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N-power It is!

September 18, 2008

Power from coal leaves a stink, and there isn’t enough coal to go around in any case. So, even as bigger coal-based power plants are planned to bridge the country’s energy shortfall, a clutch of companies is drawing up big plans for nuclear power, looking for foreign partners and the green signal from a government that is basking in the success of the Indo-US civilian nuclear deal.

According to a recent McKinsey & Co report, if India is to grow at an average of eight per cent over the next 10 years, then the demand for power is likely to rise from around 120 GW now to 315-335 GW (1 GW= 1,000 MW) by 2017. Most of India’s electricity comes from coal, but the power plants are battling a critical shortage of coal. So, it is hardly surprising that about 40 domestic companies have begun negotiating with overseas vendors to get into nuclear power even before the civilian nuclear deal is cleared by the US Congress. 

The numbers are enormous— the Delhi-based Associated Chambers of Commerce & Industry (Assocham) says opportunities in nuclear power can suck in fresh investments of Rs 2 lakh crore—but there is no dearth of ambition. Tata Power, Jindal Power and Videocon Group are among those already exploring joint ventures with established foreign players. “The (nuclear) power generation will be to the extent of 40,000 MW over the next 15 years and the cost of power will be cheaper,” says Venugopal N. Dhoot, Chairman of the Videocon Group and former president of Assocham.

Assocham will soon submit a blueprint to the Prime Minister on the subject. The Tatas are equally bullish. At the 89th annual general meeting of Tata Power in Mumbai on September 10, Tata Sons Chairman Ratan Tata said he sees the civilian nuclear deal as a great opportunity, but added that a lot would depend on government policy and more clarity on the nuclear deal.

The public sector Nuclear Power Corp. of India (NPCIL), being the only entity that can under the law set up and run nuclear power plants, has already drawn up a detailed road map. NPCIL, said its Chairman and Managing Director, S.K. Jain, aims to put up 10 lightwater reactors (LWRs) using imported uranium once the civilian nuclear deal gets all approvals and a government policy emerges. The first two plants will come up in 2014-15 (it takes five years to build one). LWRs are much cheaper than the pressurised heavy water reactors (PHWRs), which account for 12 of the 14 plants operating in India. NPCIL has already begun exploratory talks with foreign vendors like GE, Westinghouse and Areva.

LWRs have another advantage, as Arvind Mahajan, Executive Director of KPMG India, explains: they are larger than PHWRs, so capacity can be scaled up quickly. Jain said in a newspaper interview recently that NPCIL will link purchase of equipment to a guarantee of lifetime supply of fuel and ask the vendor to supply it or arrange for it.

Government-owned NTPC, India’s largest power generating company, has a joint venture with NPCIL but it has its own plans also. “We plan to add 2000 MW of nuclear power by 2017… As and when opportunities come up, we will grab them and move quickly,” says R.S. Sharma, Chairman and Managing Director, NTPC. Among the leading private players keen to enter is the GMR Group. “Our group wants to be a serious player in nuclear energy… It’s going to be cheaper in the long term, just like hydel,” says M.V. Subba Rao, Director, GMR Energy. He admits that initial costs will be high, but says technology advances will lower costs and make nuclear energy affordable.

But the government has to address two key issues before these dreams can turn into reality. First, the Atomic Energy Act of 1962 has to be amended to allow private players into the sector. Then, says KPMG’s Mahajan, it has to evolve a public-private partnership (PPP) model to sort out issues like power purchase agreements, tariffs, taxes and liabilities in the event of an accident. “If we are able to address these issues, the installed nuclear capacity could reach 52,000 MW or 15 per cent of the total installed capacity by 2020 as against three per cent now. This will take us closer to the global average of 17 per cent,” Mahajan says. “If 100 GW of capacity from coal is substituted by nuclear power, then we will be reducing carbon emission by 180 million tonnes a year. That is the size of carbon reduction commitment the whole of Europe has made under Kyoto protocol.” Globally, over 30 countries have announced plans to go in for nuclear power or expand their existing facilities. India, hopefully, will put its dismal past behind, and script a new story of success in electricity generation.

K. R. Balasubramanyam

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