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India’s Kudankulam nuclear power station means big debt to Russia

Kudankulam: Nuclear power utility struggles to repay Russia for supplies    The sanctioning of lower than requisite funds comes at a time when NPCIL’s budgetary support requirement has gone up in light of the utility taking up 10 new projects that had been cleared by the government in May 2017.  by Anil Sasi |New Delhi  February 1, 2019  Inadequate budgetary support to the strategic nuclear energy sector over the last two financial years has squeezed funds earmarked under the investment head for the Nuclear Power Corporation of India Limited (NPCIL), resulting in India’s frontline nuclear utility slipping back on its repayment obligations to the Russians for equipment supplies to the Kudankulam nuclear project.

The sanctioning of lower than requisite funds comes at a time when NPCIL’s budgetary support requirement has gone up in light of the utility taking up 10 new projects that had been cleared by the government in May 2017.

The problem of non-payment of Russian credit on account of a reduction in the provision for Russian credit to NPCIL was discussed before a parliamentary panel, responding to which the Department of Expenditure in the Finance Ministry subsequently “conveyed” the concerns to the Budget Division of the Department of Economic Affairs in the same Ministry for “further necessary action”.

Under a credit arrangement between the governments of Russia and India, as soon as equipment leaves Russia for Indian projects such as the nuclear station in Kudankulam, that much money is released by the Russian government to the suppliers, which then becomes a loan on the Government of India. This loan is then supposed to be routed to NPCIL by way of a budgetary provision. Against that, the same money would be given back to the Government of India so that it becomes a loan on NPCIL.

This arrangement has come under strain due to the reduction in budgetary allocation under the ‘investment in PSUs’ head, which has affected the loans payable to NPCIL towards ‘Russian credit utilisation’ that is outstanding in the books of the Controller of Aid Accounts and Audit. The CAAA is the division within the Department of Economic Affairs entrusted with the responsibility for withdrawal of loan and grant proceeds for all official development assistance where India is the recipient.

While the extent of the slip-up in the payment obligation to the Russians could not be ascertained, the trend was seen as serious enough for the Parliamentary Standing Committee on Science and Technology, Environment and Forests to flag this an issue to which the Ministry of Finance responded in the affirmative, a senior government official involved in the exercise confirmed. Queries sent to K N Vyas, Secretary of the Department of Atomic Energy and Chairman of the Atomic Energy Commission, did not elicit a response.

According to official estimates, while budgetary support to NPCIL had gone up from Rs 370 crore in the budget estimate for 2017-18 to Rs 1435 crore in the revised estimate for the year (entailing a total of Rs 685 crore under the investment head and Rs 750 crore as loan), the actual requirement in form of budgetary support submitted by the DAE was thrice that amount — Rs 4305 crore. The higher amount, official said, was primarily on account of a shortfall of earlier years in receipt of equity to the tune of Rs 402 crore and obligations under the Russian Credit of Rs 3,903 crore.

For 2018-19, while the allocation was hiked to Rs 1,665 crore in the budget estimate, it still left a funding gap of around Rs 2,870 crore, according to DAE estimates. The situation was exacerbated by 10 new projects based on the indigenous 700 MWe (mega watt electric) pressurised heavy water reactors (PHWRs) that had been sanctioned in mid-2017, due to which budgetary support requirement had also increased.
NPCIL is currently operating 22 commercial nuclear power reactors with an installed capacity of 6,780 MWe, while it has another eight reactors under various stages of construction totaling 6200 MWe capacity.

Russia and India had, in 2015, agreed to actively work on projects deploying 12 additional Light Water Reactor (LWR) nuclear reactors, for which, the localisation of manufacturing in India under the NDA government’s flagship ‘Make in India’ initiative and the commencement of serial construction of nuclear power plants was flagged as a joint initiative.

In this context, the Programme of Action for localisation between Russian state-owned utility Rosatom and the DAE was finalised during Prime Minister Narendra Modi’s Moscow visit in 2015. At the Kudankulam site, where the two Russian-designed VVER-1000 series reactors have being installed, nearly 100 Russian companies and organisations are involved in documentation, supply of equipment and controlling construction and equipping process. At the same site, four more Russian reactor units are slated to come up in the coming years.

February 2, 2019 - Posted by | business and costs, India, politics international, Russia

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