A few months ago, this correspondent asked an American diplomat during the course of a friendly, off-the-record conversation, if the US was covertly behind all the protests against the Kudankulam nuclear power plant.

The diplomat laughed thoroughly. Then, noting that he was aware of such an impression going around, he provided some perspective to show why such a supposition could not be true. Kudankulam, he said, was a landmark. If Kudankulam had not come, no other nuclear power project would ever take off in India. The US, therefore, was keen on the project coming up.

Now, the first unit of the Russia-aided nuclear power project has gone critical and it looks certain that it would start pumping in electricity in a couple of months. Thus, going by the American diplomat’s logic, the necessary condition for future nuclear projects in the country has been met.

US Vice-President Joe Biden’s ongoing visit will be the first by a foreign dignitary to India after the commissioning of the Kudankulam power project. Nuclear power projects for American companies will be top on Biden’s agenda — he will start where Secretary John Kerry left off last month.

There seems to be some renewed optimism among American companies. In response to Business Lines email, the US company Westinghouse said that “building on the success at Kudankulam” it looked forward to building 6,000 MW of nuclear power projects in Gujarat.

Tellingly, as if addressing the point of safety expressed over Kudankulam plants, Westinghouse stressed that its AP 1000 reactors were the “safest, most advanced reactors”, with eight of them currently under construction in the US and China, and 20 more in various stages of development around the world.

So, clearly Kudankulam’s commissioning is seen as a shot in the arm for nuclear energy in India.

But is it, really?

A reality check seems to indicate that Kudankulam, if anything, has made it more difficult for future projects using imported reactors.

You need to look no further than Kudankulam units 3 and 4, currently under negotiation, for insights. At a whopping Rs 40,000 crore, or Rs 20 crore a MW, the units seem not worth it economically. That is the estimate today. One should not forget that the initial estimate of the cost of Kudankulam units 1 and 2 was Rs 13,171 crore. As of August 2012, it had risen to Rs 17,270 crore.

Unit cost of power

Addressing this point, Chairman of the Atomic Energy Commission R. K. Sinha told this correspondent that what mattered at the end of the day was the unit cost of power.

The Nuclear Power Corporation of India has said that Kudankulam power will cost about Rs 3 a unit. It is not clear as to how this tariff has been arrived at.

For instance, it is unclear whether the government-owned NPCIL, the owner of the Kudankulam project, will be backed to meet the cost overrun.

Besides, it is essential to remember that the Kudankulam project is being built at easy terms of finance provided by Russia — a $2.55-billion loan, carrying a 4 per cent interest fixed for the entire 20-year loan duration, which includes a 6-year drawing period and a 14-year repayment period, and no guarantee given by the Government of India.

Future projects may not be so lucky. As things stand today, the balance of convenience lies in assuming that the actual costs and the terms of finance will make power from these projects pricey.

Further, the anti-nuclear protests are likely to get shriller. Already, we see resistance building up in Jaitapur, Maharashtra — the site where the French company, Areva, has been promised projects. The protests will have their time and cost implications.

It is therefore not clear as to whether the Kudankulam project has tipped the scales in favour of imported nuclear reactors — it has probably done the opposite. In his negotiations,

Joe Biden will have to remember that American companies will have to sweeten their offers further for any business to result.

ramesh.m@thehindu.co.in

(This article was published on July 22, 2013)
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