India, France fail to announce final deal for nuclear reactors

After a two-hour discussion on bilateral issues, leaders of India and France on Monday failed to announce a final deal for the construction of six new nuclear reactors. Instead, the two sides said that the deal will be finalised within a year.

France had inked a nuclear deal with India in 2008 allowing French supplier Areva to sell reactors to India.

The two leaders encouraged their industrial companies to conclude techno-commercial negotiations by the end of 2016 for the construction of six nuclear power reactor units at Jaitapur, the two countries stated in a joint statement issued at the end of talks in New Delhi on Monday.

The negotiations will consider cost viability of the project, economical financing from the French side,collaboration on transfer of technology and cost-effective localisation of manufacturing in India for large and critical components in accord with the Indian government’s Make in India initiative.

It said “France acknowledged the need for India to have lifetime guarantee of fuel supply and renewed its commitment to reliable, uninterrupted and continued access to nuclear fuel supply throughout the entire lifetime of the plants, as stated in the 2008 bilateral IGA on nuclear cooperation.

Responding to a query, foreign secretary Jaishankar told mediapersons, “The two leaders agreed on a roadmap of cooperation to speed up discussions on the Jaitapur Nuclear Power Project in 2016. Their shared aim is to start the implementation of the project in early 2017.”

The six proposed reactors at Jaitapur will add 9,600MW to India’s installed nuclear capacity. The government-owned Nuclear Power Corporation (NPCIL), the sole company that builds and operates commercial nuclear reactors in India, has set a “target” of expanding the installed nuclear power capacity from the current 5,720 MW to about 14,000 MW by 2024.

The French nuclear gaint Areva since May 2015, announced huge losses amounting to 4.8 billion euros (well above its capital base) and in June the French government announced that Areva would be broken up, with its nuclear power arm, Areva NP, (including engineering, construction and design) being sold to another French energy giant, EDF. The French state has an 84.5% stake in EDF.

Both Areva and NPCIL have been negotiating unit price of power generated from the proposed Maharashtra power plant for years. A source at NPCIL said the French firm was asking for a simply too high price. The French company which uses Japanese components, has a deal to build six reactors in India, although restructuring within that company was likely to delay construction until 2017.

The two countries have moved beyond one of the key concerns that was holding up their nuclear partnership – India’s nuclear liability law. The French administration has conveyed its acceptance of the nuclear insurance pool India has set up that foreign nuclear equipment providers can dip into to cover their products against accidents. But short and long-term financial considerations continue to pose challenges.

However, France’s nuclear industry is in financial crisis and Paris is striking a hard bargain over the extent of “localisation” of the manufacture of nuclear components in India.  As part of Prime minister Modi’s push to ramp up nuclear energy capacity in India, Areva which has been discussing with Indian companies to build six reactors in western India, are now stuck over the price, and EDF.PA recent takeover of Areva’s reactor business has slowed progress.