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#5218, 3 January 2017

Special Commentary

India’s Nuclear Energy Policy: Bottlenecks to Implementation
Niharika Tagotra
Research Intern, IPCS

India has an ambitious nuclear energy programme but its legislative-regulatory mechanism does not quite match up to it. With a present installed capacity of 5780 mega watts (MW), contributing about 3 per cent to the total energy production, nuclear power in India is produced primarily by its Pressurised Heavy Water Reactors (PHWRs) that operate at a Plant Load Factor (PLF) of 50 to 60 per cent given the shortage of uranium fuel supply. India aims to produce anywhere between 45,010 MW (optimistic scenario) to 78,060 MW (highly optimistic scenario) of nuclear energy by the year 2047 as per the Indian Energy Security Scenario (IESS).

This will however require the country to fully utilise the capacity of its existing PHWRs, as well as commission production in the 8 new sites identified for setting up of PHWRS (6 reactors per site). India will also have to build 2500 MW of Fast Breeder Reactors (FBRs) using the spent fuel obtained from its thermal reactors. Further, the country will need to identify and commission at least four new Light Water Reactors (LWRs).

In sum, by 2047, India will need to develop and commission around 55 new nuclear power plants in order to be able to substantially increase the share of the percentage of nuclear power generated. The energy scenario however faces innumerable bottlenecks including a laggard energy bureaucracy as well as a series of legislations pieced together in an incoherent manner.

Nuclear Energy Bureaucracy
The nuclear energy infrastructure in India comes directly under the purview of the Atomic Energy Commission (AEC).  AEC is the umbrella body that sets out the atomic energy policy and oversees the functions of the Department of Atomic Energy (DAE) as well as the Atomic Energy Regulatory Board (AERB). The DAE administrates the nuclear Public Sector Undertakings as well as the R&D centres. It also provides the AERB with technical support and staff. The AERB in turn monitors the PSUs that are under the purview of the DAE, regulates the safety aspects of these agencies as also the licensing process of setting up new nuclear plants.

The AERB, despite being a regulatory body, lacks the independence of authority. There is an evident conflict of interest between the three agencies – DAE, AEC and the AERB. To begin with, the secretary to the government of India in the DAE is also the ex-officio chairman of the AEC. Hence, the party that is being monitored by the AERB and the party being reported to are essentially the same; a fact also strongly underlined by the PAC parliamentary report of 2011-12 as well as the recently concluded Integrated Regulatory and Review Service (IRRS) mission sent by the International Atomic Energy Agency (IAEA) to India in 2015. This muddling of the chain of command is one of the major reasons behind the never ending delays in commissioning of reactors.

The fact that the FBRs in India are still awaiting regulatory clearances even after being close to criticality for three years now is a case in point. The issue was also highlighted by A Gopalakrishnan, former Chairman of the AERB (1993-96), who argued that the interference in AERB’s functioning by the DAE has led to the “AERB toning down the seriousness of safety concerns and agreeing to the postponement of essential repairs to suit the DAE's time schedules.”

In 2011, the Nuclear Safety Regulatory Authority (NSRA) Bill was introduced in parliament with a view to improve the regulatory status of the nuclear facilities in the country. The NSRA bill aimed to establish a central regulatory authority by the name of Council of Nuclear Safety (CNS). The NSRA, replacing the AERB, would have jurisdiction over all nuclear facilities and premises. The bill takes the regulatory mechanism a step further; however, with the Chairman of the AEC included in the CNS, it fails to address the issue of conflict of interest.

Further, the bill authorises the government to exempt certain facilities and activities from the purview of the NSRA on grounds of national defence and security. However, there is no provision for the setting up of regulatory authorities for exempted facilities. The absence of a standing Appellate Authority is another point of concern in the bill. The NSRA bill lapsed with the dissolution of parliament in 2014 and has not been introduced since the new government came to power. Thus the regulation and security environment for the current nuclear facilities remains status quo.

Bottlenecks for the Private Sector
In order to increase the pool of finance for its nuclear power projects and lessen the duration required for construction of nuclear power plants, the government will also need to look at increasing the participation of private players and regularise the flow of investments to the cash- crunched nuclear energy sector. Currently, India sees a very low participation by the private sector in its nuclear energy industry. The participation from the private industries has been limited to the supply of components, equipment, and works contracts, partaking in the sector only as junior equity partners. Companies like BHEL, L&T and WIL have been awarded contracts for the manufacture of steam generators and reactor equipment but their participation is plagued with policy delays and other regulatory and bureaucratic issues.

The process of private participation is also hampered by a weak management of contracts by the Nuclear Power Corporation of India Limited (NPCIL). The company uses the L1 method for awarding of contracts. Under the L1 or the ‘lowest bidder’ tender system, the contract is awarded to the bidder who provides a product that meets all the mandatory requirements specified under the Services Qualitative Requirement (SQR) at the least net cost. This, however, comes with its own set of challenges, whereby the tender system fails to take into account the ‘cost-plus’ phenomenon. Bids that are too low to be implemented affect the quality of the products delivered, and lead to contract termination or delays due to litigation.

The issue of L1 procurement was also highlighted in the Dhirendra Singh Committee report on Make in India in Defence Sector. The report highlighted the need for the government to base its public-private partnership on the model of ‘strategic partnership’ premised on the pillars of strategic needs, quality criticality, and cost competitiveness. The Committee’s recommendation of the selective identification of a few important players, and nurturing them through preferential treatment so as to co-opt them for buy-and-make and government-to-government procurement programmes, can also be used for India’s civil nuclear energy programme.

Streamlining of the process of bureaucratic inspection during manufacturing and setting a base price for competitive bidding can also help in ensuring fair competition for the private industries. In addition to this, the civil nuclear policy in India lacks an offset programme that has been working well for its defence sector. It has been able to accrue a substantial amount of capital for its defence-industrial development and if incorporated in the nuclear energy sector, could help augment the production and R&D capacity.

The outsourcing base for the NPCIL is also very limited. For instance, only BHEL and L&T are involved in the process of manufacturing steam generators. The manufacture of each unit takes about four years, on an average, and in view of its production targets, India would need around 50 steam generators. The total time for their manufacture will total up to anywhere around 100 years at the current pace.

Nuclear Liability
India's nuclear legislative framework is patchy. Its fragmented domestic policies are mostly inconsistent with the international agreements signed by the country. The Civil Liability for Nuclear Damage Act (CLNDA) passed by the Indian parliament in 2010 gives the NPCIL a right to recourse against suppliers in case of a nuclear accident (clause 17(b)) and allows the supplier to be sued under an Indian law by the citizens at large (clause 46). This stands in contradiction to the clauses mentioned under the Convention of Supplementary Compensation (CSC), an IAEA instrument ratified by India in February 2016.

Article 10 of the Annex to the CSC convention declares, “the operator shall have a right of recourse only if this is expressly provided for by a contract in writing; or if the nuclear incident results from an act or omission done with intent to cause damage, against the individual who has acted or omitted to act with such intent.” While the CSC convention provides a more liberal framework for supplier/operator liability, the framework provided for under the CLNDA is more stringent, thus pointing at incoherence between the two.

The fallout of the general ambiguity around India’s liability regime has been the reluctance of Westinghouse and General Electric (GE) to venture into the Indian nuclear energy sector. Although India has responded to this policy loophole by setting up an insurance pool of INR 1500 Cr to compensate nuclear firms for mishaps in India, the amount insured appears to falls short of what might be required in the case of an eventuality.

Additionally, the demand for an unlimited time and cost liability from a limited liability company imposes an unnecessary burden on the supplier, an issue which has deterred even domestic vendors from acting as suppliers/sub-suppliers.

In order to revamp its nuclear energy architecture, India will need to replace the piecemeal approach to policy-making with a coherent, integrated policy on regulatory and liability issues. The many layers of secrecy around the country’s nuclear infrastructure and shifting accountabilities that  induce ambiguity around the regulatory framework discourage private participation and capacity building in the sector. In order to achieve the slated targets, India will need to substantially restructure its inward-looking nuclear policies.

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