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From Russia, With Love

26 Sat Dec 2015

Posted by in India, Nuclear, South Asia

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Narendra Modi’s visit to Russia yielded 16 agreements ranging from defence, energy, space cooperation, manufacturing, and education. Of particular interest to some has been the announcement regarding the purchase of Russian nuclear reactors for Kudankulam as well as a yet-to-be-decided site. Modi swept into office promising electrification and ample energy for all; his visit to the Bhabha Atomic Research Centre in July 2014, just two months after taking office, his party’s manifesto promise of aggressively pursuing thorium reactor technology and deployment, and his discussions with US president Barack Obama in January 2015 that led to a convoluted arrangement that partially resolved apprehensions about India’s nuclear nuclear liability law all indicated that the prime minister would actually deliver on his promises.

However, little moved on the nuclear front over the past 18 months; in fact, it would not be amiss to say that things actually slid back a little with the chief executive officer of General Electric, Jeffrey Immelt, announcing that he would not risk exposing his company to India’s nuclear liability law and that GE would not be in the Indian nuclear business. Even the much hyped nuclear understanding with Japan has not yet turned out to mean much, and the prime minister made no mention of nuclear power at the international climate change conference in Paris a couple of weeks ago. Nuclear developments from the Russia trip, then, were a much welcome bit of news. As is typical of the Indian government, the announcement was just a stub, even in the official press releases, and not much has been spelled out about India’s new Russian purchase.

In his statement, the prime minister announced that India was keen to acquire twelve Russian reactors for two sites. The first of these sites is Kudankulam, where one Russian 1,000 MW VVER is already operating (though on suspiciously long maintenance downtime) and another is about to achieve criticality in a few weeks. This site was originally finalised in 1989 for two reactors with the option of expanding to eight units. However, the collapse of the Soviet Union, an Indian economic downturn, and anti-nuclear protests delayed work and the first reactor went online only last year in 2014. Confirming six reactors at Kudankulam does not utilise the 1989 understanding to its maximum but it is nonetheless a significant departure for Indian nuclear policy, and one for the better: for reasons unknown to outsiders, it has been the practice of the Department of Atomic Energy to sanction two reactors at a time. Reactors in India have always been built in pairs at each site – Narora, Kaiga, Kakrapar, Tarapur, Madras, and Rawatbhata. This may seem like an insignificant deviation but as the United Arab Emirates’ recent experience has shown, building more reactors of the same type simultaneously improves the efficiency of construction. This is further supported by industry analyses of why the construction of the EPR at Olkiluoto went completely off the rail.

The second site for six more of Russia’s reactors, it is being reported, is in Andhra Pradesh though the exact spot is yet to be determined. These are thought to be the slightly larger VVERs, rated at 1,200 MW. Interestingly, Andhra is already in line to receive six of GE’s 1,520 MW Economic Simplified Boiling Water Reactor (ESBWR) reactors at Kovvada. Does the prime minister’s announcement mean that Kovvada has now been handed over to the Russians, especially in light of Immelt’s outburst in September 2015? If this is not the case, Andhra Pradesh will be home to twelve reactors. Hyderabad’s interest in procuring Russian reactors is no secret. Earlier this year, in June, when West Bengal balked at having two Russian VVERs at Haripur, chief minister Chandrababu Naidu offered his state as a potential home for the displaced reactor plans. This marks a sharp departure from the state’s earlier decision to rely on oil & gas to meet its energy needs.

Modi’s Russian nuclear package also comes with a ‘Make in India’ bonus: Rosatom, the Russian nuclear reactor manufacturer, will be sourcing more components from Indian vendors. The joint statement read, “India and Russia will expand their cooperation in science and technology, industry, localization of equipment and spares, uranium mining, fabrication and supply of nuclear fuel, management of spent fuel and in other aspects of the nuclear fuel cycle.” It is not clear if this entails technology transfers as the deal with Areva at Jaitapur has meant for Larsen & Toubro: the French concern has agreed to help L&T upgrade its forging capacity to produce components suitable for the EPR. Rosatom may well ask Indian companies to assemble knocked-down kits as Russian defence contractors have done in the past with Indian industry.

From a governmental perspective, the most positive aspect of this deal is that it will go through. India’s nuclear liability law, enacted in 2010, delayed or scuttled many other promising ventures such as the ones at Mithi Virdhi and Kovvada; Jaitapur has also had its share of delays to the extent that its environmental clearance license expired last month. Rosatom has been the only international vendor that has stuck with India, though it has worked in a substantial hike in the price of its reactors in a renegotiated contract: while Kudankulam I and II cost the Indian taxpayer approximately Rs. 17,300 crores, Kudankulam III and IV will cost them in the vicinity of Rs. 39,500 crores. Not all of that 130 per cent hike can be explained away by inflation and exchange rate fluctuations. Moreover, there are doubts whether Rosatom will actually pay damages in the extremely unlikely event of a nuclear accident at Kudankulam: although the operator is committed to a no-fault liability, supplier liability can easily get bogged down for decades in courts under a mountain of technical data and legal manoeuvres.

Overall, however, the deal is good for India. Russia’s VVER reactors are among the more advanced Gen III+ designs and will provide clean, cheap, and reliable energy. The real drawback of the outcome in Moscow is that India’s joint vision with Russia on nuclear energy cooperation envisages only 12 reactors over the next 20 years. With the construction of high speed rail networks planned in India, a growing economy, and increasingly affluent citizens, these reactors will be a mere drop in the bucket. As the United States in the 1960s and 1970s, and France in the 1980s and 1990s, demonstrated, achieving a safe construction pace of three to five reactors per year is very much within the realm of possibility. India’s nuclear ambitions ought to mirror China’s building spree and 12 reactors ought to be ready by 2020 at the latest. The real question is, what do we do after that, Mr. Modi?

This post appeared on FirstPost on December 27, 2015.

An Empty Deal

12 Sat Dec 2015

Posted by in India, South Asia

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News of an agreement on civil nuclear cooperation between India and Japan has been met with much fanfare in the Indian media. The announcement came on the second morning of Japanese prime minister Shinzo Abe’s three-day trip to India to attend the ninth annual India-Japan Summit. Despite the celebratory tone in India, the fine print and context of what was agreed upon between the two nations is less than satisfactory and will mean little in practice.

The nuclear deal has been a sensitive subject between Delhi and Tokyo for the past five years. In 2005, the United States spearheaded the effort to recommence international nuclear commerce with India, urging the International Atomic Energy Agency (IAEA) and the Nuclear Suppliers Group (NSG) to consider Delhi’s excellent nuclear non-proliferation and safety credentials and make an exception for the South Asian country despite its refusal to accede to the Non-Proliferation Treaty. The international legal infrastructure was in place by 2008, and India has since concluded several nuclear cooperation agreements enabling it to purchase nuclear equipment and fuel from the international market. Delhi’s increasingly warm relations with Tokyo had led the former to believe that the latter would also ink such an accord once the United States and other major powers had done so. Mistakenly, as it turned out.

Japan holds an important position in international nuclear commerce. Over the years, the island nation has developed expertise in manufacturing several critical reactor components of high quality and become a key node in the supply chains of at least three of the major nuclear vendors, namely the French firm Areva and the American firms General Electric and Westinghouse. Among the major players, only Russia’s Rosatom and China’s two major state-run nuclear vendors – China General Nuclear Power Group (CGN) and China National Nuclear Corporation (CNNC) – are independent of Japanese components. As per Japan’s strict export controls stipulating end-user certification and other conditions, US and French nuclear firms would first need the permission of their Japanese suppliers before doing business with India. Tokyo’s consonance on nuclear cooperation with India thus achieved a greater import, not to mention the symbolic value India put on such an agreement as an indicator of its nuclear normalisation.

The declaration at the India-Japan Summit falls considerably short of a nuclear deal. The two sides merely signed a memorandum of understanding that has punted the legal and technical differences further down the road. In essence, this means that Japan has only agreed to the principle that it can conclude a civil nuclear cooperation agreement with India, that it will make an exception to its rule of not conducting nuclear commerce with a state that is not a signatory of the NPT. This is progress, no doubt, but what price Japan will extract for its concession in terms of technical requirements or how long the nuclear deal will take to operationalise is anyone’s guess. If the joint statement between the two countries is any indication, Japan’s pound of flesh will probably include Indian concessions on the Comprehensive Test Ban Treaty (CTBT) and the Fissile Material Cut-Off Treaty (FMCT). India’s view has been that both these treaties perpetuate the nuclear apartheid regime that the NPT is the foundation of. Although India has of its own volition declared a moratorium on future nuclear tests, being party to a legally binding agreement is a bridge too far from Delhi’s perspective. Furthermore, a historical perspective on the fate of India’s MoUs may be had by looking at the country’s role in upgrading the Iranian port of Chabahar or its Medium Multi-Role Combat Aircraft (MMRCA) contract.

Even if India and Japan had succeeded in inking a comprehensive civil nuclear cooperation agreement, the chances of it having much impact on India’s nuclear energy sector are slim. As part of its agreement with the United States, India agreed to bring into force a nuclear liability law like all other states with nuclear facilities. However, Delhi’s interpretation of liability, informed as it was by the Bhopal Gas Tragedy of 1984, was not in congruence with the international standard that limited damages and made the operator solely responsible for economic compensation. Consequently, no vendor is willing to enter the Indian nuclear market. Chairman Jeff Immelt stated categorically that he was not willing to expose his company to the risks Indian liability law required of nuclear suppliers, and Areva has slowed down its work at Jaitapur pending further clarifications regarding liability despite signing a pre-engineering agreement for the site with Larsen & Toubro in April 2015. Similarly, Westinghouse has been remarkably silent on its interest in India since January 2015 when US president Barack Obama and Indian prime minister Narendra Modi achieved an expensive and convoluted workaround on supplier liability by establishing an insurance pool for nuclear vendors.

The only benefit India is likely to accrue from an agreement on nuclear cooperation with Japan is the transfer of technology for reactor components, particularly Japan Steel Works’ forging of large, single-plate reactor pressure vessels. India may also diversify its suppliers and develop its indigenous nuclear energy industry. While both of these are welcome developments, they will not amount to the rapid expansion of nuclear energy in India that was envisaged in the wake of the Indo-US nuclear deal in 2008. Another possible benefit, if Modi is capable of being so bold, is the acquisition of plutonium and spent nuclear fuel for use in India’s Fast Breeder Reactors (FBR). This will expedite the introduction of thorium reactors in India, which are safer, cleaner, cheaper, and more proliferation-resistant than conventional reactors.

There is some debate about why Japan has made even this slightest of shifts in its position on nuclear cooperation with India. The Yomiuri Shimbum, arguably Japan’s leading daily, suggests that China’s forays in emerging as a major nuclear vendor has Tokyo worried. By various means, Beijing has acquired advanced Western technology and incorporated it into its own designs that are now being marketed to the world. China’s large reserves of foreign exchange also allow it to extend generous lines of credit to its customers who would be happy with a greater range of international partners. Additionally, by retreating from the international nuclear market and refusing to supply major customers, Japan will lose its technological edge in the field as Britain has. This is a plausible explanation but betrays the newspaper’s conservative leanings more than reveal Tokyo’s reasons: any argument along these lines must also take into account that there is still a large lobby against nuclear relations with a non-signatory of the NPT like India as well as the opposition to nuclear energy expansion in Japan; restarting the country’s fleet of 43 idling reactors has itself been a challenge for the Abe government.

From an Indian point of view, there are strategic as well as economic considerations at play here. Abe is not unaware of this, but he must also be able to sell this deal to his domestic audience and have it approved by the Diet. It might be his thinking that this is best achieved in small, incremental steps as the MoU was. In the meantime, there is much Modi can do to maximise the gains from a nuclear deal with Japan when it comes. It involves reforming the Atomic Energy Act to allow active participation by the private sector, establishing a de facto and de jure independent regulatory authority, improving transparency in the nuclear sector, and amending India’s nuclear liability to conform to international norms. Whatever the potential benefits of a civil nuclear cooperation agreement with Japan may be, India has not achieved them today.

This post appeared on FirstPost on December 13, 2015.

In Search of a Nuclear Vision

09 Fri Oct 2015

Posted by in India, Nuclear, South Asia

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Few things are as confounding as watching India mismanage its nuclear energy policy. The Indo-US nuclear deal in 2008 raised hopes that the country might be on the verge of a nuclear renaissance but Delhi handled subsequent steps with about as much aplomb as a tapdancing platypus. The latest fallout of this ham-handed approach to nuclear policy has been General Electric’s announcement that it will not participate in the Indian nuclear market until the country’s nuclear liability laws meet international standards.

The Civil Liability for Nuclear Damage Act is but a symptom of a far greater malaise that has plagued Indian nuclear thinking for decades. In the early years after independence, India’s nuclear tsar, Homi Bhabha, had a close relationship with Prime Minister Jawaharlal Nehru. Consequently, he could count on Nehru’s support in his ambitions for India’s nuclear programme. The prime minister himself was also a devotee of high technology for it signalled to him a way in which India might leapfrog several stages of development.

Bhabha used the fact that he had the prime minister’s ear to dream big: he formulated the three-stage programme which would eventually see the country powered by thorium reactors and free from external dependencies. To reach this goal, India would first have to build a fleet of pressurised heavy water reactors and fast breeder reactors that would produce the fuel for the third stage. The chutzpah is astonishing when one considers that India did not even have a single nuclear reactor then.

Post Nehru, Indian leaders have been distant of the nuclear programme. It was difficult, however, to disavow the programme entirely. This was partly because the energy programme was inextricably interwoven with a weapons programme and India’s principled opposition to international nuclear apartheid linked the political fortunes of both to each other. The closeness between Bhabha and Nehru, not to mention the latter’s childlike fascination and wonder at big science, created a dynamic that has not since been replicated.

One thing India’s political class has never been accused of is possessing in-house expertise and this shows in the way Delhi seems lost at sea when it comes to nuclear energy. The drastic adjustment of the growth target for nuclear energy in the country – from 63 GW to 27.5 GW – by 2032 betrays a worrying incompetence in the Indian bureaucracy, or at the very least a complete disconnect between scientists and policy makers. The plan had been to build 16 domestic and 40 foreign reactors but fumbling on nuclear liability, viewed only through a prism of political expediency rather than technical criteria, repelled desperately needed foreign investment in India’s nuclear energy sector. Even if foreign vendors were forthcoming, the cost of their products has also shot up due to the convoluted bypassing of nuclear liability via the suppliers’ insurance pool. In the seven years since the epochal nuclear deal, the only good news the nuclear establishment can boast of is the securing of uranium supplies for the next decade or so.

The nuclear liability quagmire aside, Indian nuclear energy is still in complete disarray. Only six reactors are under construction in the country presently, a 1,000 MW VVER at Kudankulam, two 700 MW pressurised heavy water reactors (PHWR) at Kakrapar, two more similar reactors at Rawatbhata, and the 500 MW prototype fast breeder reactor (FBR) at Kalpakkam. All have seen significant delays in construction – an inter-governmental agreement between India and the Soviet Union was signed in 1988 but construction only began in 2002; Kakrapar and Rawatbhata were approved in 2005 but construction started in 2010, and the PFBR is at least three years behind schedule. These are among the faster projects – the nuclear power project in Gorakhpur was sanctioned in 1984 but finally broke ground only in 2014!

Delays are rampant across the industry. Yet most are due to political or bureaucratic inefficiencies such as trouble with land acquisition, unforeseen hurdles in financing, and at times, protests and litigation. Once the reactors are built, however, the nuclear enclave seems to have done a splendid job in operating and maintaining them – in 2003, Kakrapar was recognised by the CANDU Owners Group of being the best performing PHWR. Similarly, an IAEA team that visited Rawatbhata in 2012 reported that the reactors they inspected were safe and impressive; in 2014, one of the reactors at the same plant set a world record for the longest continuous operation.

Admittedly, some delays do arise due to technical shortcomings. For example, the design and construction of the reactor pressure vessel (RPV) for the PFBR took Larsen & Toubro almost three years more than anticipated; any increase in the power rating of future FBRs will again require a similar timeframe to re-design the RPV. The reason Indian manufacturing lags behind nuclear industry needs, P. Chellapandi – Chairman & Managing Director of Bhavini – explained, is that there is little incentive to pre-empt demand given how small and infrequent it is. India has built some 21 reactors in the 70 years since independence; by contrast, France built 60 reactors in just 20 years from the mid-1970s to the mid-1990s under the Messmer Plan; the United States built 100 reactors before the lull that set in under President Jimmy Carter; the European Union’s nuclear trade association, Foratom, has just called for 100 new reactors by 2050; China has 25 reactors under construction presently, has plans for 43 more, and is sitting on proposals for 136 more by 2030!

In the last couple of years, Areva, Toshiba, and Urenco have all looked for outside investors in their nuclear divisions. India has let the opportunities by without so much as a whimper. While India has secured nuclear fuel for the next decade, uranium prospecting or acquisition of mines abroad – especially when prices are so low – does not seem to have factored high on the Indian agenda.

In terms of technological cooperation too, India is nowhere on the international scene. China is the hot destination for nuclear vendors and startups – the size of Beijing’s orders has persuaded GE to share its AP1000 technology with Chinese firms, and Bill Gates’ TerraPower recently signed a deal with China National Nuclear Corporation to build the first of a new generation of reactors, the travelling wave reactor (TWR), a 1,150 MW liquid sodium-cooled fast reactor that uses depleted uranium as fuel. This type of reactor will generate less waste, be cheaper, and safer. In the meantime, India postponed the start of its PFBR again and the advanced heavy water reactor is nowhere in sight.

Like any large national project, say, for example, the highways or the railways, the utility and efficiency of nuclear power increases with scale. Furthermore, the high upfront cost of nuclear power demands a clear set of short and medium-term goals with a long-term vision. It is, therefore, essential that the government, either in partnership with the private sector or on its own, have a considered and clear-eyed policy for the industry. The urgency to meet deadlines, the impetus to remove roadblocks, must come from the top to galvanise the entire chain. Indian nuclear fingerprints appear nowhere in the various international nuclear ventures, from mining through construction to development.

Prime Minister Narendra Modi has outlined an environmentally friendly trajectory for Indian development that is mindful of climate change, air quality, and other environmental concerns. It is unclear how he intends to meet these goals and grow the economy at eight per cent per annum at the same time without substantial help from nuclear power. Admittedly, plans for nuclear reactors at ten sites were announced in April 2015 but it is unlikely any of this will come to fruition in a timely manner without developing Indian manufacturing and bringing the CLNDA in line with international practices. Thankfully not ubiquitous, the attitude that the world needs India more than vice versa is far too common among Indian bureaucrats, planners, and citizens. They are in for a rude surprise. As former commerce secretary Rahul Khullar succinctly explained in a recent article, this attitude, combined with domestic calculations, narrow ministerial interests, a fundamental lack of understanding of negotiating give and take beset India’s negotiations with the outside world.

Even more helpful would be to rekindle the relationship between the prime minister’s office and the heads of the nuclear community to the same level as that between Bhabha and Nehru – after all, nuclear energy does fall under the PMO and not the Power or New and Renewable Energy ministries. Modi seems to be the point source for visions and thinking big in the ruling party and were senior nuclear scientists to have the prime minister’s ear, it may be just the sort of thing to accelerate growth in Indian nuclear energy. With their domain expertise and confidence of the prime minister’s support, an ambitious yet realistic nuclear expansion programme can be launched. To be clear, there is no Indian century without nuclear power – clean air, carbon emissions control, plentiful energy, employment, economic growth, energy security…in one industry can India find solutions to so many of its needs. We just need a little vision. Desperately.

This post appeared on FirstPost on October 29, 2015.