CIVIL NUCLEAR COOPERATION MUST NOT CONSTRAIN INDIA'S

UNCLAS SECTION 01 OF 03 MUMBAI 002068

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: CIVIL NUCLEAR COOPERATION MUST NOT CONSTRAIN INDIA'S
THREE-STAGE PROGRAM, KAKODKAR TELLS U/S LAVIN

REF: MUMBAI 2064

MUMBAI 00002068 001.2 OF 003


Summary

--------------


1. (SBU) Anil Kakodkar, chairman of India's Atomic Energy
Commission, told Commerce Undersecretary Frank Lavin and U.S.
nuclear industry leaders on December 2 that the planned
U.S.-India civil nuclear initiative must not constrain India's
planned three stage program that will establish a closed nuclear
fuel cycle. To help bridge the country's power needs before the
closed fuel model became reality, India would import foreign
reactors in significant numbers once the civil nuclear deal was
implemented, he said. India expected that foreign vendors
understood the country's determination to transfer technology
and indigenize development and construction of nuclear
technology initially purchased abroad, he emphasized. Kakodkar
said public/private partnerships, including partnerships with
foreign companies, in the nuclear power business were already
possible under existing Indian law as long as a state-owned
Indian company maintains the majority. Regulatory issues needed
to be worked out, but India was open to foreign participation in
the nuclear generation business, he said. U/S Lavin invited
Kakodkar and representatives from the Indian nuclear industry to
Washington to share their perspective with U.S. decision makers.
Kakodkar suggested the two sides stage a conference on export
control procedures and policy issues relating to the planned
civil nuclear cooperation. End summary.

India's Growing Power Needs

--------------


2. (SBU) After introducing representatives of the U.S. nuclear
industry (see paragraph 12) Commerce Undersecretary Lavin opened
his December 2 discussion with Dr. Anil Kakodkar, chairman of
India's Atomic Energy Commission, with a mention of the historic
quality of the Business Development Mission. He said that the
Congressional support for the civil nuclear legislation was
overwhelmingly positive, demonstrating broad and deep bipartisan
support for a deeper strategic partnership between the U.S. and
India.


3. (SBU) Kakodkar said India currently had a power generation
capacity of 132,000 MW. Conservative studies conducted by the
AEC show there was a need to expand this capacity 11 - 12 times.
Despite this growth, an energy deficit will remain. Ideally,
nuclear power should make up 25 percent of the country's power
mix. Achieving that goal would ultimately require the
installation of 100 times the current nuclear capacity - or
350,000 MW. Fuel is a problem, however, since there was only
enough fuel to generate 10,000 MW.

No Constraints on India's Fast Breeder Program, Kakodkar Insists

--------------


4. (SBU) To meet the described growth requirements, the AEC was
pursuing a three-stage strategy which will include fast breeder
technology - keeping in view the country's wealth of thorium
reserves. R&D was proceeding smoothly; the first experimental
500 MW fast breeder reactor would become commercially viable
soon. This first generation thorium reactor would utilize oxide
fuel. The breeder program, Kakodkar said, was a must for India
- and this was the imperative of his concerns about the
U.S.-India nuclear agreement. Nothing should constrain India's

MUMBAI 00002068 002.2 OF 003


growth plans in this field.

Imported Technology Will Be "Indigenized"

--------------


5. (SBU) In the near term, Kakodkar said, there was a need for
the NPCIL to augment its capacity with additional reactors from
international vendors. The bedrock of this cooperation must be
what he called "mutual respect", and an appreciation for India's
desire to indigenize technology and develop local supply chains.


6. (SBU) Kakodkar said he believed the U.S. will embrace India's
plans for a closed fuel cycle from the standpoint of sound
engineering and to meet the environmental challenges resulting
from spent fuel. For the initial power plants using foreign
technology, however, the spent fuel will either need to be
reprocessed or shipped back to the supplier. In all cases, there
must be reliable fuel and technology supplies, Kakodkar told
Lavin.


7. (SBU) Initially, India will purchase foreign reactors for
four "nuclear island" projects identified on the east coast of
India. (Note: A day earlier, officials of the Nuclear Power
Corporation of India told the delegation they had identified six
locations, two of which were on India's west coast. See reftel).
Each unit will require 6 to 8 reactors, and each island will
have a capacity of 6,000-10,000 MW. Kakodkar said that the final
price of electricity generated could not be the criteria for the
selection of a technology if everything will be imported. There
will not be open bids for these projects, but rather direct
negotiations with individual vendors. Selection criteria will
focus on the technology and, more importantly, the ability to
develop, in country, an indigenous support capability and supply
chain. Therefore, the concept of co-production, technology
transfer, and development of critical spares in-country will
figure highly in the final negotiations and selection. Kakodkar
said India had no preference for which technology it imports.
Cost efficiency and indigenization were the main drivers in the
selection process.

Private Participation in the Nuclear Power Industry

-------------- --------------


8. (SBU) Kakodkar clarified India's plans for private section
participation in the nuclear power industry. As long as the
majority stake was held by a public sector company (namely the
two GOI nuclear enterprises, NPCIL and Bhavini),private
participation was possible. Kakodkar used the theoretical
example of Larsen & Toubro (a large and respected Indian
engineering and construction firm) and a U.S. utility teaming
with majority shareholder NPCIL as a model that would be
permissible under current law. (Note: In New Delhi the T.
Sankarlingam, managing director of the state-owned National
Thermal Power Corporation, told the delegation that his company
could also conceivably team up with a foreign vendor to operate
a nuclear power plant. End note.) Kakodkar said that
regulatory and policy issues needed to be addressed, but this
was achievable so long that the U.S.-India civilian nuclear
initiative passed the U.S. Congress.

All U.S. Industry Supports Civil Nuclear Deal

--------------


MUMBAI 00002068 003.2 OF 003



9. (SBU) USIBC President Ron Somers, who accompanied U/S Lavin
to the meeting, made the point that all U.S. industry supported
the civil nuclear initiative, including those industries
unrelated to nuclear power. Moreover, this was the first time
that the Indian American community mobilized in unanimous
support, since the legislation was seen by them as a test of
trust and mutual respect. Somers also underscored the
Undersecretary's argument that whatever the flaws of the final
legislation, it was important for the two countries and both
must focus on the long term view and make the initiative work.
Waiting for better legislation in the 110th Congress would be a
folly, Somers said, since the authors of the troubling
provisions were from the party that will soon control both
houses of Congress; they would unlikely offer a better bill.


10. (SBU) Kakodkar asked about Westinghouse's status and its new
Japanese shareholders. Likewise, he queried about GE's tie-up
with Hitachi. The U.S. delegation assured him that equipment
could be sourced from around the globe to assure reliable supply
at lowest cost - and that these new tie-ups were to enable just
that.


11. (SBU) Under Secretary Lavin offered the vision of a global
partnership to develop projects outside India in third
countries. He also invited Kakodkar and the NPCIL team to come
to Washington to share their perspective with U.S. decision
makers. Kakodkar ended by indicating an interest in organizing
a discussion and conference on export control procedures and
policy issues relating to U.S. cooperation with India.

Participants

--------------


12. (U) United States:

-- Frank Lavin, Undersecretary of Commerce for International
Trade

-- Joe Neuhoff, Director, Office of Energy and Environmental
Industries, Department of Commerce (notetaker)

-- Ron Somers, President, U.S. India Business Council

-- Pramod Joshi, Marketing Director - India Region, General
Electric

-- Omer Brown, Contractors International Group on Nuclear
Liability

India

-- Dr. Anil Kakodkar, Chairman, Indian Atomic Energy Commission
and Secretary, Department of Atomic Energy

-- Dr. Nandhini Iyer Krishna, Joint Secretary (MEA),Department
of Atomic Energy

-- Dr. Ravi Grover, Director, Strategic Planning Group,
Department of Atomic Energy.


13. (U) Embassy New Delhi and DOC/FCS New Delhi cleared this
cable.
OWEN