Behind (or ahead of) the India-US nuclear deal: India Inc bets big on N-power
July 31, 2008
Indian capital is quick to take cue from the government’s move and has already started planning its investments in the nuclear sector. Whose interest will the nuclear deal serve? (1) US strategic interests, and (2) Indian corporate interest. The CPI(M) is and probably will remain silent about the second.
One might even go a little further and see the haste in the government’s move resulting from pressures emanating from these two quarters: (1) US administration, and (2) Indian big capital. Thus, it seems that a nice alliance is in operation here, the alliance between multinational capital (represented by the US State) and national capital (represented by the Indian State). Analyzing the changing nature of this alliance over time might offer insights into the evolution of contemporary imperialism. - Dipankar Basu, Sanhati.
India Inc bets big on N-power
Indian companies led by Anil Ambani’s Reliance Power (RPower), Nuclear Power Corporation of India (NPCIL) and Bharat Heavy Electricals (BHEL) plan to invest over Rs 100,000 crore in the next five years to expand their presence in the nuclear energy sector after the country signs the nuclear agreement with the US, paving the way for import of fuel and transfer of technology.
Engineering major Larsen and Toubro (L&T) is also foraying into the nuclear energy sector, with plans to manufacture nuclear reactors.
The BHEL stock rose by 11 per cent to Rs 1,772, Reliance Power surged 19 per cent to Rs 170.95, while the L&T scrip went up by 7 per cent to Rs 2,766.65 on the Bombay Stock Exchange on Wednesday, whose benchmark index, the Sensex, shot up by 838 points on Wednesday.
Reliance Power has planned an initial investment over Rs 20,000 crore to foray into nuclear power generation. The company is already implementing 28,000 mw of thermal power projects.
“There are plans to start with 1,000-1,500-mw capacity initially with one or two reactors and then expand it to higher capacities in the long run,” V K Chaturvedi, former NPCIL chairman and managing director and nuclear energy consultant for Reliance Power, said.
Reliance Power has already started negotiations with leading international companies in the field for joint ventures and strategic alliances in nuclear power generation, technology and equipment, he said.
The country’s nuclear power manager, NPCIL, hopes to double its capacity to generate an additional 10,000 mw with an investment of over Rs 80,000 crore by 2012.
“The availability of fuel will help our existing reactors to increase the capacity utilisation (plant load factor) from around 50 per cent currently to about 90 per cent, almost double the current production, Sudhinder Thakur, executive director, NPCIL, said.
At present, India has 17 nuclear power plants with a total installed capacity of 4,120 mw in operation.
BHEL, India’s biggest power equipment maker, plans to triple spending on nuclear components to Rs 1,500 crore in two years once overseas companies are allowed to supply technology, Bloomberg News reported, citing K Ravi Kumar, the managing director of the company.
Reliance Power’s Chaturvedi said the company has already started negotiations with leading international companies to foray into nuclear power generation. However, he pointed out that the plans depended on the government opening up the sector for private players.
NPCIL has plans to set up 10,000 mw of new capacity during the 11th Five-Year Plan of 2007-12. Six additional units, with a capacity of 3,160 mw, are under various stages of construction.
These include expansion of the Rawatbhata station in Rajasthan (2X220 mw), Kaiga in Karnataka (220 mw) and Kudankulam in Tamil Nadu (2 X1,000 mw).
NPCIL and the government have an understanding with the Russian government to increase capacity of the Kudankulam project (Kudankulam 3-6). Further, the government has sanctioned to set up a 1,000-mw reactor in Jaithalpur, Maharashtra.
BHEL too has drwan up big plans to enter the nuclear energy sector. “If the nuclear deal comes through, we are quite confident that there will be a lot of orders in this area and we don’t want to be left out,” BHEL Chairman and Managing Director K Ravi Kumar said in an interview.
BHEL plans to spend Rs 1,500 crore in two years building plants to supply components for reactors of 1,600 mw, Kumar said yesterday. Without the accord, BHEL will invest Rs 500 crore to build steam turbine generators and other components for 700-mw plants designed in India, he said.
BHEL will set up a 50-50 venture with state-run NPCIL that will supply components for nuclear plants with a capacity to generate 700 mw, 1,000 mw and 1,600 mw of power, Kumar said. The company will also seek overseas partners to provide technology for these plants, he said, declining to name the companies.
“We will invest depending on the volume,” he added.
“The orders could be divided and companies such as Areva, Siemens and ABB will be involved,” said Taina Erajuuri at Glitnir Asset Management in Helsinki, which manages $158 million in Indian assets, including BHEL. “The government may prefer some local companies as well, like BHEL and L&T.”
“The existing sites can accommodate about eight reactors and another five could come up on new sites, which will be developed in the future,” said an NPCIL official.
NPCIL’s strategy is to set up power plants in coastal areas as large equipment for reactors can be shipped into country easily.
A site selection committee of the Department of Atomic Energy (DAE) has already recommended four sites for the new nuclear projects in the coastal areas of Saurashtra in Gujarat, Andhra Pradesh, Orissa and West Bengal.
The officials said NPCIL is in touch with international players for equipment supply and civil construction of the new plants.
“It is too early to talk about it and everything depends on how soon the government is able to go through the deal so that we can source the fuel,” said an official.
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The smaller corporate interests
“This deal will bring exciting opportunities for us. So, we are drawing up plans to enhance our facilities in getting ready for the new opportunities for major supply orders,” says SS Gangavati, president, strategic planning and market research at Walchandnagar Industries. The engineering major has supplied critical components like the calandria to most of the nuclear power plants in India. The company has been waiting for the government to decide upon the classification of the orders for supplying the parts. Gangavati added that the company is ready for the production facilities and if requires, it may expand the capacity to meet the additional demand.
And as they are getting ready for it, they will provide opportunities for small players by way of sub-contracting to manufacture small parts or spares. Rajkot-based Kiwi Pumps is in full swing to talk with Walchandnagar Industries, L&T and BHEL for making spares and small components. Jayesh B of Kiwi Pumps says, “The deal may bring orders for us from the giants. We will consult with specialists in manufacturing the best quality for the nuclear plants.” The company has been exporting some casting parts to power equipment majors for the last few years.
Says D Vidyasagar, MD of Hyderabad-based SEC Industries, “This is a great opportunity for us, particularly since we indirectly engaged with government nuclear bodies for fabrication work.” The company expects to scale it up to the volume and sophistication levels required by the plans that are going to come into operation post-deal. The company makes equipment for some of the most sophisticated weapons, including the Prithvi missile.
Power plants also need construction companies, and players in this sector are expecting an array of big orders to erect nuclear power plants. HCC, which has executed four nuclear power plants in India and is working on another two, is hopeful of adding few more to its portfolio. Soon after the news of Left parties withdrawing their support, some top officials of the company had met government representatives. “We expect that a substantial part of our revenue in power sector would be generated from nuclear plants,” says Praveen Sood, CFO, HCC. The company claims to have executed 60% of construction related work for in nuclear plants in India.
Nuclear Power Corporation of India Ltd (NCPIL), too, supports the growth of small manufacturing players in this area. It’s waiting for a working model between the US and India. “The specifics of the deal aren’t decided yet, but it seems India and US will work on 50:50 model,” says an official spokesperson of NCPIL. He added that smaller companies would have a substantial role to play. US companies helping to set up the plants will be looking to work with Indian companies as the labour cost will be a third.
This article appeared in The Economic Times
