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Author, most recently, of Asian Juggernaut: The Rise of China, India and Japan.

India pampers foreign vendors, reserves a nuke park for each

The saga over the much-trumpeted nuclear deal with the United States continues endlessly, with the Indian Government now working for its full implementation. That in essence entails India awarding multibillion-dollar reactor contracts to the US, France and Russia; providing nuclear-accident liability protection to foreign reactor suppliers, as sought by Washington; and meeting the other American demand for assurances on the transferred equipment’s end uses.
With the public focus in India presently on the controversial nuclear-accident liability bill, another important aspect of the way the nuclear deal is being implemented by the Indian Government has escaped national attention. The Indian Government has earmarked nuclear parks for foreign-origin reactors, reserving separate sites exclusively for US, French and Russian firms. In fact, it has set aside each park for a specific foreign reactor vendor. The US firms, General Electric and Westinghouse, have each been assigned a separate nuclear park.
France’s Areva has been earmarked the Jaitapur nuclear park in Maharashtra. It will build six European Pressurised Reactors (EPRs) of 1,600 megawatts each. Atomstroyexport, the Russian company building the much-delayed Kundakulam twin-reactor nuclear plant, will get to construct six more reactors at Kundakulam and another four at a new nuclear park, Haripur, in West Bengal.
At each of the two nuclear parks reserved for American firms — Mithi Virdi (Gujarat) and Kovvada (Andhra Pradesh) — a minimum of six reactors will be built. In other words, US companies will get to build 12 reactors, to start with.
GE, which has a tie-up with Japan’s Hitachi Nuclear Energy, last year signed agreements with Nuclear Power Corporation of India Limited (NPCIL) and Bharat Heavy Electricals (BHEL) to begin planning to build 1,350-MWe Advanced Boiling Water Reactors (ABWRs). Westinghouse, now owned by Toshiba, signed a separate memorandum of understanding with NPCIL last year regarding construction of its AP1000 pressurised water reactor, which has received design certification from the US Nuclear Regulatory Commission (NRC). The AP1000 is a 1,154 MWe reactor.
The reservation of a nuclear park for each foreign vendor even before terms of a reactor deal have been negotiated is unusual. Such reservation, like the Government’s Civil Liability for Nuclear Damage Bill, is anti-market.
The liability bill — now before Parliament’s Science and Technology Standing Committee — seeks to extend a generous Indian state subsidy to foreign firms. By seeking to shield foreign-reactor builders from the weight of the financial consequences of severe accidents, the bill actually shifts the main burden for accident liability from the foreign supplier to the Indian taxpayer. In fact, it weakens nuclear safety by granting foreign vendors criminal liability upfront.
The reservation of nuclear parks also is intended to help out foreign firms. This is evident from the fact that the Indian Government is acquiring land on their behalf. As in the case of accident-liability coverage, the Government is seeking to help foreign firms cut their costs of doing business in India.
The reactor deals are to be signed Government-to-Government without open bidding and transparency, just the way India has entered into contracts for US arms worth billions of dollars in recent years.
Yet, Indian authorities insist the contracts will be awarded on a competitive basis. By earmarking sites exclusively for each foreign firm, what bargaining leverage is India left with?
The more-likely scenario is that if a foreign vendor refuses to sell equipment at prices the Department of Atomic Energy (DAE) deems to be reasonable, the department will likely come under pressure from the Prime Minister’s Office (PMO) to give in and sign the contract. Ever since the nuclear deal was unveiled in 2005, the PMO has taken special interest in steamrolling objections at each stage of the long, tortuous journey of the deal.
No less significant is the fact that foreign reactor builders are being freed from the task of producing electricity at marketable rates. The Government will run the reactors through the state operator, NPCIL, and subsidise the high-priced electricity generated. It will be the Indian taxpayer who will be burdened, as also in providing accident-liability coverage.
Although the nuclear deal was ratified by the US Congress in 2008, its nuclear-energy benefits for India are unlikely to start flowing until nearly a decade from now as the average global lead time for reactor construction has stretched to eight years. The energy benefits actually will come at enormous economic costs because the US and French reactors are likely to be twice as expensive as indigenous plants, in terms of per megawatt of installed generating capacity.
Prime Minister Manmohan Singh had repeatedly promised to bring the deal to Parliament and “abide” by its decision. For example, he stated on 30 June 2008: “I have said it before, I will repeat it again, that you allow us to complete the process. Once the process is over, I will bring it before Parliament and abide by the House.”
Yet, no sooner had the process ended than the Government signed the 123 Agreement with the US while sidelining Parliament. It recently signed another bilateral agreement related to the deal — the reprocessing accord — by again sidelining Parliament. Having given no role to Parliament on the deal, the Government now wants the two Houses to pass a special law to provide foreign suppliers with accident-liability protection.
Under the deal, India got no legally binding fuel-supply guarantee to avert a Tarapur-style cutoff, and no right to withdraw from its obligations under any circumstance, although the US has reserved the right for itself to suspend or terminate the arrangements if it holds India not to be in compliance with the stipulated terms. The deal actually arms Washington with the right to suspend fuel supply forthwith and to withdraw its reprocessing consent to India. In addition, the continuation of cooperation is expressly conditioned on India not carrying out another nuclear test.
Creating an artificial nuclear-energy market with state subsidies, exclusive reservation of a nuclear park for each foreign vendor, land acquisition on behalf of foreign firms, skewed accident liability, and electricity supply at Government-supported rates is no way to meet energy needs, or to reduce carbon emissions, or to help India’s poor. The deal should be seen for what it has become — an anti-market framework designed to promote unfair business practices and cartelisation by rigging commercial terms in favour of select foreign suppliers.

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