Cost implications of nuclear insurance package are likely to be insignificant: Ratan Kumar Sinha

Interview with Chairman, Atomic Energy Commission

Nuclear power capacity addition is expected to get a boost after India and the US arrived at an agreement to operationalise the civil nuclear deal. In an interview with Sanjay Jog, Atomic Energy Commission Chairman Ratan Kumar Sinha spoke on a number of issues. Edited excerpts:

Can you please provide details of the creation of insurance pool to provide cover to suppliers who shunned the civil nuclear agreement because it made them liable to pay compensation in the event of a nuclear accident?

Several major Indian suppliers, based on their interpretation of Section 17 (b) of the Civil Liability for Nuclear Damage (CLND) Act had the apprehension that each one of them, irrespective of the value of the supplies made by them and the contracted product liability period, will have to set aside a sum equal to the maximum amount of liability (Rs 1,500 crore each) till the end of life of the nuclear plant (for which they made a supply) plus, may be, at least two decades more.

 
The Department of Atomic Energy (DAE) held discussions with General Insurance Corporation of India (GIC) for development of an insurance package for the operator, as well as suppliers.

Accordingly, the GIC prepared a scheme and would have launched it earlier, but there was a hitch. GIC and its partners were first required to create an insurance pool to provide for a total insured sum of Rs 1,500 crore. Based on Indian insurance regulatory guidelines, the Indian general insurance companies could, based on their current net worth, provide for only about Rs 750 crore. 

What is GIC’s new proposal, and has it been approved by the finance ministry?

Based on the recent trend in growth of their net worth, it is expected that this Indian pool will grow every year reaching the figure of Rs 1,500 crore in the next five years or so. It is a normal practice for international reinsurers to also contribute to building such pools. As a matter of principle, DAE, however, could not accept involvement of foreign inspection for those of its nuclear power plants which are based on indigenous technology, particularly those which are outside the International Atomic Energy Agency (IAEA) safeguards.

GIC and their Indian partners considered and proposed two possible options to build this pool. The first one is to get government support for the balance of the sum (Rs 750 crore in the first year, which may progressively reduce with increase in the permitted pool amount). The second option is to issue special bonds for getting the required sum from financial institutions. Both these proposals are currently under consideration of the finance ministry.

The insurance-based scheme for the Indian suppliers had been suggested as a way forward to address the concerns raised by suppliers in respect of US- and French-built reactors as well.

The concept of nuclear insurance package in the country arose with the concerns of the Indian suppliers first. The package to be made by the GIC will be tuned first to the Indian operators and the Indian suppliers. Therefore, logically, it is incorrect to say that the idea of insurance pool has been an outcome of the recent dialogue between the US and India.

The recent discussions between the Indian and the US contact groups helped in achieving an understanding by the US side on the utility of the insurance based solution to address the vendor concerns.

Who will pay the premium?

It is a common practice that the insured has to pay the premium to the insurer. Under the provisions of the CLND Act, the operator has to take a suitable insurance to meet the requirement of providing compensation upon occurrence of a potential nuclear incident. At present, Nuclear Power Corporation of India Ltd (NPCIL) is providing the required assurance by taking bank guarantee. With the availability of nuclear insurance package, NPCIL will have an insurance scheme to meet the above requirement.  Naturally, the premium has to be paid by NPCIL for this purpose. Similarly, suppliers are expected to pay the premium in respect of their insurance cover.

What will be the cost implications?

The details of the insurance package are yet to be finalised.  However, it is expected that its implications on the cost of nuclear products as well as unit energy cost of nuclear power in the country (whether arising from Indian reactors or from the reactors built with foreign technology) will not be significant.

When do you expect the commencement of negotiations between Nuclear Power Corporation of India Ltd (NPCIL) and GE-Hitachi and Westinghouse?

The discussions the NPCIL and Westinghouse have led to identification of a reference plant for AP-1000 reactor, receipt of technical assignment (plant specifications), some parts of Preliminary Safety Analysis Report for proposed Indian Plant, interactions of Westinghouse with some Indian suppliers for participation for supply of components, etc.  In the context of these discussions, a clarification on availability of a viable insurance against nuclear liability claims by the operator, should serve to help address the risk perceptions of the suppliers favourably and to potentially have an impact in bringing down the cost of the plant.  

In the context of GE-Hitachi, there have been some preliminary discussions between NPCIL and GE-Hitachi so far.  It is hoped that after the recent grant of design certification for GR-Hitachi’s Simplified Boiling Water Reactor (SBWR) plant by US Nuclear Regulatory Commission (USNRC), further discussions will take place expeditiously.

When can we expect final agreement to be reached between the NPCIL and AREVA for the 9,900 MWe Jaitapur project in Maharashtra?

The discussions between NPCIL and AREVA for the supply of Evolutionary Pressurised Reactors (EPRs) have been going on for quite some time.  An understanding had been reached with the French side that discussion on CLND related concerns could be held in abeyance till the Indian insurance product is available for domestic suppliers, based on which the required package for the international suppliers could also be made available.  The discussions between the two companies today are focussing on various factors related to equipment supply as per reference plant having an impact on the Unit Energy Cost of the electricity produced from the plant.

Nuclear capacity addition has been delayed due to policy and regulatory issues. Do you expect India will be able to achieve its target of 68,000 MWe of nuclear capacity by 2040?

Considering an optimistic scenario, DAE has set for itself a target of reaching 63,000 MWe of nuclear installed capacity by the year 2032.  It could well be translated into 68,000 MWe by 2040.  We expect that by then reactors with international civil nuclear cooperation, amounting to approximately 40,000 MWe installed capacity would be commissioned.  We envisage, providing a major part of the target to be met through these contributions, with additional construction of indigenous reactors, including Light Water Reactors of Indian design.