France is "dwarfing" Sweden, Israel in supplying obsolescent technology to India

By Shantanu Basu*
Jaitapur Nuclear Power Project is a proposed nuclear power plant in India. If built, it would be the largest nuclear power generating station in the world by net generation capacity, at 9,900 MW. Construction was to have started in late 2018. At an estimate cost of Rs 1.12 lakh crore ($16 billion) spread over six units of 1650 MW each. The state-owned Nuclear Power Corporation of India is the implementing and operating agency.
On December 15, 2018, French company EDF has submitted a techno-commercial proposal to the government following talks in Paris with India’s EAM Swaraj and the French Foreign Minister. The Indo-French deal was signed in September 2008. Negotiations first began with French company Areva, but in 2017, French utility company EDF took over its nuclear reactor business after the former faced financial issues.
The idea of importing six nuclear European Pressurised Reactors (EPRs) was initiated by the UPA government more than a decade ago, but the project made little progress due to concerns about the economics and safety of the EPRs, local opposition, and the collapse of the initial French corporate partner, Areva.
Since Areva, and now EDF was bringing in new technology, the Atomic Energy Regulatory Board (AERB), the country nuclear watchdog, asked for a reference plant. A reference plant is a functional power reactor and the Areva had then cited a power reactor at Flamanville. There have been several factors that were hindering the power plant, which includes the "reference plant". Despite these problems, in the past few months, Government of India (GoI) took several high-level steps towards actuating the project.
EDF and GE signed an agreement for constructing six evolutionary power reactors (EPR) at the Jaitapur nuclear plant. The strategic cooperation agreement will provide a platform for a long-term partnership concerning the construction of the conventional island on each of the six reactors. Under the agreement, GE Power will design the conventional island for the Jaitapur nuclear plant, in addition to supplying its main components.
In addition, GE will provide operational support services and training programmes to meet requirements of the Nuclear Power Corporation of India (NPCIL), which will own and operate the future nuclear power plant. EDF will be responsible for engineering integration covering the entire project including the nuclear island, conventional island and auxiliary systems, and will provide the required input data. In effect, EDF gets the lion’s share of this project.
In March 2018, EDF and the Nuclear Power Corporation of India (NPCIL) signed an “industrial way forward” agreement in the presence of Prime Minister Narendra Modi and French President Emmanuel Macron. The urgency is inexplicable as it comes before the techno-commercial offer has been examined and as earlier questions about costs and safety remain unanswered.
Moreover, with the Indian power sector facing surplus capacity and a crisis of non-performing assets (NPAs), a large investment in the Jaitapur project is particularly risky. In addition to the high costs, safety problems with the reactor design and construction have emerged in several EPRs.
The most serious of these pertained to the pressure vessel, which is the key barrier that prevents the spread of radioactive materials from the reactor. In April 2015, the French nuclear safety regulator, Autorité Sûreté Nucléaire, announced that some sections of the pressure vessel that the French Creusot Forge had supplied to the Flamanville and Taishan reactors had too much carbon in the steel.
The Flamanville project was also found to have substandard welding in the reactor’s pipes. The EPR at Olkiluoto in Finland encountered problems with vibrations in the pipe that connects the primary coolant system with the pressuriser, which maintains the pressure of the water circulating in the reactor.
These safety concerns are exacerbated by India’s flawed nuclear liability law. If and when completed, Jaitapur “will be the largest nuclear power plant in the world”. In the event of an accident, the nuclear liability law would require the public sector NPCIL to compensate victims and pay for clean-up, while largely absolving EDF of responsibility. The Indian law provides NPCIL with a limited opportunity to obtain compensation from EDF for the “supply of equipment... with... defects... or sub-standard services”.
However, the joint statement issued in March 2018 promised that the “enforcement of India’s rules” would be in accordance with the International Convention on Supplementary Compensation for nuclear damage, which severely limits the operator’s right of recourse. This raised the disturbing possibility that the NPCIL may have promised not to exercise its right to claim compensation from EDF as allowed by Indian law.
In any event, there is a “moral hazard” here: Since EDF can escape with limited or no consequences even after a severe accident, it has little material incentive to maintain the highest safety standards, particularly if the requirements of safety come into conflict with the imperative to lower costs. Such pressures might be accentuated by EDF’s poor financial state.
Compounding these are concerns about the per KwH cost of energy from Jaitapur that a study estimates could be as high as Rs 15 KwH that must be revised upwards to account for the construction experience with EPRs over the past five years. Across the world, EPRs have experienced delays and cost increases. The first EPR entered commercial operation in December 2018 at the Taishan site in China, five years later than originally projected. Its final capital cost was estimated by industry sources to be “40% over the original estimate”.
The story in Europe is more dramatic. The EPR at Flamanville in France, for example, went from an expected start date of 2012 to 2020, and a cost estimate of €3.3 billion to €10.9 billion. Two EPRs have been planned at Hinkley Point in the U.K. Even before construction began, the estimated cost has risen significantly to £20 billion (about ₹1.75 lakh crore). The British National Audit Office assessed that the project “locked consumers into a risky and expensive project with uncertain strategic and economic benefits.”
While nuclear costs have been rising, other low-carbon sources of electricity, especially solar energy, have become cheaper. In 2010-11, tariffs for solar photovoltaic (PV) projects under the National Solar Mission were between Rs 10.95 and Rs 12.76 per unit. But several projects approved under Phase II of the mission have been connected to the grid in the last year with tariffs below Rs 5 per unit. In recent auctions for solar PV projects, winning tariff bids in the range of Rs 2 to Rs 2.50 per unit have become routine.
The high capital costs of the EPRs are of particular concern because power-generating capacity in India has grown faster than demand causing projects to run into financial difficulties. In March 2018, the parliamentary standing committee on energy listed 34 “stressed” projects, including NPAs and “those which have the potential to become NPAs”, with a cumulative outstanding debt of Rs 1.74 lakh crore. In this context, the government was throwing caution to the winds by investing lakhs of crore in the Jaitapur project. Since NPCIL’s debts would ultimately be underwritten by the Indian government, if the project encounters financial difficulties, the costs would fall on Indian taxpayers.
Notwithstanding such unsound economics and dubious technology, the Modi-Macron statement “emphasized the need for the project to generate cost-effective electricity”. It is hard to see how this is possible. To begin with, the government must answer several specific questions: how much will the entire project cost, who will be accountable for cost increases and delays, and what is the precise arrangement that the government has reached with France on liability?

Unless it is transparent about these details, the Modi government may well find itself engulfed in yet another controversy involving overpriced French equipment. It is in this context that former Union Finance Secretary Dr EAS Sarma’s reported letter to CAG, Rajiv Mehrishi, assumes significance. Needless to add, CAG’s response is unlikely.
It is also interesting to note that Dassault Aviation, another French company, is reportedly selling Rafale fourth generation (F-4) to the French air force at under Rs 600 crore per plane against India’s third generation (F-3) for Rs 1600 crore each. 

“The F4 standard guarantees that Rafale will remain at world-class level so that our combat air forces can carry out all their missions with optimum efficiency, whether in coalition operations or completely independently, as required by the French nuclear deterrent,” said Eric Trappier, CEO of Dassault Aviation. He added that “this new standard also guarantees that Rafale will remain a credible reference on the export market.”
Interestingly, the F1 standard was specific to the first aircraft for the French Navy. The F2 standard gave it air-to-ground and air-to-air capabilities, while the F3 and F3R gave it extended versatility. The French are certainly dwarfing Bofors AB Sweden and the Israelis in supplying obsolescent technology to India. And our government is only too happy to oblige the French. Jab mian biwi raazi to kya karega kaazi?
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*Senior public policy analyst and commentator. Source: Author's Facebook profile