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India's Kudankulam Nuclear Power Plant - Caveat Emptor

As India’s nationwide power outage last week showed, the country needs new energy resources – fast.

And New Delhi sees nuclear power as a shortcut to alleviating its energy shortages, adding to its six current nuclear power plants (NPPs) containing 20 reactors which generate 4,780 megawatts, an additional seven reactors are expected to generate an additional 5,300 megawatts.

The poster child for this expansion is the $2.5 billion, Kudankulam NPP in Tamil Nadu state, containing six 1,200 megawatt and two 1,000 megawatt reactors.

Despite sustained civil protests during its construction, Nuclear Power Corporation of India Limited (NPCIL) Chairman and Managing Director K.C. Purohit told the media, “Our inspection (of the reactor pressure vessel) is almost complete,” he said from Mumbai. “We will submit our observations and reports to a committee of the Atomic Energy Regulatory Board (AERB) and load the fuel based on its decision,” adding that “the day is not far off” for the nuclear fuel rod assemblies to be loaded into the reactor pressure vessel beginning  in mid-August.

But this sunny picture has recently been somewhat clouded by the increasing skepticism of Indian Prime Minister Manmohan Singh, who is now querying the Department of Atomic Energy about liability and who will pay if there is a mishap at the Kudankulam NPP. It doesn’t help nuclear proponents that Prime Minister Singh is also India’s Minister for Atomic Energy.

Needless to say, everyone involved with the Kudankulam NPP has been furiously backpedaling from the issue of liability.

India’s Department of Atomic Energy asserts that the NPCIL does not need to worry about liability as there is a provision in India’s international agreement with the Russia Federation.

Unconvinced however, Prime Minister Singh has sought legal clarification from India’s Ministry of External Affairs and the Law Ministry on whether preexisting international obligations agreements with the Russian Federation can override India's Nuclear Liability Bill passed in 2010.

As an Inter-Governmental Agreement on the Kudankulam NPP project was signed in November 1988 by Prime Minister Rajiv Gandhi and USSR General Secretary Mikhail Gorbachev, for the construction of Kudankulam’s initial two reactors, the Russians have sought that the provisions of its 2008 agreement predating the 2010 Nuclear Liability Bill be extended to reactor units 3 and 4 as well. Russian Ambassador to India Aleksandr Kadakin said of the preexisting contracts for Kudankulam, "We understand that if you want same terms of credit, we get same terms of conditions... It would be logical... Nuclear liability is a latter invention."

When the final agreement for the Kudankulam NPP was signed between India and Russia in December 2008 for units 1 and 2, India had no Nuclear Liability Bill and the agreement stipulated that India, as the NPP operator, would be fully responsible for any damage caused by a nuclear incident.

India’s Nuclear Liability Bill provided that the supplier is also liable if the equipment is faulty, allowing India under the law as operator, to claim damages from the supplier in the event of a nuclear “incident.”

All of this loose talk about liability has officials at Atomstroieksport, the Russian Federation's nuclear power equipment and service export monopoly, increasingly worried. Its not like business is booming – in 2011 the company’s net losses doubled from their 2010 rate to $469 million. So, hardly surprisingly, Russian Atomstroieksport officials, who also built Iran’s controversial Bushehr NPP, have their fingers crossed that the Indian government will not saddle them with liability for the Kudankulam NPP, which could cause yet more oceans of red ink to wash across their books.

But Singh’s government is playing for high stakes, as his queries to the Department of Atomic Energy are seeking clarification on whether granting a waiver from the Nuclear Liability Bill to the Russian Federation would have any implication on the similar agreements India has signed with other countries .including France and the U.S., while an offer made by South Korea to set up nuclear power plants in India is also under examination.

In the wake of the March 2011 Fukushima Daiichi nuclear debacle, Singh’s concerns are merely prudent, however it might affect Atomstroieksport’s “bottom line.” If Atomstroieksport wishes to continue business not only in India but elsewhere, it well behooves them to take such considerations seriously.

By. John C.K. Daly of Oilprice.com




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