Nuclear deal: India is becoming sanctions-proof

The manifestos of the BJP and Communist Party (Marxist) accuse the Congress Party of bartering away India’s security in the nuclear deal with the US. They worry that India will be dragooned into signing other treaties that limit its nuclear options, and open it to nuclear sanctions if it ever tests a bomb again.

This is a needless fear. Current developments suggest that, in a decade or so, India itself will become a major nuclear equipment supplier to the whole world. The multinationals of France, US and Japan want to manufacture nuclear equipment in India to meet not just Indian but global demand. Once India becomes part of the global supply chain, it will become effectively sanctions-proof. As a supplier of global equipment, it will be in a position to impose sanctions on others, not just be at the receiving end.

India plans to set up several massive nuclear power parks. The sites chosen so far are Jaitapur in Maharashtra, Haripur in West Bengal, Patisonapur in Orissa, Mithirvirdi in Gujarat and Kowadi in Andhra Pradesh. Six to eight reactors, of 1,000-1,650 MW, will be installed at each nuclear park. Negotiations are in progress with four global suppliers—GE-Hitachi , Toshiba-Westinghouse, Areva of France, and Atomstroyeksport of Russia.

Earlier, when Korea and China placed major orders for nuclear power plants, their deals mandated transfer of technology and localization of equipment manufacture. India will follow the same path. All foreign nuclear suppliers will transfer technology and indigenize production in India.

They will do so enthusiastically, not reluctantly. Visiting teams of MNCs from France and the US have expressed great keenness to set up joint ventures in India to meet not just Indian but global demand for equipment.

Why? India and China have emerged as low-cost producers of electrical machinery. Western manufacturers find the cost of new nuclear plants spiraling, casting doubts on the viability of nuclear power. To survive, they must slash costs. They can best do so by outsourcing production to India and China.

For decades, not a single nuclear power plant has come up in the US, UK, or Germany. Nuclear power has been derided as expensive and unsafe. But now global warming is a pressing issue. Nuclear power is suddenly seen as essential to produce carbon-free electricity.

The Copenhagen conference later this year will set ambitious targets for reducing carbon emissions. One key strategy will be to tax fossil fuels—either by a carbon tax or a cap-and-trade system for emissions. This taxation of fossil fuels promises to make nuclear energy economically viable again–provided equipment costs are kept down.

With cost control, the demand for nuclear equipment could quadruple. Existing capacity is not remotely enough for massive new projects in the pipeline. All major suppliers need to create new capacity. And they intend to create much of this in countries which have skills, low costs, and large local demand—-India and China.

Only two plants in the whole world (in France and Japan) can make the giant forgings needed for large nuclear power plants. Bharat Forge has recently become the second biggest auto forging company in the world, thanks to its success in cutting costs. It has now signed a pact with Areva to manufacture nuclear equipment—including giant forgings. Larsen and Toubro has signed a similar nuclear equipment deal with Mitsubishi. The Jindals and Anil Ambani also appear interested. All are formidable low-cost producers.

Till now Bharat Heavy Electricals Ltd has held a virtual monopoly on large power plants. Now Bharat Forge has tied up with Alsthom and L&T with Toshiba to manufacture conventional power plants. These can later be upgraded to produce complete nuclear power plants.

India may still fund it difficult to get plutonium reprocessing or uranium enrichment technology. This may be true of some high-tech components too. So India may not become self-sufficient in every aspect of nuclear power. But if it becomes a major exporter of nuclear equipment, it will become effectively sanctions-proof.

If all the global manufacturers have plants in India itself, import sanctions will lose their meaning. And if India itself becomes a vital supplier of nuclear components to the rest of the world, others cannot impose sanctions on India without suffering supply disruptions themselves. That’s why the biggest hawks in our nuclear establishment, who badly want nuclear testing in the distant future, can relax on the issue of sanctions. De facto, India will become a member of the privileged P-5 when it becomes part of the global supply chain of nuclear equipment in the next 10 years.

What do you think?