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KUMAR SUNDARAM | 28 JANUARY, 2016

Nuclear 'Make in India' with France Unleashes Nightmarish Scenario

A well in Jaitapur


NEW DELHI: France’s nearly-bankrupt company passes on the partial manufacturing of its reactor design, the safety of which has been questioned by the French, American and Finnish regulators, and the Modi government embraces it as technology transfer and localisation. The latest farce with Jaitapur would be laughable, if it were not so dangerous.

The government signed the MoU (Memorandum of Understanding) with French company EDF, during President Francois Hollande’s visit to New Delhi. Just two days later, EDF has moved to delay the final investment decision to go ahead with the nuclear project of the same design in UK’s Hinkley Point, owing to funding problems.

Funding woes are not new for European Pressurised Reactor (EPR) design, 6 of which are being imported by India to be set up in Maharashtra’s Jaitapur. The staggering costs have been a major reason behind a general and terminal decline of the French nuclear industry.

The contract for 6 EPRs in Jaitapur was signed in 2010 with Areva. Areva remained the world’s largest nuclear power company owned by the French government till last year, when Fukushima exacerbated its financial crisis and the Électricité de France (EDF), a government owned electric utility company, had to step in and buy majority stakes in Areva to save it from bankruptcy. Areva has resorted to massive job cuts – it implemented 6,000 layoffs worldwide in 2015 - and is frantically seeking foreign investors to rescue itself from the crisis. This has been accompanied by a larger energy policy shift in France, with an aim to reduce one-third of its reliance on nuclear energy by 2025, also made attractive by the increasingly cheaper and efficient renewable sources.

The India-France joint declaration issued on Tuesday mentions initialing of the revised MoU between EDF and the Nuclear Power Corporation of India Limited(NPCIL). This means that the EDF will take over the construction of six EPR units at Jaitapur. However, there is no public discussion in India about adopting the French nuclear industry’s burden.

More importantly, the Modi government’s ambitious program, Make in India, has been added as a proud label to the Jaitapur project. The declaration states that the two countries would pursue “collaboration on transfer of technology and cost-effective localisation of manufacturing in India for large and critical components in accord with Government of India’s "Make in India” initiative.”

While the above language might enthuse some people, it actually means that the EDF would pass on precisely those parts of its business which it is cannot absolutely manage on its own for financial and safety reasons. The EPR design fits this scheme. France is building six reactors in Jaitapur of the same design, of 1650 megawatt capacity each. Totalling 9,900 megawatts, Jaitapur would be the world's largest nuclear power park.

The EPR reactor design is not operational anywhere in the world today. Areva has under-construction projects in Flamanville in France, Olkiluoto in Finland, and Taishan in China but the EPR projects in all three cases have experienced two to three fold cost escalation and huge time over-runs.

In Flamanville, the cost shot up from initial 3 billion euros to €10.5 billion. It was supposed to start operation in 2012 and now EDF has admitted it cannot start before 2018.

In Finland, France got contracts to build two ERPs, the first of which at Olkiluoto reactor is running 10 years behind schedule and €5bn over budget.

The two EPR reactor videos being built in China are also delayed, and the cost remains non-transparent. It is after considering these massive delays, that the European Union pegged an estimate cost of £24 billion for two EPRs proposed at Hinkley Point in UK. Cameron govt has come under severe criticism for a non-transparent deal it did with China to finance the project. The UK government has guaranteed a price of £92.50 per unit to EDF for the electricity Hinkley produces, for a 35-year period, twice more than the current price.

In the Indian case, the Hinkley Point benchmark would translate to a tariff of a minimum per unit cost of Rs. 19 for the electricity produced from the imported nuclear plant. This is nearly thrice the price that the former Chairman of the Atomic Energy Commission promised for Jaitapur. Clearly, the Indian government would have to bear the gap through direct and indirect in such case and it will become another Enron for Maharashtra. A diplomatic cable revealed by Wikileaks quoted the General Manager of NPCIL saying that India is paying a 'high' price for Jaitapur.

Due to this major stumbling block of cost negotiations, the Jaitapur project has been delayed several times since the initial agreement in 2010. For last several years, joint announcements between the French and Indian governments have been ritually mentioning commitment for an early conclusion of the final commercial agreement for Jaitapur. The delay has been staggering: the two countries were close to sealing the deal in 2012, the negotiations continued to be in progress in 2013, the new government under PM Modi reaffirmed its commitment to French Minister after assuming power in 2014, then PM Modi signed an agreement to expedite the commercial agreement during his Paris trip last year, and the latest joint declaration says that “the two leaders encouraged their industrial companies to conclude techno-commercial negotiations by the end of 2016”. The two governments are now optimistic that the construction will begin in early 2017.

However, the exorbitant cost of the EPRs are not the sole worry that Areva and EDF face.

When PM Narendra Modi went to the UK last year in April, he signed an agreement “to expedite the commercial agreement” ironically two days after France’s own nuclear regulator, the Autorité de Sûreté Nucléaire (ASN), seriously warned about the vulnerabilities in Flamanville EPR’s Reactor Pressure Vessel(RPV) – the extremely huge steel core of the reactor where nuclear fission takes place.

In 2015, Areva had to ask the US Nuclear Regulatory Commission to suspend certification review for EPR design. The US has been postponing certification for EPR since 2007. The Finnish safety regulator STUK actually took Areva to the court for delays and neglect of problems with the instrumentation and control system. After a prolonged legal battle on the first reactor, Finland has canceled the order for the second EPR reactor in Olkiluoto.

A nuclear ‘Make in India’ would be a nightmare

In real terms, the ‘maximum localisation’ and ‘technology transfer’ under ‘Make in India’ as mentioned in the joint statement means that partial construction of Jaitapur project would be transferred to Indian companies.The task of manufacturing the reactor pressure vessel has been given to L&T, with which Areva signed an MoU in April last year. The French nuclear regulator’s strong observations on anomaly in Areva’s EPR designs had to do precisely with the pressure vessel. It noted:

“The nuclear pressure equipment regulation requires that the manufacturer limits the risks of heterogeneity in the materials used for manufacturing the components most important for safety. In order to address this technical requirement, AREVA carried out chemical and mechanical tests on a vessel head similar to that of the Flamanville EPR. The results of these tests, in late 2014, revealed the presence of a zone in which there was a high carbon concentration, leading to lower than expected mechanical toughness values. Initial measurements confirmed the presence of this anomaly in the reactor vessel head and reactor vessel bottom head of the Flamanville EPR.”

In a nightmarish irony, L&T which has no experience of nuclear industry at all, has been tasked with manufacturing the most crucial component of the world’s largest nuclear reactor project, of a design that the world’s largest nuclear industry in France could not master in the past 15 years. This arrangement is supposed to bring down the price of electricity from Jaitapur substantially – to Rs. 7 per unit. Under such cost-cutting compulsions, the Modi government expects a new expects a new entrant to ensure safety standard that nuclear corporations with long history in the business have not achieved.

Entry of private players in the Indian nuclear sector for large supplies and manufacturing is also a new phenomena. But there is an unmissable distinction in the Indian privatisation. In the West, private firms have been running nuclear power plants; and the nuclear industry is like any other industry which has to compete with other utilities and power companies on free market principles and has to maintain best practices with relatively higher standards of transparency.

This has also made nuclear power uncompetitive and the US has not built a single new nuclear power plant after 1973. In the Indian case, the government is not only ensuring profit for the private players from taxpayers' money, but also insulating them from public scrutiny and accountability using the 'national security' rubric devised for the nuclear establishment. The operator, under the current laws can only be a government company and it enjoys complete secrecy under the 1962 Atomic Energy Act and also wider political patronage and public support as the same establishment has also delivered the nuclear weapons which are mistaken as guarantors of the nation's security.

The private sector must be stripped off these privileges if it has to be allowed to run the nuclear industry. After the separation of civil and military nuclear facilities in the country, under the US-India nuclear deal of 2005, it is patently absurd to let private players prosper under public sector patronage and avoid competition and openness.

Inclusion of domestic private sector in India's nuclear industry would also mean more stakeholders demanding dilution of nuclear liability for the nuclear suppliers and vendors. Till now, mostly the foreign companies have been targeted by citizens groups for such undue pressures, although the Indian industrial chambers have also in fact demanding a clean exemption from liability in case of accidents. More private players would simply mean more pressure to dilute nuclear liability in current circumstances.

Last year on the Republic Day, to please the US President Barack Obama who was the Chief Guest, Modi government effectively surrendered the government's option to sue the nuclear vendors in case of a nuclear accident by creating an insurance pool from public funds to channel suppliers' liability back to the taxpayers. This has been a complete u-turn from the earlier strong reservations of the BJP on nuclear liability, terming any dilution as being against India's national interests.

The joint declaration also mentions that France has expressed happiness on India's ratification of the Convention on Supplementary Compensation(CSC) for Nuclear Damage. The industry-promoted CSC requires an even playing field globally without liability for nuclear suppliers. The foreign corporations have also been opposed to the Indian law as it is a departure from the CSC, which they want the world to adopt as an international template.

Ironically, India rushed to sign the CSC in October 2010, soon after it enacted the domestic law. It then started citing that as a reason to amend the Parliament-mandated law. India actually had an opportunity, as an attractive investment destination for the nuclear sector, to actually lobby for amendments to the CSC to ensure adequate liability for people in developing countries.

A nuclear 'Make in India', by partnering with crisis-ridden French nuclear industry on its worst performing reactor project would unleash a nightmare in India. If Parliament and civil society does not oppose and stall this disastrous move, India will be setting up probably the world's most dangerous nuclear power plant and facing horrendous consequences, or at best hoping that the design, financial and other problems turn it into another white elephant like Koodankulam which is simply not working 3 years after being commissioned with much fanfare, huge investment and brutal repression of the local community.

(Kumar Sundaram is Senior Researcher with the Coalition for Nuclear Disarmament and Peace(CNDP))

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