Opinion

Securing India’s nuclear energy future

SIDHARTH BIRLA | Updated on April 29, 2014 Published on April 29, 2014

Fading prospects Nuclear power needs to become an attractive investment proposition

The law paints a daunting picture of liabilities in the event of a mishap. This has held up industry participation

There are no two ways about it. To secure its economic future, India will have to ensure its energy security through exploration of all possible sources of energy, including nuclear energy.

India’s long-standing nuclear apartheid ended with the signing of international co-operation agreements with United States, UK, France, Russia and Canada, which granted India access to nuclear materials from the 46 countries in the Nuclear Suppliers group.

However, the Fukushima Daichi incident and apprehensions over the clauses of Civil Liability for Nuclear Damage Act (CLNDA) 2010 have stymied the progress in this sector. Unlike Germany, India cannot afford to jettison nuclear power options, as it will not be able to afford high-cost renewable energy beyond a certain proportion in its supply basket.

Though no effort or expense ought to be spared in ensuring greater safety of existing and future nuclear power plants, forsaking this vital energy source could be detrimental to India’s future energy supply.

Law is a hindrance

India, which is already feeling the stress in conventional power generation due to issues surrounding fuel and delayed clearances, needs to embark on a progressive power policy which ensures access to assured, affordable and a cleaner energy source.

Even in the face of stringent sanctions, India’s domestic nuclear manufacturing entities steadfastly stood behind the country’s nuclear establishment in the formative years. This enabled us to move rapidly up the learning curve, often sacrificing commercial interests to meet the long term goal of self sufficiency in civil nuclear technology.

However, this effort at capacity creation is running into difficulties due to some provisions of CLNDA, 2010, and its rules. The scope of liability, both in terms of definition of a supplier and the quantum of liability, are not clearly defined in the current CNLA.

This has caused undue apprehension among international and domestic players. After the creation of the CNLA Act, the supply chain partners/subcontractors requested major industry players to indemnify them from any liability. However, the Act prohibits any such move. Subsequent rules approved by Parliament don’t provide the clarity desired by industry.

It goes without saying that nuclear reactor operations should have plans and safeguards to deal with adverse events such as human error or a natural calamity. India’s track record in the operation of its nuclear plants has been commendable.

India’s nuclear manufacturing industry has the wherewithal to contribute effectively towards India’s goal of achieving 63 GWe of nuclear power by the year 2032. This includes the induction of thorium-based Advanced Heavy Water Reactors (AHWRs), which augurs well keeping in view the vast deposits of monazite which India has.

However, for the industry participation to become a reality there ought to be more clarity on legal and financial risks. The amount payable in the event of an incident should be firmly established.

Unlimited liability

There exists a stipulation of maximum liability of 300 million SDR (about ₹2,800 crore currently) on a single supplier right now. The majority of contracts will be smaller than the rupee equivalent of 300m SDR.

The spectre of virtually unlimited liability on a single supplier’s balance sheet is never an encouraging prospect for industry. There is no insurance product which could cover such a risk. Further, as suppliers are keen to participate in multiple installations, there is uncertainty over the implications of liability at multiple sites. A nuclear accident can’t be caused by a single failure, due to multilayered safety features incorporated in the design of nuclear power plant, which makes apportioning liability on a single supplier difficult and unreasonable. If each supplier seeks insurance cover for the same liability, nuclear power plant construction costs will become economically unviable.

Nuclear industry demands specialised training to establish a nuclear safety and quality culture. The best in the talent pool need to be assigned for nuclear projects. The impractical CNL legislation has resulted in lack of work for the past three years.

The youth is no longer keen on working on nuclear projects. At the other end, Indian industry has heavily invested in building new capabilities and expanding current capacities. The stalemate created due to legal issues has resulted in underutilisation of even existing capacities.

While it goes without saying that all entities ought to be responsible for, and involved in, ensuring a safe and incident free operation, a rational division of risk-reward is just as important -- among suppliers, operators and other stakeholders. Otherwise, keeping the lights on India's economic growth story may turn out to be an onerous task.

(The writer is President, Federation of Indian Chambers of Commerce and Industry (Ficci))

Published on April 29, 2014
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