Indian private sector to play a part in nuclear

NEW DELHI, INDIA - The Indian government recently announced the decision to allow private-sector participation in the country's growing nuclear power sector.

Making the announcement, the Minister of State for Science and Technology, Prithviraj Chavan, indicated that domestic private power producers interested in setting up nuclear power plants will have to form joint ventures with the Nuclear Power Corporation of India Limited NPCIL. International firms cannot establish nuclear power plants in India, but foreign companies will be allowed to participate in the country's $150 billion nuclear power sector as suppliers of reactors and other critical equipment.

Chavan indicated that domestic power companies could hold stakes of 10, 15, 26 or 49 in the joint venture with NPCIL. So far, NPCIL has entered into joint venture agreements with Indian Oil Corporation Limited IOC and NTPC Limited.

Several international nuclear power equipment suppliers, including Areva SA, GE-Hitachi Nuclear Energy Incorporated and Rosenergoatom Concern OJSC are holding talks with NPCIL. Equipment supplies from international companies will be subject to multi-level clearance procedures in the country of manufacture and India. India will purchase the equipment only after receiving clearances from the Atomic Energy Regulatory Board.

In early September, the Indian parliament cleared the much-awaited Nuclear Liability Bill. India has been under pressure to implement the bill, as several international companies are awaiting the nuclear liability legislation become active. In the absence of the bill, domestic players were unwilling to enter the nuclear power sector for fear of unlimited financial liability. The bill was cleared after the liability limit of $320 million was fixed. The liability limit will be applicable in the event of a nuclear accident or any kind of damage. In March, the government's efforts were thwarted after opposition parties refused to clear the draft bill. In the case of a nuclear accident, the draft bill put a limit of $65 million liability on the operator of the nuclear power plant.

In a related development, Bharat Petroleum Corporation Limited BPCL is seeking joint-venture partners to enter the power-generation sector. The company has announced that it will invest $133.5 million to $222.5 million in this sector. According to S. Radhakrishnan, the chairman and managing director of BPCL, the company made the decision after extensive studies on new growth drivers and segments.

By 2015-16, BPCL aims to establish power projects with a capacity of 500 megawatts MW. Over the next four years, BPCL will invest $1.67 billion, which will include $222.5 million on new energy projects, about $668 million on ongoing oil exploration and production, and $779 million on new exploration and production projects. While $779 million of the total investment will come from internal accruals, the remainder will be raised through debt. Radhakrishnan said that the company, which owns 26 exploration and production blocks in Brazil, is also scouting for new blocks.

Experts have observed that BPCL is following the footsteps of IOC, which is currently seeking partners for its power projects. BPCL has extensive experience in operating captive power plants at the company's refineries in Mumbai, Bina and Kochi. BPCL and IOC are both state-controlled energy utilities. Presently, the Indian government holds 74.14 and 54.93 stakes in IOC and BPCL, respectively. As part of the shareholding pattern, each company has government nomination to the company board.

Pradeep Kumar Sinha has been deputed as the part-time non-executive director at BPCL. Sinha, who is the financial advisor and additional secretary in the Ministry of Petroleum & Natural Gas, also serves as a non-executive director in IOC. IOC and BPCL are also joint venture partners in Petronet LNG Limited. Petronet LNG operates a liquefied natural gas re-gasification and delivery terminal at Dahej in Gujarat. The company is constructing a second terminal at Kochi in Kerala. BPCL is also proposing to foray into India's nuclear power sector. Presently, India's total power generating capability is about 164,000 MW. Nuclear power accounts for about 2.4 of this. Industry analysts have observed that the Nuclear Liability Bill will pave the way for increased participation and growth of nuclear power projects in the country.