September 19, 2013

India's n-trade dilemma: US power rate twice that of Russia

PranabDhalSamanta : New Delhi, Thu Sep 19 2013, 09:41 hrs

The high cost of power from US nuclear reactors India has proposed to buy is proving to be the biggest hurdle to pursuing nuclear trade negotiations with Washington, with the upper price limit calculated by the Department of Atomic Energy being almost twice the price finalised with Russia for Kudankulam units 3 and 4.
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Based on the talks so far, the upper limit calculation — essentially the maximum price per megawatt before negotiations — is Rs 38.76 crore per MW, which works to Rs 12.19 per KWH for the consumer. This, sources said, is way higher than the recently negotiated price with Russia, which is about Rs 22 crore per MW, translating to about Rs 6 per KWH for the consumer.

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Even though the Nuclear Power Corporation of India Ltd is yet to begin price negotiations, there were concerns over signing a preliminary agreement without getting a clearer picture on how far the prices could be reduced.

The exchange value is pegged at Rs 67 to a dollar as of now for the purpose of this agreement, which has been moved as a Cabinet note and would be taken up by the Cabinet Committee on Security soon.

One of the reasons for the cost being so high is India's civil nuclear liability law and its requirements, which has raised insurance costs for all nuclear power firms doing business with India. American companies are being overcautious to ensure that they do not lose out due to some litigation as has happened to some US firms.

As a result, the preliminary agreement, which is worth just Rs 102 crore, leaves out reference to any contentious issues. In fact, the DAE has made it clear that the agreement will lead to no nuclear activity and more importantly, has emphasised that liability issues will only be dealt in the main contract.

From what has been proposed, the agreement is clearly just symbolic to convey India's intent to stay the course on the India-US nuclear deal. It commits both sides to carry out a preliminary safety analysis, a second technical assessment, design review and assess design compatibility with Atomic Energy Regulatory Board codes, electrical aspects and holding technical training workshops.

The main problem, however, remains the cost of the project, which is to come up at Mithivirdi in Gujarat. At present estimates, the cost of the project to set up two units of Westinghouse's AP-1000 reactors is over Rs 92,000 crore, up from Rs 60,000 crore estimated in 2009.

The plan is to ultimately have six reactors at the site. But clearly a lot of the spadework still remains to be done before the project can take off even though land acquisition has moved fast with the public hearing also completed from the environmental end.

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