India throws open a $100bn nuclear bazaar
By Raja Murthy
http://www.atimes.com/atimes/South_Asia/JI11Df02.html
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 aboutonly 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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