Capitalising on India?s nuclear strength

The difficulty of examining the recent Indo-US agreement on the peaceful use of nuclear energy is not one of perception alone, but of substance. It is quite apparent that the sudden development, in fact, much more than was in the PM?s agenda, was due to initiative from the highest level on the US side. The concern with growing energy demands from India and China, and the impact this would have in the future on the prices for petroleum products in the US, clearly energised a President who understands the oil business well. To that extent, there was certainly enlightened self-interest in the offer. That was perhaps the reason that the initial reaction from the opposition was that this represented, not an extension of the earlier policies, but new directions altogether, involving international oversight commitments that India had earlier not agreed to. The delay of a week in the PM reporting the details of the US visit to Parliament was due to the time taken by him to convince the opposition, both internal and external, that whatever the origins of the largesse, it would be a positive step for India?s energy security.

The arithmetic of the need to secure sources of energy for growth is fairly well documented. In 2002, the installed power generation capacity in the country was around 140 giga watts (one giga watt is 1,000 megawatt) inclusive of captive generation. 67% of power generation is from coal-based stations, 20% from oil and gas 10% from hydro and 3% from nuclear. Over the next few decades, growth rates of even around 8% will demand a quadrupling of this capacity, with shares of coal and hydrocarbon progressively coming down. Nuclear energy will have to take on the responsibility of being the backbone of power supply in the future.

China has already embarked on its path towards greater reliance on nuclear energy. The mainland has nine nuclear power reactors in operation and two units are under construction. Additional reactors are planned, to give a five-fold increase in nuclear capacity to 40 GWe by 2020. The country aims to become self-sufficient in reactor design and construction, as well as uranium supply and fuel production. Electricity demand is growing at 15% per year. Nuclear cap-acity of 36,000 MWe is planned by 2020. Mainland China is starting to rely heavily on imported uranium to fuel its nuclear power programme.

In Taiwan, six nuclear power reactors operate and two advanced reactors are to be ready within a few years. China?s nuclear market has expanded at a rapid rate. From 1996 to the end of 2003, not one company has brought a single new reactor on line in the US, nor cleared a patch of ground to begin building, nor applied for a licence to start construction. Since January 2002, China has brought six on line in China, plus one reactor in Pakistan. The question is no longer: can China?s nuclear industry maintain its current growth rate? The question now being asked is, can China accelerate that growth rate to meet the even more ambitious pace of its new energy plan?

There is also considerable maturity in the Indian nuclear industry. No longer are there concerns about international supervision and adherence to international transparency norms. The recognition of the distinction between peaceful uses of nuclear energy and other uses, by the US, marks a distinct shift in opportunities to separate these two initiatives. India stands to gain in technology and equipment. Most im- portant, with a deal such as this, India can also shop around ? an oppo-rtunity hitherto not available. The target of 20,000 mw of nuclear power generation capacity suddenly app-ears to be feasible and achievable.

Notwithstanding these positives, there are several issues that are causes for concern. The first is the Atomic Energy Act of 1962, that reserves the generation of power from nuclear energy entirely to government and government-owned entities. Thus, the receiver of the technology, would, in all likelihood, be an Indian public sector entity. While the sourcing would have to be from private entities in the US, such as Westinghouse. This interface of foreign private and Indian public sector has always suffered from implementation problems. It appears to make sense to revisit the Act to consider private-public partnerships that will allow technology transfer, absorption and plant operation to be efficient.

The concern is that the atomic energy establishment in India has always been an insular entity, lacking transparency, and its record of project completion has been very poor. The question is whether government will be able to recognise the limitations of its existing structures and allow the larger strategy to dictate the emergence of new and relevant structures.

Second, and equally important, is the concern that in matters of defence and strategy, the US has been less than reliable in the past. Our strategists have always been concerned about sourcing equipment from the US, for fear of supplies drying up on some change in US policy. There will need to be clear and transparent backing of the US government to enable Indian industry to consider the sources as reliable and dependable in the long term.

The third is the issue of fuel. It is a pity that environmental activists have held up for over a decade the exploitation of resources. It is amazing that the sovereign state, with all the muscle at its command, has not been able to resolve and settle issues regarding the opening of the new mines. Due to this, there is likely to be considerable dependency for fuel in the years to come. It is important to address this issue firmly and secure control over our own natural resources.

There is a great opportunity that has opened up?it is to be hoped that it will be seized and acted upon.

The writer is a former finance secretary and economic advisor to the PM