The mood is again upbeat among engineering companies. From having to fret about losing top talent to overseas companies, this core sector feels it is all set to see a sharp increase in business contracts, thanks to the Nuclear Suppliers Group’s decision that has overturned a three-decade-long ban on India buying materials related to nuclear energy.
However, actual contracts could take more than three to four years as varied issues, such as financial assistance and legal, regulatory and safety issues, are spelt out clearly and local capability is developed. It is expected that the nuclear agreement with the US may allow India to generate 40,000 megawatts of nuclear power by 2020. The waiver and the prospects of a possible Indo-US nuclear deal has led global nuclear power majors, such as General Electric, Westinghouse, Areva and Rosatom, are expected to relaunch talks for manufacturing and supply of nuclear power equipment while also initiating parallel negotiations with the state-owned Nuclear Power Corp of India for supply of nuclear fuel and technology for existing power plants and upcoming projects, said sources close to the development. Top engineering companies such as Larsen & Toubro and are also keen.
Global uranium suppliers led by Australian, Kazakh and Canadian firms, are also eyeing fuel supply contracts with NPCIL, said the sources who can’t be named. L&T, India’s largest engineering company, expects a sharp increase in interest in nuclear energy. “Foreign companies have been in talks with us frequently to assess our expertise ever since the India-US nuclear talks started,” said a senior official with L&T. “We expect the negotiations to resume now as India has become a member of the Nuclear Club,” he added.
Recently, L&T chairman AM Naik told ET that that his company is ready for its foray into building nuclear reactors. “We will invest about Rs 1,800 crore for a forging unit through a joint venture with Nuclear Power Corp,” Mr Naik had said.
The agreement with the US is likely to generate orders of more than $10 billion for companies such as L&T and Bhel. This is expected to boost revenues for these companies and also stem flight of executives from large companies such as L&T which have seen alarming attrition levels of 15%.
“(However) the whole process will take some time,” said Kameswara Rao, India leader (power practice) at PricewaterhouseCoopers. “Apart from developing local capability, we also need to look for clarity on the financial issues as not many multilateral agencies lend to nuclear projects,” he added. The options then include tapping bilateral loan guarantees and also facilitating uranium mining, apart from developing private public partnership models. India’s nuclear reactors are operating at just 55-60% capacity due to low-uranium supplies which face restrictions after India blasted its first atom bomb at Pokhran in 1974.
State-owned Nuclear Power Corp of India (NPCIL), the monopoly nuclear power generator, has identified four reactor manufacturers — Westinghouse Electric Company (AP1000 series of reactors), GE-Hitachi (ABWR reactor series), Areva (1,000 mw European pressurised reactors) and Russia’s atomic energy agency Rosatom (VVER 1,000 reactors) — as among the frontrunners for new projects planned across the country. This is based on “suitability” of technical parameters for placement of orders that will form the first phase of the Centre’s plan to build 40,000 mw of nuclear capacity by 2020.
The nuclear space is currently dominated by leading companies from Russia and France, which have sophisticated nuclear technologies. Areva, a France-based company with a listed unit in India, has already said it plans to join hands with Indian firms for production of nuclear power equipment. “We are negotiating with Indian companies for a possible joint production in India,” Areva president Anne Lauvergeon said recently.
Private energy companies were cautious talking about the deal. Reliance Energy officials were tight-lipped. A spokesperson for the Mumbai-based electricity company that is part of the Anil Ambani group, said that the deal would be good for the country and that the company is willing to wait and see how it unfolds. Tata Power is another private company that has been waiting for India’s nuclear isolation to end so that it could foray into nuclear power. About a year ago, the company had initiated talks with Areva on sourcing of nuclear power equipment.
Tata Power recently said it was planning a minimum $3 billion investment in nuclear energy, either on its own or through joint ventures.
The local capability also needs to be developed. Tata group’s TRF executive director RC Nandrajog says that immediate benefits may not be there, “but once there are efforts to build plants, we will see lot of business on fabrication and engine making.”
While French nuclear major Areva NP and Russian state-owned firm Rosatom are among the companies keenly eyeing the Indian nuclear pie, US players such as General Electric and Toshiba Corp-owned Westinghouse Electric are other key players waiting for a ratification by the US Congress.
Russian firms are currently helping India build two 1,000-MWe (megawatt electric) light water reactors at Koodankulam in Tamil Nadu and plans for an additional six units could be speeded up.
US-based nuclear firms, meanwhile, will wait for the approval from the US Congress to resume trade with India. If this happens GE would act upon its joint venture with Hitachi for the Indian market and has recently been reported to be open to local partnerships.
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