India throws open a $100bn nuclear bazaar
By Raja Murthy
MUMBAI - The deal is all but done and dealers are already in. The anticipated
US$100 billion worth of nuclear power infrastructure deals are buzzing across
India Inc after India last week became the only country to be allowed to trade
in nuclear material without signing the nuclear Non-Proliferation Treaty (NPT).
Last weekend, the Nuclear Suppliers' Group (NSG) gave India a waiver allowing
it to engage in nuclear commerce without signing either the NPT or the
Comprehensive Test Ban Treaty, paving the way for the US Congress to ratify a
potentially lucrative civilian nuclear deal with New Delhi.
Nuclear power plant infrastructure companies from the US, Russia, France and
Britain are expected to fight for chunks of
India's fat nuclear business pie. Investments worth more than $20 billion could
now be made in infrastructure related to nuclear power plants, as India moves
towards its goal of generating 40,000 megawatts of nuclear power by 2020.
That increase, from the present 3,500 megawatts, will raise the nuclear share
of energy production in the fast-growing economy to between 5% and 7% of the
country's total energy output from the present 3%.
The size of India's nuclear business potential, with US firms being promised
preference, gives ample indication of the kind of American pressure that went
into getting approval from reluctant countries such as Ireland and New Zealand
in the 45-nation NSG. The waiver agreement follows strong lobbying by groups
such as the Washington-based US-India Business Council vowing to secure
congress ratification to "clear the way for US companies to participate in
India's nuclear renaissance".
The Confederation of Indian Industry was also quick to indicate the
expectations of Indian and US companies, with a statement released on September
8 entitled "Important role for industry to play in clean energy sector". The
statement began with David Bohigian, the US assistant secretary of commerce,
saying nearly $17 trillion would be invested in clean energy technologies by
2025, and that "India and the United States can be active partners in this
drive towards sustainable and green industry".
India's communist parties (which withdrew parliamentary support to the
government on July 9 after the government pressed ahead with the nuclear deal
with the US) were left impotently screaming about India having surrendered its
nuclear sovereignty, and suspicion gave way to satisfaction that it is now in a
club of one: the only country that can trade in nuclear fuel material without
signing the NPT.
Two years of heated, divisive debate on the nuclear deal also gave way to a
buzz across the country on how much India stands to gain. The stock markets
gained 3% as plans by India's largest engineering firms such as Larsen &
Toubro took a huge jump towards becoming reality.
Over 400 Indian and foreign firms are expected to gain from the NSG waiver,
according to leading industry bodies such as the Federation of Indian Chambers
of Commerce and Industry. The 2020 goal for the country's nuclear power
generation industry requires a minimum investment of $45 billion, estimates the
Associated Chambers of Commerce and Industry of India.
While most of the new nuclear power plant deals are in the near future
category, Larsen & Toubro has already struck a $750 million joint-venture
deal this past July with the government-owned Nuclear Power Corporation of
India Ltd (NPCIL) to manufacture forgings for nuclear power plants.
Another engineering major, government-owned Bharat Heavy Electronics Ltd, and
L&T are together expected to garner contracts worth $10 billion of the
estimated $100 billion worth of deals over the next two decades.
Mumbai-based NPCIL, which spearheads India's nuclear power program, says it has
17 nuclear reactors in operation and five reactors under construction.
The $1.2 billion GVK group, another leading infrastructure-developing Indian
company, has plans to buy reactors and equipment from American companies such
as General Electric and Westinghouse Electric.
Other companies standing to benefit include consumer durables giant Videocon,
which has recently forayed into the power sector. It is one of at least 40
companies, which include Tata Power and Jindal, in contention for contracts to
build nuclear reactors and ancillary infrastructure.
The tricky part lies in the fact that current laws have to be amended to allow
the private sector into the nuclear trade, with India's Atomic Energy Act of
1962 declaring that only companies that are government-owned with over a 51%
stake are allowed to enter the nuclear power sector.
The 40 companies have formed a pressure group to lobby the government to allow
private companies to get involved in the sector. "These 40 companies have
already started negotiations with the government and their foreign
counterparts," Videocon chief Venugopal Dhoot told the media.
India's three biggest industry bodies - the Associated Chambers of Commerce and
Industry of India, the Federation of Indian Chambers of Commerce and Industry,
and and the Confederation of Indian Industry - are pushing the government to
make appropriate amendments to the law to let the companies get a share of the
pie.
The government, though, has put such hopes on hold, with the junior cabinet
Minister for Power Jairam Ramesh declaring there was "no hurry" to let private
companies into nuclear power projects.
The first priority, the minister said, would be to have government-owned
companies such as the Nuclear Power Corporation of India Ltd establish more
nuclear power stations and in having existing nuclear plants run at full
capacity.
India's nuclear power plants are estimated to be running at about only 50% of
capacity. The country has been starved of sufficient nuclear fuel for the past
34 years after being banished into the nuclear cold after its first atomic
weapons test on May 18, 1974, at Pokhran in the desert sands of Rajasthan in
north-western India.
Growth in the nuclear industry will benefit more than just companies building
the plants and their suppliers. The US-India Business Council points out that
India suffers severe shortages of energy, leading to power cuts and low power
use. At the same time, it imports more than 75% of polluting hydrocarbons it
uses.
"India's energy utilization is fractional compared to most countries," a US
India Business Council statement noted, with India "consuming only 600 kilowatt
hours of electricity per person per year as compared to 14,000 kilowatt hours
per person consumed in Europe and the West." With even the capital New Delhi
suffering from daily power cuts, ordinary folk and unrelated businesses will be
grateful for any improvement.
To get India's nuclear power plants running at full throttle, the government is
investing heavily in sourcing more uranium within India, as well as picking up
equity in uranium mines abroad. Efforts could include a $1.2 billion investment
in a Canadian uranium mine, and mining in African countries such as Namibia,
Niger and Gabon.
Major nuclear power plant infrastructure providers such as Rosatom, General
Electric, Westinghouse - as well as political delegations from their countries
- have been anxiously scurrying in and out of India over the past two years
expecting the Indo-US nuclear deal to win the nod. With that struggle nearly
over, the fight begins to share the spoils.
India has refused to sign the NPT, forged in 1968 and signed by 189 other
countries, on the grounds of universal nuclear disarmament, pointing out that
the treaty is discriminatory in allowing the US, Britain, France, Russia and
China (the permanent members of the UN Security Council) to retain their
nuclear arsenals.
The NSG exemption granted at the weekend is also being seen as a reward for
India's clean record at non-proliferation, unlike Pakistan, North Korea and
China, which have long been accused of entering into dirty deals to illicitly
swap nuclear technology.
US Congress ratification is considered a formality, despite the tight
scheduling required before its session ends on September 28. Even so, questions
by American legislators or public watchdogs on the full range of hidden Indian
assurances and commitments to the George W Bush administration could be
damaging politically to the government in Delhi.
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