After long-drawn-out negotiations, the Nuclear Suppliers' Group (NSG) has finally granted a waiver to India to resume nuclear commerce with the 45-member nuclear technology supplying nations. This crucial waiver has ended India's 34 years of nuclear isolation imposed in the wake of the Pokharan nuclear tests in 1974. India shall now be able to trade in nuclear technologies and materials with all members of the NSG. The US Congress is scheduled to convene from September 8, 2008 and is expected to consider and endorse the agreement post which India can resume trade with USA.
Indian nuclear industry—current scenario
In India, Nuclear Power Corporation of India Ltd (NPCIL) is the only agency that generates nuclear power on a commercial basis. NPCIL, incorporated in 1987, is fully owned by the Government of India and operates under the administrative control of the Department of Atomic Energy.
Currently, the company has a capacity of 4,120MWe from 17 nuclear power plants. India is implementing its nuclear power programme in three stages. In the first stage, natural uranium is used as fuel in pressurised heavy water reactors (PHWR) for generating energy and forming plutonium. In the second stage, plutonium is used as fuel along with thorium to produce uranium-233 in Fast Breeder reactors. Uranium-233 is used as fuel to generate power in the last stage.
Since India has abundant thorium reserves but limited uranium reserves, most of its nuclear plants operate at significantly low utilisation levels. The NSG waiver would ensure India an uninterrupted supply of uranium and hence would aid in increasing the utilisation levels at the existing nuclear facilities. This, in turn, will enable India to make good use of its ample thorium reserves as well.
NPCIL has already drawn up plans to expand its nuclear capacity by 2,660MW and the project is under various stages of implementation. India plans to expand its nuclear capacity exponentially in the years to come. It is looking at taking its nuclear capacity to 20GW by 2020 and further to 68GW by 2030. Going by the capital expenditure pattern of NPCIL in the past, an investment of ~Rs6.5 crore is required to set up 1MW of nuclear capacity. By that token, the opportunity size of India's capacity expansion plan could be about Rs103,000 crore by 2020 and about Rs415,000
crore by 2030.
Economics of nuclear technology
Nuclear fuel based power plants are much more capital intensive compared with the gas and coal fired plants. Typically, the capital outlay for a nuclear fuel based power plant is $1,000-2,000/KWh or Rs6-7 crore per MW, which is much higher than the Rs4-5 crore required to generate per MW of energy on the coal fired sets.
NPCIL is currently setting up a (2x1,000MWe) plant in Kundankulam in Tamil Nadu at a total cost of Rs13,171 crore. The cost of per MW of power thus works out to Rs6.6 crore in NPCIL's case. While the cost of setting up a nuclear fuel based power plant is higher compared with the plants running on practically all other kinds of fuels, the cost of power generation works out to be much lesser in nuclear plants. As enumerated in the table below, the cost of manufacturing 1MW of nuclear power ranges from $21 to $31 as compared with $25-50 per MW (considering a discount rate of 5%) of energy generated from coal.
Possible beneficiaries of the NSG waiver
Apart from NPCIL, a host of other companies involved in the manufacture of nuclear reactor components are likely to benefit from the NSG waiver. Currently, very few Indian players possess the necessary technology in the nuclear field, but the private sector is expected to gain access to
the requisite technology through tie-ups with the foreign players over a period. Accordingly, initial beneficiaries of the end of India's nuclear isolation are likely to be some of the foreign behemoths like Areva of France, GE of the USA, Westinghouse of the USA and Atomstroyexport of Russia.
Among the Indian players, Larsen & Toubro (L&T) and Bharat Heavy Electricals Ltd (BHEL) already have some experience in nuclear power generation and are likely to gain from the NSG approval.
L&T
L&T manufactures reactor vessels for PHWR and FBR—designed technology, and critical equipment and systems for heavy water plants, fuel re-processing plants and plasma reactors. It also manufactures other critical components such as Steam Generator Assemblies, reactor roof slabs, and other control and switchgear equipment for a nuclear plant. L&T has also been accredited by ASME to use "N" and "NPT" stamps for some of its products including the MC vessels, piping system and storage tanks. This is also likely to boost its ability to export nuclear components in the future.
BHEL
BHEL is the leading manufacturer of boilers, turbines and generators in the country. The nuclear opportunity will augur well for the company as BHEL has already joined hands with NPCIL to jointly execute engineering-
venture would also explore and evaluate the various technology options available for Steam Turbine Generator sets of 700MWe rating and above. It would also help in developing BHEL as an indigenous designer and manufacturer of Steam Turbine Generator sets of these ratings to meet the needs of the various nuclear projects proposed to be set up in the country in future.
NTPC
In its recent analyst meet, National Thermal Power Corporation (NTPC) had shown its interest in generating power using nuclear technology. Being one of the largest utility companies in the country, NTPC has the skills and a strong balance sheet to support its initiative.
HCC
That Hindustan Construction Company (HCC) has been associated with the construction of four out of every seven (executed/under execution) nuclear plants coming up in India is the proof of the confidence reposed in the company by Nuclear Power Corporation. HCC was also the first Indian construction company to undertake civil engineering works for PHWR type nuclear power projects in the country.
Many more likely to benefit
Besides the ones mentioned above, there would be a host of other companies that would also benefit from the opening of India's nuclear power sector. Companies operating in the balance-of-plants space (ie makers of pumps, pipes etc) would also benefit, for instance. Companies like Crompton Greaves, Ratnamani Metals, KSB Pumps, Gammon India, Rolta India and Walchandnagar Industries (to name a few) are some likely beneficiaries of the NSG waiver. In the recent past, companies like Punj Lloyd, GMR Infrastructure and Reliance Infrastructure had also shown interest in entering the nuclear power space and hence could gain from the development.
Financial impact of NSG waiver
The resumption of nuclear commerce definitely spells good news for the utility, power and infrastructure sectors. However, we do not see any impact of the NSG waiver on our FY2009 and FY2010 estimates for the possible beneficiaries under our coverage because there will not be
any revenue flow as a result of this development during this period.
Beneficiaries of the deal—a snapshot
Products and services
Civil construction works
Boiler feed pumps
Heat exchanger
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