Home > In the Media > India May Pay GE, Nuclear Reactor Builders $40 Bln (Update2)

India May Pay GE, Nuclear Reactor Builders $40 Bln (Update2)

Archana Chaudhary in Bloomberg

May 19, 2006

May 19 (Bloomberg) — India, seeking to meet rising energy demand, may pay suppliers including General Electric Co. 1.8 trillion rupees ($40 billion) to build nuclear reactors over the next 14 years, an Indian official said.

France’s Areva SA, Electricite de France and U.S.-based Westinghouse Electric Co. are among the possible providers of 25 to 28 reactors by 2020, Nuclear Power Corp. of India Chairman S.K. Jain said. U.S. President George W. Bush is seeking an end to the three-decade-old international ban on nuclear technology sales to India, prompted by its atomic bomb test in 1974.

India and China are leading a worldwide revival in atomic energy after oil and coal prices rose to records. Russia and Japan are among the nations that may lift sanctions on India and enter the contest for contracts to install 40,000 megawatts of capacity, enough to supply four cities the size of New York.

“We are very confident the deal and all the agreements will go through,” Jain said in an interview in Mumbai on May 16. “As an outcome of that, India will have access to the global nuclear technology market.”

Bush has asked Congress to end the U.S.’s nuclear sanctions against India. The U.S. and other members of the so-called Nuclear Suppliers Group, including France, Russia, Japan and Australia, are debating whether to lift their ban on exports to India of equipment and materials for atomic use.

Manmohan Singh

India is turning to overseas nuclear-reactor builders after Prime Minister Manmohan Singh doubled the nation’s 2020 capacity target from an initial 20,000 megawatts. India’s homegrown atomic power program, initially based on Russian technology, won’t cope with the stepped-up construction plan, Jain said.

The program was also limited because of a uranium shortage caused by the international embargo on sales of the reactor fuel. Once sanctions end, supplies of enriched uranium will be included in contracts to install reactors, Jain said.

The sanctions were prompted by India’s testing of a nuclear weapon in 1974. The explosion conducted in a desert in western India prompted the formation of the Nuclear Suppliers Group, of which the U.S. is also a member. Another round of tests by India in 1998 led to the U.S. choking trade with India by disallowing the Export-Import Bank and Overseas Private Investment Corp. to guarantee loans for projects in India.

U.S. Decision

The U.S. removed the economic sanctions in 2001 after the Sept. 11 attacks to bolster support for its campaign against terrorism. The U.S. decision to give India access to civilian nuclear technology was initiated during Prime Minister Singh’s visit to Washington in July and concluded during President Bush’s visit to India seven months later.

The agreement, which needs the approval of the U.S. Congress, will help India develop its nuclear power industry to boost energy generation. The South Asian nation is seeking to raise output at its atomic power plants, which account for about 3 percent of generation, to reduce reliance on oil and coal.

“We cannot depend on one source to meet all our energy needs,” said V. Raghuraman, senior adviser on energy at the Confederation of Indian Industry, India’s largest industry body. “We need nuclear power as conventional sources are getting scarce and as environmental norms are getting stricter.”

`Piece of the Cake’

Indian demand for nuclear reactors is enough for all companies “to have a piece of the cake if they participate in our program,” Jain said. “We are looking at huge investments, all by 2020.”

Nuclear Power Corp. has held initial talks with Areva, the world’s biggest builder of nuclear power stations, Electricite de France, General Electric, Westinghouse and the Russian government, Jain said.

India may open investment in nuclear power to other local companies, Jain said. Investor-owned Tata Power Co. and Reliance Energy Ltd. and state-run NTPC Ltd. have indicated interest.

“The Atomic Energy Act does not permit investments by other companies,” Jain said. “The Act will have to be changed because the business will require multiple players.”

India is building two reactors with Russian help under an agreement signed by the two governments in 1988.

India, China

India is rivaled by only China as a market for new nuclear reactors. China plans to increase its nuclear-power capacity to 36,000 megawatts by 2020 and will require an estimated 27 new 1,000-megawatt reactors costing about $2 billion each, according to a September estimate by Yu Jianfeng, a director at China National Nuclear Corp.

In recent speeches, President Bush has said both India and China offer business prospects for Americans.

“India’s growth is creating new opportunities for our businesses and farmers and workers,” Bush said in a speech in February. “India’s middle class is buying air conditioners, kitchen appliances and washing machines, and a lot of them from American companies like GE, and Whirlpool, and Westinghouse.”

India plans to set up nuclear parks where it can house more than 8,000 megawatts of power generation capacity at one site. Nuclear Power Corp. has already selected a coastal site at Jaitapur in the western state of Maharashtra, Jain said.

Coastal Sites

Another three coastal sites will be chosen before year-end, he said. Nuclear Power Corp. has made provisions to add six more reactors of 1,000 megawatts each at its Kudankulam unit in the southern state of Tamil Nadu, where it is constructing two units of 500 megawatts. It can add two more units at its Tarapore site in Maharashtra, Jain said.

“Sites are available for setting up 14,000 megawatts, right away,” Jain said. “Land will not be a problem for foreign collaboration projects.”

India will open all its new reactors for inspection by the International Atomic Energy Agency, Jain said.

The country plans to add 20,300 megawatts of power generating capacity in the year ending March 31, the Hindu Business Line reported on May 17, citing R.V. Shahi, secretary in the ministry of power.

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