View from the top: Re-energising India

The information carried explains that the company concerned intends to award a contract to construct a 2400 MWe nuclear power station on build, operate and maintain basis. Such an ad wasn't likely to have been placed by any organisation five years ago.

A major hurdle has been crossed with the US Congress voting positively on the essentials of the agreement reached between President Bush and Manmohan Singh in July last year.

What is particularly noteworthy is the fact that the measure was passed by the House with an overwhelming majority of 359 to 68 votes. However, there are still major hurdles to cross before the deal actually comes into existence.

The deal can bring about a major change in opportunities that India can now avail of in its future development of energy supply. It can be nobody's view that any immediate relief would accrue from this deal in respect of India's chronic power situation.

But if it's implemented properly, this opportunity can help expand India's nuclear energy capacity significantly. It could then facilitate reduction in the possibilities of our power situation getting much worse.

India's fuel supply situation has entered rough territory. The growth in demand for power consequent to increases in income and high rates of economic growth achieved consistently in the last three years, impose a major challenge for our coal supply and transport sectors.

With an extremely sluggish pace of reform in the coal industry, the output of coal is likely to stagnate at a level where it would act as a major constraint in the expansion of power generation.

There is a growing problem of fuel supply in our coal-based power plants, as a result of which India has to import increasing quantities of coal.

With the increase in global oil prices, the price of natural gas, particularly in the form of LNG, has gone up significantly. Increased prices have also been partly responsible for stalling agreement on the Iran-Pakistan-India pipeline.

With widespread shortages of power, consumers are having to install captive power generating capacity, a large part of which is based on petroleum products.

This form of power generation is now much costlier and would, therefore, not expand at the rate witnessed in recent years. Particularly since industrial units would have to compete in the global market, and may not be able to function with costly electricity as an input.

Irrespective of the fuel source for power generation, reforms in the sector have become critical and long overdue. It is ironic that despite the establishment of so-called independent regulatory commissions, the dilemma of increasing fuel prices and the political problems of passing on electricity price increases to consumers is bedeviling decision-making in this area.

This is a reality which would also act as an impediment for establishment of nuclear power capacity in the country, particularly if, as is intended, these would be financed and possibly established by the private sector.

If the US-India nuclear deal comes through, the full benefit of this historic change will not accrue to India if the price of electricity continues unchanged.

The poor efficiency levels existing in several segments of the power supply industry would only compound this problem. Reform of the sector has to be implemented with speed, or else the nuclear deal would not achieve full potential.

The major benefits of this diplomacy would remain unrealised, and the problems in the power sector could worsen. Nuclear power is no silver bullet for the Indian economy, but it could be a significant part of the solution.