Now for nuclear power

The dust is settling on the nuclear deal, and it looks as though""for the first time in four decades, if not more""the country can look at nuclear energy with enthusiasm. If the US Congress co-operates by changing some American laws, and if the countries in the Nuclear Supplies Group co-operate in permitting hitherto banned supplies to India, then the country will once again have the option of buying nuclear reactors and fuel. Nuclear energy is much bigger in the energy mix of many countries than is the case in India. A full 75 per cent of electricity in France is nuclear, 36 per cent in Japan, 29 per cent in the UK, and 20 per cent in the US. If India is able to go up to such levels over the next 20 years, it would involve building 100,000 Mw of nuclear generation capacity (compared to barely 3,000 Mw of functioning capacity today).

The most important thing that the country needs in this unfolding scenario is loyalty to commercial principles. India must not embark upon nuclear generation as a result of a "policy push". Firms should be rationally choosing between coal-fired, hydel and nuclear plants as an instrumentality for generation. The decision to use nuclear should be based on purely commercial grounds. And so, on purely commercial grounds, is there a case for nuclear generation? This depends on four factors: geography, interest rates, hydrocarbon prices and emissions control. From Gujarat to Andhra Pradesh, the costs of transporting coal to the coast are onerous, and that improves the viability of nuclear power. Nuclear generation involves high fixed cost and low marginal cost; it is favoured at low interest rates. When oil and coal prices are high, the case for nuclear power is more appealing. Most important, if the world makes even the smallest steps in the direction of penalising carbon emissions, the economics of nuclear energy improves greatly. Generation companies such as Tata Power and Reliance Energy should weigh these, with profits and nothing else in mind. Decisions to go nuclear should voluntarily emanate from them""not from the government.

One major factor which has yet to be internalised in India is the existence of superior reactors that are available internationally. India has got used to the department of atomic energy's home-brewed efforts. While these were a commendable effort at a time when India was cut off from trade, top quality can never come from a non-transparent, state-owned enterprise which faces no competition and wrestles with technology denial. In contrast, the world market has private firms building reactors based on commercial considerations under competitive conditions. Indian power companies should familiarise themselves with the price/performance of the best reactors available overseas.

Meanwhile, the government has its role cut out. It needs to take a hard look at the pricing distortions in the energy sector and remove them. And only the government can regulate nuclear plants to ensure adequate safety. But apart from these tasks, which involve public goods, there should be no role for the state in nuclear generation. The last thing the country needs is a central planning effort to build X number of nuclear generation plants because the government or the Planning Commission thinks that is the right thing to do. What is needed most today is to de-mystify nuclear energy, and turn it into a mundane and everyday business decision of managers in electricity utilities.