Page last updated at 15:38 GMT, Wednesday, 24 September 2008 16:38 UK

Indian firms eye nuclear business

By Neil Heathcote
Editor, India Business Report, BBC World

Precihole worker
The nuclear deal will give a big boost to Indian firms.

Power shortages are one of the biggest problems for engineering firm Precihole.

When the electricity stops on the outskirts of Mumbai, the company often has to throw away the parts that it was working on. No flaws can be allowed.

It cuts metal to extremely high specifications, for customers like India's Nuclear Power Corporation (NPC).

It's just one of the firms that have helped keep the country's nuclear power stations running over the years.

Now the NPC is planning to spend $14bn (7.6bn) building new reactors, and Precihole is hoping to benefit - and not just from a more regular power supply.

"If they're planning to build eight reactors, then it's going to be huge business for us, as well as the entire industry," says director Amit Nayak.

"We're expecting our nuclear business to double or triple in one year or two years."

Decades of isolation

For more than three decades, India has pursued its civilian nuclear programme in isolation from the rest of the world.

Precihole director Amit Nayat
Amit Nayat says Precihole could see a huge rise in business

In 1974 it conducted its first atomic weapons test. In response, the other nuclear states refused India access to nuclear technology and fuel.

India has 17 nuclear reactors, but without that fuel, most are running at 50% capacity. They generate just 3% of the country's overall power.

Now all that is set to change.

Earlier this month, the Nuclear Suppliers Group agreed to end its embargo.

The US Congress is debating whether to sign off on the decision, but its agreement is now seen as simply a matter of time.

India's state-run Nuclear Power Corporation has already announced plans to start building new reactors. Its investment for the coming year alone will be $14bn.

Indian electricity pylons
Indian firms currently suffer from power shortages

The giants of India's engineering sector like Larsen & Toubro (L&T) are best-placed to reap the rewards of this rapid expansion.

And they're being courted by the world's biggest technology suppliers - Areva, GE, and Westinghouse.

"It's an opportunity to upgrade the all-round industrial capability of India," says L&T chairman, A M Naik.

More important than the contracts, he says, will be the opportunities they unlock.

"It opens up a lot of other sectors," he says, "co-operation in defence, and space - a lot of programmes which are super-high-tech."

Global interest

The scale of the opportunity has ensured strong political interest in the contracts.

France and Russia have been lobbying the Indian government hard on behalf of their firms.

India is holding off, in deference to America's help in getting other suppliers to waive their boycott.

American firms cannot trade until Congress gives its assent. But behind the scenes talks are ongoing - and India has hinted it will not wait too long.

'Privatisation'

Companies like Larsen & Toubro are hoping not just to supply the new power stations, lucrative as that will undoubtedly be. They want to build and run them.

Nuclear Power Corporation employee
Analysts predict the NPC will look towards the private sector

At the moment, only the state-run Nuclear Power Corporation can do that. Industry insiders believe that will change.

"I think the sheer magnitude of money which is required will drive everyone to go to privatisation," says A M Naik. "I don't see much choice."

Such is the scale of investment required, he thinks government companies will be able to meet only a quarter of the country's long-term power needs.

Many others agree, but point out that there's a lot of paperwork to be done first.

The Atomic Energy Act would have to be amended. The government would have to decide what level of foreign involvement in nuclear power generation is acceptable.

"Once those are set in place, then obviously nuclear power, under the private sector, will ramp up," says Kuljit Singh from the consultants Ernst & Young. "There'll be a huge market going forward."

'Far away'

Others in the industry are more cautious. They believe this is all a long way off.

Much remains to be sorted out, for example in terms of corporate liability in case of accidents - a sensitive issue in a country where memories of the Union Carbide disaster in Bhopal are still fresh.

Mukesh Ambani, the head of one of India's largest power companies, Reliance, is also watching developments closely. "But in my view, it's quite far away," he says.

For the moment, the government's first concern is simply to produce more electricity, as quickly as it can. It wants to increase nuclear power generation tenfold by 2020.

That will require a huge amount of fresh investment, both to modernise existing plants and build new ones.

And even once that stage is over, nuclear power will still make up less than 10% of the country's needs.



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