Saturday, 20 June 2015

Three big changes that will give boost to India’s nuclear programme

NEW DELHI: India's nuclear programme is set to get a huge boost thanks to three big changes. First, Japan has asked India for a dedicated nuclear reactor site, signaling that not only is it willing to shed all inhibitions of doing nuclear commerce with India but is also keen to be counted with the US, France and Russia as a power building nuclear parks here.
Second, India is giving big contracts for six reactors each to US blue-chip companies GE and Westinghouse. This is a big shift from India's long-standing policy of signing deals for two reactors at one go. The six-reactor deal with the two American companies will mean cheaper pricing for India.
Third, a critical component of the nuclear industry, the insurance structure, will be activated next month when Nuclear Power Corporation of India Ltd (NPCIL) buys a nuclear insurance policy at Rs 100-crore premium from a consortium that includes General Insurance Corporation (GIC) and a group called Nuclear Risk Insurers from Britain.
The Japanese willingness to set up a nuclear park in India is a major foreign policy advance. This is because Japan is the only country that has faced a nuclear attack and is still willing to invest in India, which despite the Indo-US nuclear deal is still a nuclear weapon state outside the Non-Proliferation Treaty. Meetings are slotted over the next few months to close Indo-Japan nuclear negotiations.
Tokyo's decision shows an even wider global acceptance of India's nuclear programme. Plus, Japan's government-driven investment plans have typically suited India most. Critical infrastructure projects, the Metro for example, took off on the back of the Japanese government's financial commitment. Capital-intensive nuclear programmes will benefit from Japanese involvement.
The 6-reactor-each order for Westinghouse and GE, which got finalised following US President Barack Obama's visit earlier this year, will lower costs, and costs have always been an issue while negotiating nuclear commercial deals with the US. The sites for these reactors are in Gujarat and Andhra Pradesh.
One reason why high per unit cost of power have typically been cited by US companies were the provisions of the Civil Liability for Nuclear Damage Act (CNLD) that asked for what many stakeholders thought were very high order of compensation.
An insurance pool was a critical part of the liability setup, and GIC plus the British group's Rs 1,500-crore insurance pool will cover India's civil nuclear programme, with NPCIL buying the insurance next month. According to the CNLD Act, this sum would be made available as compensation right away after any nuclear disaster or accident that impacts areas 10 km beyond the site. Payment will not depend on fixing responsibility and will be quick.
Since the CNLD Act made suppliers - say, GE or Westinghouse - liable for a nuclear accident, as opposed to global norm of holding the operator, in India's case NPCIL, responsible, nuclear liability rules became anti-investment. This issue was resolved through an insurance pool that covers risks for suppliers.

The resolution happened after Prime Minister Narendra Modi came back from the US late last year and instructed officials that the issue must be solved without changing the law and without putting a big financial burden on the government.

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