The US-India Nuclear Agreement: Expectations and Consequences

[Known_Unknown]

This seminar took place at the Brookings institution at the end of March 09. There's a transcript up on the Brookings website which I'm posting here. There's a lot of important information in there, and I suggest anyone having some interest in the implementation of the nuclear deal and it's associated strategic implications, have a look. Here's a few paragraphs I found interesting:

http://www.brookings.edu/~/media/Files/events/2009/0323_india/20090323_india.pdf

Swaminathan S Anklesaria Aiyar: Now the interesting thing has happened. There is now an explosion in world demand, it seems, for nuclear equipment. And suddenly, the demand for nuclear equipment is much more than can be handled by the existing capacity of companies in the U.S. -- or, for that matter, companies around the world. I went and talked to the Areva people last year, and they made the point that, you know, “India, you’re saying you want nuclear equipment, but we are fully (inaudible). We are unable to even manage our supply chain for the current plants in Normandy and Finland, let alone create new capacity for new guys outside.”

And so they said, “We will be extremely keen on setting up large-scale manufacturing facilities in India for making nuclear equipment. And the reason we want to do this is that we have already seen your capacities. India is potentially a very low-cost producer of this kind of equipment. So we would like to use the manufacturing capacity in India--not only for India’s own nuclear program, but for exporting to our various plants all around the world.”

Okay. That was Areva. Then there was a group of U.S. companies that came over and visited India. They said exactly the same thing. They too said, you know, there is a very, very serious problem in the supply chain right now, and a lot of new capacity has to be created. And we would like to make a lot of this in India, and we would like to see India used as a production hub for global supplies.

The biggest bottleneck, in fact, appears to be in what they call “giant forgings.” If you want really large new generation nuclear power plants, you require massive forgings. And for these massive forgings --there are only two plants in the whole world which have the capacity to produce it, one in France, one in Japan. Because of that, that is the area where Indian private sector companies are now focusing. Joint venture agreement has been signed between Bharat Forge, Areva and BHEL to manufacture giant forgings. A separate agreement has been signed with (inaudible), with Mitsubishi to produce those giant forgings, and the Jindals appear to be interested, too. So you have a large number of Indian companies getting into the production of these giant forgings, which are likely to be critical for the supply chain across the world.

Bharat Heavy Electricals, a government company, have had a monopoly in the production of large turbines. That’s ending. Now complete power plants are going to be made in the Indian private sector, (inaudible), Bharat Force just started up (inaudible). They’re going to start by making these large gold-based power plants, and then they’ll be upgraded into producing nuclear power plants. Tata, Reliance and others are interested. So, by 2020 or 2025, India could be a key part of the global supply chain for nuclear equipment.

This has major strategic implications. If India becomes a global hub for nuclear equipment production, it becomes largely sanctions proof. If, for instance, India at some point tests a nuclear thing, but already equipment supply is localized, you know it’s self-sufficient. You can’t be sanctioned. India would, of course, still require fuel imports perhaps. But by then, it will have stockpiled fuel, and it will have its own nuclear uranium mines by then in Niger, or Kazakhstan or somewhere else. And, of course, it’s going to finally develop its own mines in Andhra Pradesh and (inaudible).

If India is a global supplier, and there’s some sanctions against India, those sanctions would disrupt the global supply chain. So India would have considerable countervailing power in those circumstances. For practical purposes, India will become a B-5 member. And, of course, this will not happen for Pakistan. To that extent, it will change the power equation in South Asia quite dramatically.

Also read the speech by George Perkovich, who goes into details about how India has managed to kill many birds with one stone with the nuclear deal, and going into the future, the nuclear deal has become one of the major foundations on which India can claim to be a first tier rather than a second or third tier great power.

 

[geoatpenn]

That deal will form the cornerstone of indian resurgence in the next decade. To think that the commies actually wanted us to not sign this when the opportunity of the century was presented to us in a platter. i am so happy with the election results.

 

[NikSha]

Great article. The only good thing coming out of Congress's last term. This time, with Left out of the picture I expect them to do anything in their power to make - what is said in this article - this come true.

 

[Rage]

An alternative viewpoint:



Setbacks in India’s nuclear power plans

By Indrajit Basu
UPI Correspondent
Kolkata, India —


It was touted as a deal that would change the global energy landscape, opening new vistas for global as well as Indian power companies. Yet just six months after the historic India-U.S. nuclear deal was signed, unshackling India’s nuclear power generation sector, analysts are predicting hurdles for the “huge opportunities” this sector was expected to open.

A plethora of challenges – including national security, regulatory risks, high costs, lack of clarity in policies, and above all the global economic meltdown – suggest that India’s nuclear renaissance will be a long, drawn-out process that could try the patience of utilities and equipment manufacturers, analysts say.

While India’s return to the international nuclear community tremendously improves the prospects of the nuclear power sector, it could take at least three years to see any real impact in terms of return on investment in the sector.

Last September India and the Untied States signed an agreement on nuclear energy cooperation that also allowed the 40-member Nuclear Suppliers Group countries to enter into nuclear trade with India, for civilian nuclear use.

The deal lifted a 35-year-old ban on India sourcing nuclear technology and fuel, imposed after the country conducted nuclear weapon tests in May, 1974. It also made India the only country to be allowed to develop and generate nuclear power for civilian use without committing to sign the Nuclear Non-Proliferation Treaty.

As a corollary, India also gained access to U.S. nuclear fuel and equipment for the first time in more than 30 years.

The deal boosted the hopes of India’s starving energy sector. Within days of the NSG waiver, estimating a US$50 billion nuclear commerce market in the next five years, close to 40 local and global companies in the private and public sectors announced plans to participate in India’s nuclear power build-up.

They estimated that nuclear power would feature prominently in the US$150 billion power infrastructure investment India required over the next five years to sustain its economic growth.

India is not a nuclear novice. It already has 17 nuclear power plants, with six more under construction. But since the country was largely excluded from trade in nuclear plants or materials, despite generating nuclear power for 30 years, its technology and know-how are not up to date.

For instance, despite having the world’s second-largest reserves of thorium, a nuclear fuel, India's power plants are all based on uranium, a nuclear fuel and technology available only in the developed world, which had helped India build nuclear power plants before its nuclear weapon tests.

India's nuclear power generation amounted to just 3 percent of its total power generation capacity of 140 gigawatts in 2007-08. Plants in various stages of construction will add another 3.2 GW of capacity, bringing total installed nuclear capacity to 7.3 GW by 2012.

According to estimates by the Associated Chambers of Commerce and Industry of India, a local industry lobby, the deal could have helped India add another 40,000 megawatts of power in the next 15 years.

“Clearly, at least on paper, the opportunities are huge,” said Sumeet Agrawal, the India-based analyst at HSBC Securities and Capital Markets. “However, we don’t expect opportunities for utility companies to materialize soon due to many impediments including regulatory, safety and ownership issues.

“Despite initial optimism, it is too early to get excited about private sector participation,” he added.

The biggest impediment to India’s nuclear power plan is the changing dynamics of the sector; following the global economic meltdown, nuclear power in India has suddenly lost much of its attraction as a cost-effective way of generating power.

“What has happened since September 2008 hasn’t eliminated the advantages of nuclear power, but they have been compromised to a large extent,” said the HSBC study.

The study says that nuclear power generation is only competitive when the costs of fossil fuels – coal and gas – are high. The global meltdown that has made energy prices crash has made coal and gas more attractive in India. According to HSBC figures, the costs of gas and coal power generation in India have come down to 6.12 cents and 4.2 cents per kilowatt respectively.

“Further nuclear plants require high capital costs and have long gestation periods. This requires long-term funding and at reasonable rates of interest, both of which seem difficult if not improbable in today's money markets,” says Sanjeev Nayyar, a current affairs analyst who runs his own consulting firm.

Lack of clarity in Indian policies for private-sector participation is the other issue bothering analysts. India’s Atomic Energy Act 1962 prohibits private-sector players from setting up nuclear power stations. The act also restricts the nuclear generation business to government-owned companies.

“For the private sector to set up independent plants, the act will have to be amended, which may be a time-consuming exercise, especially with the general elections round the corner,” said the HSBC study.

Besides, private companies’ lack of experience in dealing with radioactive waste and technologies critical for national security could also become a serious issue.

“More importantly, is the government of India willing to change its mindset and trust the private sector with generation of nuclear power and dealing with radioactive waste?” asked Nayyar. “While some political parties in India may do so, it seems very difficult if a Third Front (leftist dominated) government comes to power. They could justify their stand by stating that countries like France, Russia and the U.S. allow foreign companies in the private sector to have minority stakes only.”

Given India’s current heavy dependence on fossil fuels, HSBC feels that nuclear power still makes sense in the long run, since it will enable the country to diversify the energy mix and help it to manage overall carbon emissions.

According to other studies, if coal-based power, which accounts for nearly 75 percent of India’s current generation, is allowed to continue to dominate until 2030, India would deplete its coal reserves completely in 48 years instead of the 100 years it is now expected to last.

Nuclear power scores over fossil fuels due to volatile prices. Moreover, nuclear scores over most fossil fuel technology when there are explicit costs associated with reducing emissions, said the HSBC study


Setbacks in India?s nuclear power plans - upiasia.com