Questions over Areva reactors may be good time for some hard bargaining

The multi-billion dollar Rafale fighter aircraft deal and the cluster of 6x1650 MW nuclear power reactors proposed by Areva will top Prime Minister Narendra Modi’s agenda in France during his maiden two-day visit beginning Thursday.

Both these deals have remained contentious. Though the French energy major, Areva, had signed an MoU in 2009 with the Nuclear Power Corporation of India Limited (NPCIL) to construct six EPR reactors at Jaitapur in Maharashtra, the project is yet to take off.

The key issues holding up the multi-billion dollar project relate to the EPR design, the cost overruns, and the long gestation in construction, clarity on the India-US deal and the nuclear liability clause, as well as environmental concerns.

The French major has offered to build 6x1650 MW (9,900 MW) rated EPR reactors at Jaitapur, which is in Ratnagiri district of Maharashtra. Around 1,000 hectares have been acquired so far for the project. The NPCIL is facing a lot of questions on environmental safety, and financial aspects of the project. The French have offered financial support and assured fuel supply for 25 years.

While Areva has claimed that the design incorporates the best technology, which ensures safety and addresses environmental concerns, there have been reports of problems cropping up at a few installations in Finland and even at Flamanville in France.

According to some scientists of the Indian nuclear establishment BusinessLine spoke to, questions have been raised over the “untested technology”.

The other big challenge confronting the NPCIL is the final cost of production of per unit of power generated from the reactors. Unless it is less than ₹6 per unit, it is not economically viable. Therefore, the onus is on the Indian side to iron out these issues during Modi’s visit, they said.

Since the project is yet to get off the ground, this is the best time for some hard bargaining on the technical and commercial terms for the Indian side. Whether the questions raised by the French nuclear regulator on the EPR reactors lead to fresh trouble and delays remain to be seen.

Since, the landmark India-US nuclear deal in 2006, which opened up opportunities for India to source nuclear reactors from global majors, negotiations have progressed with the US (Westinghouse), France (Areva) and Russia for several projects.

However glitches remain. The only positive movement has been from Russia, with which India signed a definitive agreement for Kudankulam 3&4 to set up two 1000 MW reactors. Already the 1&2 of the same size have been completed.

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