NPCIL OUTLINES ITS VISION OF INDIA'S NUCLEAR FUTURE AT

UNCLAS SECTION 01 OF 05 MUMBAI 002064

SIPDIS

SENSITIVE

SIPDIS
DEPT. OF ENERGY FOR U/S GARMAN, S. JOHNSON, T. CUTLER, A. SCHEINEMAN
DEPT OF COMMERCE FOR U/S F. LAVIN, A/S VINEYARD,J.NEUHOF

E.O. 12958: N/A
TAGS: PREL PARM TSPL KNNP ETTC ENRG TRGY PGOV ECON
BEXP, IN
SUBJECT: NPCIL OUTLINES ITS VISION OF INDIA'S NUCLEAR FUTURE AT
LARGEST EVER MEETING OF U.S. AND INDIAN NUCLEAR INDUSTRIES

REF: A: Mumbai 1975; B: Mumbai 1803

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1. (U) This is an action request. See paragraph 14.



Summary

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2. (SBU) India hopes to import 20 to 25 foreign nuclear reactors
in the coming decades, the head of the country's nuclear power
utility told over 25 U.S. companies from the nuclear sector on
December 1 in Mumbai. S.K. Jain, chairman of the state-run
Nuclear Power Corporation of India (NPCIL),said India had
increased to six the number of "nuclear parks," all of which he
named, that it will build on India's coastline to house the
foreign reactors. Jain confirmed that the NPCIL already has GOI
approval for two of the sites. NPCIL officials emphasized
privately that U.S. vendors were still in the running for one
site where the French company Areva had done preliminary work
for the the NPCIL. NPCIL officials said India would welcome
reactors from both General Electric and Westinghouse, and was
prepared to be the first country to build the newest reactors
offered by the two companies. When importing foreign reactor
technology, India would pursue "phased Indianization" to ensure
technology and know-how transfer over time, Jain said. He
doubted whether India's nodal nuclear power authority would
permit private nuclear power generators until the NPCIL reached
a bottleneck in its expansion plans. He also emphasized that
the GOI understood U.S. firms' concerns on nuclear liability and
was preparing appropriate legislation. The companies
accompanied Commerce U/S Frank Lavin to Mumbai as part of DOC's
Business Development Mission. The atmosphere at the path
breaking day-long event hosted by NPCIL, the largest ever such
gathering between U.S. and Indian firms involved in commercial
nuclear power, was open and cordial, and laid the groundwork for
future civil nuclear cooperation with potentially tremendous
commercial benefits for the U.S. At the same time, U.S. firms
remained concerned that French and Russian companies might be
the first to benefit from the successful passage of the civil
nuclear initiative. End summary.



Cordial, Open Atmosphere Reigns at Commercial Nuclear Event

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3. (U) Over 25 U.S. companies from the nuclear energy sector
accompanied U/S Frank Lavin to the Business Development Mission
on Nov. 29-Dec. 1 in Mumbai. The group included top-level
executives of General Electric, Westinghouse, nuclear fuel
suppliers and companies involved in the design, construction and
administration of nuclear power plants. Several of the
delegates visited the Tarapur nuclear power station near Mumbai,
and on Dec. 1 the group had a full day of interaction with the
Nuclear Power Corporation of India (NPCIL) and with Indian
companies that support the NPCIL's design, construction and
operational activities. The atmosphere was relaxed, open and
cordial, and marked the first time that most of the U.S.
companies had interacted with India's commercial nuclear
community. A smaller group met with Department of Atomic Energy

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(DAE) Chairman Anil Kakodkar on December 2 (septel).



Six "Nuclear Parks" Planned For Foreign Reactor Technology

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4. (SBU) NPCIL chairman S.K. Jain gave the U.S. companies an
update of India's plans to import nuclear reactors and
technology once the civil nuclear initiative creates an enabling
environment. India now hoped to create 60 gigawatts (GW) of
nuclear generation capacity by 2032, Jain said. The country
could not achieve that goal with its indigenously developed
pressurized heavy water reactor (PHWR) technology and its
planned fast breeder program, he said. To make up the
shortfall, the NPCIL needed to import 20 to 25 foreign light
water reactors (LWR) with a capacity of 1 to 1.6 GW each.
Confirming his earlier discussions with the USG on the NPCIL's
expansion plans (ref A),Jain said his company planned to bundle
foreign-built reactors in individual "nuclear parks," each
housing six to eight reactors generate a total of 6 to 8 GW.
For cost control and design efficiency reasons, the NPCIL would
not mix different foreign technologies at each site, he added.




5. (SBU) Jain said the NPCIL hoped to establish such parks at 6
coastal sites. He confirmed earlier reports (ref B) that the
NPCIL had received GOI approval for nuclear parks at Jaitapur in
southern Maharashtra and Kudankulam in Tamil Nadu, where two
Russian LWRs are currently under construction. An interagency
site selection committee led by the NPCIL had identified a
further four sites, Jain said. They were Mithilirdi in Gujarat,
Haripur in West Bengal, Patiswapur in Orissa and Kovvada in
Andhra Pradesh.




6. (SBU) In separate discussions on the margins of the formal
presentation, Jain and other top NPCIL officials told Congenoffs
that the company had not yet decided on specific foreign
technologies for each site. Several officials conceded,
however, that the Kudankulam site is reserved for Russian
technology, since two Russian reactors are already under
construction and coming on line in 2007. No decision on
Jaitapur had been made, they emphasized, although they confirmed
reports that the French company Areva had helped the NPCIL
perform preliminary survey work at the site.



Do U.S. Companies Still Have a Chance at Jaitapur?

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7. (SBU) The NPCIL would "soon" decide on the reactor technology
for the Jaitapur site, Sudhinder Thakkur, the company's
executive director for corporate planning, told Congenoff. He
emphasized that U.S. firms remained in the running and that the
NPCIL was willing to discuss whatever was possible for GE,
Westinghouse and others under U.S. law. Once the NPCIL

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committed to a specific reactor design and did the other
necessary homework, it would approach India's Atomic Energy
Regulatory Board (AERB) for concrete approval to build and
operate a plant at Jaitapur. Thakkur would not say when the
NPCIL planed to commit to a specific reactor design, but only
stated that AERB approval normally took up to 36 months.
Separately, Timothy Richards, GE's director for international
energy policy, told Congenoff that his company still felt it had
a chance at the Jaitapur site.




8. (SBU) The planning for Jaitapur was the most advanced of that
at any of the proposed nuclear parks, several officials told us.
When selecting a site, the NPCIL must first identify a
potential location and obtain approval "in principle" from the
GOI, Thakkur explained to us. It then formulates a design for
the specific site and approaches the AERB and Ministry of
Environment and Forests for approval. The NPCIL had yet to
receive GOI approval for the four additional sites, Thakkur
said, but that process normally took 9-12 months. The NPCIL's
site selection committee was preparing reports on each site that
will soon be sent to India's Atomic Energy Commission for
approval. Thereafter the Prime Minister's Office will make the
final decisions in consultation with the respective state
governments, he said. He did not indicate when that might
happen, but only said the company hopes to move quickly.



Is There Room for Both GE and Westinghouse?

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9. (SBU) NPCIL management gave conflicting signals on whether it
would buy reactors from both GE and Westinghouse, or concentrate
on only one U.S. reactor. During a roundtable discussion with
GE and Westinghouse, S.K. Agrawal, NPCIL project director, said
his company could envisage separate parks for both U.S. vendors.
However, officials told both Emboff and GE that NPCIL would
focus on only one vendor each from the U.S., France and Russia.
Nonetheless, both Jain and Agrawal emphasized that U.S. reactor
designs had a competitive advantage because the AERB used many
regulatory norms of the U.S. Nuclear Regulatory Commission (NRC)
and even compelled the Russians in Kudankulam to follow NRC
standards and reformulate documentation and safety reports to
comply with NRC formats. The AERB and the NRC had a long
history of co-operation (including the current placement of two
AERB personnel in NRC),and NPCIL therefore anticipated quicker
regulatory clearances with regard to U.S. reactors, Jain told
us.



A Strategy of "Phased Indianization"

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10. (SBU) To speed up the process of buying foreign reactors,
the NPCIL would desist from open tenders and conduct one-on-one
negotiations with selected vendors, Agrawal said. Localization
and technology transfer were the chief priorities for the

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selection of a technology provider. Price and resulting tariff
rates ("the grid will pay anything we ask," one NPCIL official
told us) were a second priority. When working with foreign
reactor vendors, Agrawal told GE's Tim Richards and
Westinghouse's Ed Cummings, the NPCIL would pursue a strategy of
"phased Indianization." Initially, the NPCIL would purchase a
complete reactor and as many foreign-built auxiliary components
as necessary. Over time, however, the company planed to
indigenize both development and construction of components and
tailor a given imported technology to the NPCIL's specific needs
and preferences. Agrawal said the company, and the AERB,
preferred known and proven technologies. Responding to a direct
question by Westinghouse's Cummings, however, Agrawal said India
was prepared to build separate plants using both GE's new
Economic Simplified Boiling Water (ESBWR) and Westinghouse's
AP-1000 reactor technologies, both of which have yet to be built
anywhere in the world. The NPCIL and India's strategic planners
recognized that the country could not afford to rule out modern
and path breaking new reactor designs. He stressed that, in any
case, the NPCIL would take charge of the planning and
construction process. Allowing a foreign company to control the
entire process would not result in the desired technology and
know-how transfer, Agrawal said.



Private Participation in Nuclear Power Generation

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11. (SBU) Several U.S. participants asked about the possibility
of private players entering the nuclear power generation
business. Jain pointed out that, under current Indian law,
private companies could have up to 49 percent ownership in a
nuclear power utility. The Department of Atomic Energy would
need to approve any public private partnerships, which could
only occur with NPCIL or Bhavini (the state company charged with
building and operating India's fast breeder reactors). Privately
Jain doubted whether the DAE would do so in the foreseeable
term. The DAE must also give consent to any other public sector
utilities, such as the National Thermal Power Corporation, that
want to enter the nuclear energy market. Amendments to the
Atomic Energy Act were currently being prepared that would allow
100 percent private participation, but publicly Jain said he
didn't expect this to pass until NPCIL reaches a bottleneck and
cannot build any more reactors on its own.



Nuclear Liability

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12. (SBU) The U.S. participants repeatedly emphasized that
nuclear liability was the sine qua non for their ability and
willingness to sell nuclear technology to India. Jain and
others said that the GOI clearly understood the issue and was in
the process of preparing draft legislation that will limit
vendor liability.




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Comment

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13. (SBU) The top leadership of the NPCIL and its major Indian
suppliers spent the entire day with the U.S. companies, and were
eager to emphasize their interest in U.S. civil nuclear
technology. The company's ambitious expansion plans and the
country's hunger to acquire and "Indianize" the world's most
advanced reactor technology will no doubt create tremendous
commercial opportunities for many of the U.S. firms present at
the meeting once the civil nuclear initiative creates an
enabling environment. Nobody doubts that the U.S. nuclear
industry will get its park, or parks. The big question is when.
Many of the U.S firms present, particularly Westinghouse and
General Electric, fear that their French and Russian competitors
could be the first to benefit commercially from the enabling
environment that U.S. diplomacy has created. During the
interactions with the Indian industry, reps from both U.S.
vendors reiterated how existing U.S. export controls prevent
them from conducting the type of substantive discussion that
Areva apparently had with the NPCIL. The NPCIL's stance at the
event made it clear that the company would welcome an Areva-like
dialogue with Westinghouse and GE.



Action Request: The Way Forward

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14. (SBU),Mission India encourages Washington to begin the
interagency discussion that will lead to the liberalization of
the export controls that currently prevent our nuclear industry
from competing equally in the next phase of India's nuclear
future. With the legislation now completed, we recommend that
Washington consider easing regulations as an intermediary step
before the congressional approval of the Agreement for Peaceful
Nuclear Cooperation (123 Agreement). We also urge Washington to
take up a suggestion that DAE Chairman Kakodkar made to U/S
Lavin (reported septel) to stage a conference dealing with
export control policies and other issues related to the
blossoming civil nuclear cooperation between the U.S. and India.
End comment.




15. (U) Embassy New Delhi and FCS New Delhi cleared this cable.
OWEN