twin BSR unit of 440 MW at 72.5% PLF (net of auxiliary consumption) would be around 2,500 MUs (mega units). The expertise charge of 60 paisekWh on this will be around Rs 150 crore annually. The present value of these yearly expertise charges, discounted over 40 years of operation at a 12% discount rate, is approximately Rs 1,250 crore. This cost is significant, especially when compared to the total project cost of Rs 3,000-3,500 crore. “The expertise fee of 60 paise per unit of nuclear power charges by NPCIL is high and will cut down the returns from nuclear power. I think NPCIL is looking at it as a revenue stream,” says Ahlawat. NPCIL says the fee has been decided by the Centre. Low PLF The industry has also flagged NPCIL’s proposal to maintain the plant load factor (PLF), which shows the efficacy and profitability of a plant, for nuclear power at 65%, significantly lower than its own reactors, which typically reach 90-95%. Reliance Industries has asked NPCIL to explain the methodology used to arrive at the PLF as the plant at Kaiga, using the same reactors, has been averaging above 90% every year over the last five years. The five-year average is 95%. “This being a captive PPA, we would like to understand how the user would be compensated in case of a PLF shortfall. For captive usage, if we consider this as the annual PLF and factor a spinning reserve equivalent for 30% of the total installed capacity, the resultant tariff will be unviable,” RIL has said. Spinning reserve is extra generating capacity already connected to the grid and synchronised with the system frequency, ready to be quickly deployed to handle unexpected changes in power demand or generation. A number of industry players have asked NPCIL to revisit the suggested PLF. “The plant is expected to operate at the normative PLF of 68.5%. The normative PLF is under consideration for a revision to 72.5%. However, the actual availability is expected to be higher as per the historical trend of similar operating plants,” NPCIL has said in its response. There are also concerns over ownership of assets with RIL seeking a “co-licensee” status. Under the proposed structure, the project has to be funded by the company, while licences, permits and approvals will be under some other entity. “We suggest having the company as the co-licensee. We also recommend providing a licence for the entire project life at one go (instead of five years for initial operations). This will provide comfort to the entity and the lenders,” it has added. Advanced Technology The companies also want the government to allow adoption of Gen III and Gen IV foreign small modular reactor technologies. The technology being offered by NPCIL is 2011 PHWR. Some are also looking at plants with higher capacity than 220 MW. NPCIL has been operating 500 MW plants and recently inducted its third 700 MW reactor at its plant in Rajasthan. Jindal’s Ahlawat says they want higher capacity in view of the company’s huge power needs. “We are looking at plants above 700 MW to meet our energy demand. After amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act are cleared, we will have foreign players such as Westinghouse and Rosatom and others wanting to do business in India. There will be a bigger pool of experts, consumers, suppliers and O&amp;M players to choose from,” he says. Jain has a different take. He wants gradual progression from 220 MW to 700 MW for private players. “The initial set-up in India was 220 MW. Gradually, we progressed to 500 MW and then to 700 MW. I think progression for the private players will be similar. So, you start with a lower scale, get hands-on experience and then build at a higher scale,” he says. Nagesh Basarkar, MD, CORE Energy Systems LimitedOn tie-ups with foreign players, a lot will depend on the changing geopolitical situation. Russia, France and the US have offered India expertise in building small modular reactors. Domestic players are already getting ready for the possible boom. CORE Energy Systems Ltd, a Mumbai-based engineering firm, has raised Rs 200 crore in a fresh funding round to accelerate its expertise in precision nuclear engineering. Nagesh Basarkar, Managing Director, says for global companies, it offers a strategic entry into one of the world’s fastest-growing nuclear markets, leveraging technology transfer, joint ventures with locally well-established companies and co-development models to indigenise critical technology at scale. “The expansion will also drive the rise of a new industrial and MSME ecosystem, while generating high-quality employment and advancing nuclear education, training, and certification,” says Basarkar. The company is about to complete the refurbishment of India’s oldest nuclear facility at Tarapur, commissioned in 1969. The Way Forward India’s nuclear plans centre on advancement of indigenous fast breeder reactors, BSRs tailored for decarbonising hard-to-abate industrial sectors, and small modular reactors of varying capacities. These are essential for ensuring cleaner energy in smaller grids and potential export to partner nations. Private players are looking to scale up nuclear power capacity in the country at a fast pace provided the legal and procedural issues are addressed. They are looking to get started by the end of the year but obtaining secure financing, acquiring land for the plants, and getting regulatory clearances to start their nuclear journey will take a lot of time and effort. @richajourno

High costs, expert fees hurdles to India Inc’s nuclear ambitions

Indian companies, including Reliance Industries, Adani Group, Tata Power, JSW Energy, and Aditya Birla Renewables, are keen to build nuclear power plants, but high cost and an expertise fee could make their investments unviable.