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Financially imprudent for India to let Westinghouse build nuclear reactors

flag-indiaThe cost of nuclear diplomacy, THE HINDU, SUVRAT RAJU, 20 JUNE 16  The government’s decision to let Westinghouse build six nuclear reactors in India smacks not only of arbitrary use of executive authority but is also financially imprudent

Toshiba WestinghouseIn their recent joint statement, Prime Minister Narendra Modi and President Barack Obama “welcomed the start of preparatory work… in India for six AP1000 reactors to be built by Westinghouse…” Judging by the cost of similar reactors under construction in the U.S., these six reactors may cost as much as Rs.4 lakh crore. This makes the deal potentially the largest commercial contract in the offing between the two countries.

There are several disturbing aspects to this agreement that deserve close public scrutiny. These include the arbitrary use of executive authority in selecting Westinghouse as a supplier, the international legal commitment made by the government to indemnify Westinghouse in the event of an accident, and the high expected cost of electricity from these reactors.

Economically unviable   When the United Progressive Alliance government announced its intention to start work on two reactors each from Westinghouse and General Electric (GE) in the 12th Plan period (2012-2017), it did little to pretend that these contracts made sense on their own merits. Instead, as the former chairperson of the Atomic Energy Commission, Anil Kakodkar, explained, India had “to keep in mind the commercial interests of foreign countries and of the companies there” and was obliged to purchase these reactors in return for U.S. diplomatic support on other issues.

Last year, GE backed out of this arrangement citing concerns about India’s liability law. This was good riddance; GE was offering India an untested design that it has not yet managed to sell anywhere in the world. But the government’s decision to deepen India’s investment in Westinghouse — even as negative news about the company has accumulated — makes little sense.

In April, Toshiba, which acquired Westinghouse in 2006, announced a $2.3 billion write-down in its value, largely because of persistent concerns about the economic viability of Westinghouse’s AP1000 design. Of more than a dozen orders that Westinghouse expected from within the U.S. a decade ago, only four have materialised. Just last month, a utility called Florida Power and Light postponed its plans for two AP1000 reactors by at least four years. And in February, the Tennessee Valley Authority, a U.S. government company, cancelled its plans for two AP1000 reactors explaining that this was “the fiscally responsible action”.

 Likewise, the fiscally responsible action for India would be to cancel this deal………
  • the government has persisted in making concessions to Westinghouse. In February, it ratified the “Convention on Supplementary Compensation” (CSC) for Nuclear Damage that contradicts India’s domestic liability law and protects nuclear suppliers from liability for an accident. Now, in the event of a disaster, Indian courts may find it difficult to exercise jurisdiction over Westinghouse that is not based in India and could point to India’s international commitments under the CSC to block any potential claims against it.
  • For example, Dow Chemicals has rebuffed attempts to make it contribute to a clean-up in Bhopal by arguing that Indian courts have “no jurisdiction over it”. And in a cautionary tale about how flawed international agreements can subvert the domestic legal system, in 2011, an international arbitration tribunal awarded White Industries Australia Ltd. AU$4 million under a bilateral investment treaty even as its dispute with the Indian government was sub judice in India’s Supreme Court……..http://www.thehindu.com/opinion/op-ed/the-cost-of-nuclear-diplomacy/article8748864.ece
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June 20, 2016 - Posted by | business and costs, India, politics international, USA

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