Jaitapur nuclear project talks stuck over cost-sharing

The 9,900-Mw Jaitapur nuclear power project in Maharashtra is caught in a cobweb of mandatory legislative requirements due to the civil nuclear liability regime, slow decision-making, a surge in cost due to the weak rupee and more safety applications.

 

The negotiations between the state-run Nuclear Power Corporation (NPC) and French nuclear reactor supplier Areva, which started after they signed an early work contract in December 2010, are progressing at a snail’s pace as cost sharing has become a major bone of contention.

 

A Department of Atomic Energy official, who did not want to be identified, told Business Standard: “The Jaitapur project is to be developed by NPC on 80:20 debt equity ratio. Raising 80 per cent debt during the current slow down, especially in the wake of the weak rupee is a real challenge for the NPC. This apart, cost escalation is quite obvious due to the inclusion of additional safety applications in the plant. The project is being developed under the inter-governmental agreement between the Indian and French governments. One thing is clear that competitive cost will be the most crucial factor on which both the parties need to agree.” 

 

Industry sources have pegged up the per megawatt capital cost at Rs 25-30 crore from Rs 10-20 crore when NPC and Areva started negotiations. The per unit tariff is also estimated at Rs 6-7 from Rs 3.50-4. The NPC spokesman declined to comment on the issue.

 

S K Jain, chairman, Indian Atomic Industrial Forum (which represents both Indian and foreign companies) said when the negotiation started, the rupee was at 47 and now is 63 to a dollar. The inflation in European countries has surged to 5 per cent from two per cent.

 

“NPC is expected to develop Jaitapur project on 40:60 ratio of indigenous and foreign supplies. Debt funding cost has gone up significantly. The interest rate to be charged by French lender is bound to increase,” he noted. He suggested both NPC and Areva would have to find short term funding to minimise cost. Besides, a mechanism to provide insulation from foreign exchange fluctuations would have to be worked out.

 

Moreover, Jain said that confusion prevails over the definition of supplier under the civil nuclear liability regime. “Foreign vendors, including Areva, are not really in a position to decide as to how much additional expenditure they would have to incur to cover their liability arising out of the provision of recourse in the Nuclear Liability Act.

 

The amount will be loaded on the cost of the plant. There is no instrument available in the country to give coverage to cover recourse risks especially when the project is executed in a hybrid scenario with the involvement of large number of agencies, contractors and organizations. In this scenario, a great part of the job is done by the operator (in case of Jaitapur it is NPC) and therefore it will be difficult to identify the agency responsible for nuclear damage," he observed.