Clearing the Way: Amendment bill allows PSUs to set up nuclear power plants

Amendment bill allows PSUs to set up nuclear power plants

In December 2015, Parliament passed the Atomic Energy (Amendment) Bill, 2015, which made changes to the Atomic Energy Act, 1962. It expanded the scope of the latter to allow all PSUs to set up nuclear power plants in India. Previously, nuclear power operations could only be carried out by two PSUs, Nuclear Power Corporation of India Limited (NPCIL) and Bharatiya Nabhikiya Vidyut Nigam Limited (BHAVINI), which are under the administrative control of the Department of Atomic Energy. With the amendment, NPCIL can enter into joint ventures (JVs) with other PSUs and government sector companies. Under such an agreement, the PSU (or government company) would become an equity beneficiary and NPCIL would be responsible for extending technical support and setting up infrastructure.

The bill amends the definition of “Government Company” under Clause (BB) of Subsection (1) of Section 2 of the act. Under the original act, a government company that is allowed to produce atomic energy is one in which the central government holds at least 51 per cent of the paid-up share capital. The amendment expands the definition to include companies where the entire paid-up share capital is held by one or more government companies. Besides this, the articles of association of the company (i.e., the PSU that wants to undertake nuclear operations) must be such that it empowers the central government to constitute a board of directors who would be partly responsible for the operations of the JV company formed with NPCIL.

In order to facilitate the participation of PSUs, the bill also amends Section 14 of the act to enable the central government to issue licences for JV companies to set up nuclear power plants. It further states that any licence granted for producing atomic energy and acquiring and using substances or minerals capable of producing nuclear energy would be cancelled if a licensee ceases to be a government company.

This move to allow the participation of PSUs in generating nuclear power aims to promote nuclear capacity development in India. It augurs well for the government’s target of setting up 63,000 MW of such capacity by 2032. At present, the country has 21 operational nuclear reactors aggregating 5,780 MW of capacity, while 10 more aggregating 7,700 MW are under construction. Previously, owing to the lack of enabling provisions for PSU participation in the nuclear segment, the government had to turn down a Rs 120 billion investment proposal from National Aluminium Company Limited to become a silent partner with NPCIL for constructing and operating pressurised heavy water reactors. NTPC and Indian Oil Corporation Limited have earlier expressed their willingness to support nuclear projects as well.

Other developments

In addition to the recent amendment, the government has been undertaking proactive steps to promote nuclear power. It has signed a host of civil nuclear agreements for the supply of equipment as well as fuel.

In December 2015, the cabinet accorded approval to the Civil Nuclear Cooperation Agreement, as well as the Administrative Arrangement with Australia in November 2015. This aims to ease uranium supply to India’s nuclear plants. In December 2015, India received the first consignment of uranium from Canada following the signing of a long-term supply contract in April 2015.

Another significant development has been the launch of an insurance pool comprising Rs 15 billion under the Civil Liability for Nuclear Damage Act, 2010 in June 2015. Through this, the government is bidding to offset the financial burden of domestic and foreign nuclear suppliers. Under the pool, the General Insurance Corporation of India and 11 other non-life insurers (including New India, Oriental Insurance and National Insurance) from the public sector, in addition to private insurance companies, would offer nuclear suppliers a special contingency policy. Following its launch, India and the US reached an understanding to implement the India-US Agreement for Cooperation Concerning Peaceful Uses of Nuclear Energy. This was signed in October 2008 for collaborating in setting up nuclear power reactors.

The central government has also signed a number of deals for the supply and manufacture of equipment for nuclear plants. These include an intergovernmental agreement with Russia for the construction of Unit 3 and Unit 4 of the Kudankulam nuclear power plant and a pre-engineering agreement with AREVA, France, for assessing the licensability of the proposed evolutionary pressurised reactor project at Jaitapur in Maharashtra. NPCIL is also in advanced stages of negotiations with US-based Westinghouse Electric Company LLC for constructing six units of the AP-1000 reactor at Mithi Virdi, Gujarat. The deal is likely to be finalised during 2016. These agreements are within the purview of the Make in India initiative and would entail the localisation and transfer of technology in some form.

Summing up

The new bill and the recently signed civil nuclear agreements are welcome moves for promoting the country’s nuclear power segment. However, legacy issues like delays in obtaining clearances and opposition from the local population continue to hinder its development, making it critical to address them on a priority basis.