Energy: Foreigners battle for nuclear power stake

By Amy Kazmin in New Delhi
Published: January 30 2009 00:10

For decades, India’s nuclear establishment worked in almost total isolation, the result of US-led international sanctions intended to punish the country for refusing to relinquish its nuclear weapons programme.
Barred from obtaining nuclear fuel or technology from abroad, the state-owned Nuclear Power Corporation of India, working with private firms, installed a mere 4,000 megawatts of nuclear power capacity, with another 2,600MW under construction.
But when New Delhi was finally accepted last year as a de facto member of the global nuclear club – as part of a deal with the US – India became an accepted partner for the international civil nuclear trade.
Since then, western energy companies have been beating a path to New Delhi. Yet even as they tout their wares, New Delhi is still grappling with sensitive questions of how much foreign involvement to permit.
After decades of self-reliance – and little outside scrutiny of its operations, India’s powerful nuclear establishment is ambivalent about foreign involvement – and apparently determined to ensure the state is not upstaged. “If you have been under sanctions for 30 years, you have a certain mindset, saying ‘Okay, we’ll do this on our own’,” Arundhati Ghose, former Indian ambassador to the United Nations, says.
Chronically short of power, and heavily dependent on imported oil, India wants to massively expand its nuclear power output to improve its long-term energy security and meet surging demand. India’s national energy plan calls for 30,000MW of nuclear power by 2020, 63,000MW by 2030 and 250,000MW by 2050.
Western companies see opportunities. In January, executives from 30 US companies, including GE, Westinghouse, Bechtel, Babcock & Wilcox, and Shaw Power, visited India for discussions with government officials and the NPCI on meeting India’s power needs. The US delegation was followed swiftly by top British nuclear energy experts, led by Peter Mandelson, the UK’s minister for business.
Yet profiting from India’s thirst for power looks set to be an arduous process, especially for private US firms. “The hype on the deal that it is going to open up tens of billions of dollars of business to the US was just that – hype,” says Brahma Chellany, director of the New Delhi-based Centre for Policy Research.
India’s Atomic Energy Act now restricts ownership and operation of nuclear power plants to government-owned companies – and any amendment that opens the sector to even limited foreign ownership is likely to trigger heated parliamentary battles.
US firms are also unwilling to conduct any nuclear commerce with India until New Delhi adopts internationally binding legislation to limit private liability in case of a nuclear accident, potentially another highly contentious political issue.
“India has been very accustomed to doing these through its state-owned companies or dealing with foreign state-owned companies,” says Ted Jones, a director of the US-India Business Council. “To induce the participation of private companies, they need to ... create an enabling framework.”
The NPCI is working with Russia’s state-owned AtomStroy Export to build two new 1,000MW reactors – projects that predate the sanctions – and the Russian agency is to help build another two reactors at the site. The NPCI also has an agreement to acquire technology from France’s state-controlled company Areva.
But while the NPCI wants foreign collaboration to help it rapidly expand energy production, India’s nuclear research establishment – obsessed with ideas of achieving technological supremacy – appears anxious.
Last year, Anil Kakodkar, the Atomic Energy Commission chairman, publicly cautioned that foreign co-operation should not erode India’s technological capacity, and warned of potential intellectual property disputes, with foreign companies claiming Indian technology as their own.
“The motto of self-reliance is not just a slogan,” he says. “It is an important element of our technological march and our ambition to lead the world,” he says. “We must conduct business in a manner that does not constrain us from getting into a top position, otherwise we simply become the so-called fabricators or service providers – fabricating something for x’s orders, y’s orders, or z’s orders.”
India’s Congress-led government has yet to unveil publicly a proposed legal framework for nuclear commerce. But local newspapers say a current draft would limit foreign companies to selling technology, supplies and services and prohibit foreign equity stakes in any nuclear power plant.
That would be a significant brake on India’s development, given the state’s limited resources for such expensive projects. “It won’t be possible for the government of India to find the resources on its own, which means international finance will be required – and a lot of that is going to be equity,” says V. Raghuraman, a Confederation of Indian Industry adviser. “We’ll have to really see what comes out and how it gets legislated. There are many questions that have to be answered.”
Copyright The Financial Times Limited 2009