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False Premise: Indo-U.S. Nuclear Deal

Whether they are supporters or critics of the U.S.-India nuclear accord, most fail to recognize that the deal is actually testament to the longstanding, expensive, and large-scale failure of the Indian Department of Atomic Energy and its tremendous but largely hidden costs, writes M.V. Ramana.

First installment in a two-part series

The recent approval of the Indo-US nuclear deal in the Indian Parliament occurred amidst theatrics that shed more light on the machinations of its members than the details of the agreement. Public debate on the deal has centered on emotions of pride and nationalism, obscuring any serious discussion of issues at hand. In this two part series, M.V. Ramana examines the fundamental choices that India makes by entering this deal, and what they portend for the future.

In the first installment, the author discusses the dominant aspects of the public debate around the deal in India thus far, and highlights the fact that several core questions remain unaddressed. The author provides a historical background and context that led to the deal in its current form. He goes on to give a realistic assessment of India’s nuclear energy program, debunking the popular notion that nuclear power is capable of addressing India’s growing energy crisis.

In the concluding article next month, the author will discuss the fallout of this deal on the subcontinental peace process, and its impact on the safety and security of the South Asian people.
Errant Debate

In India, the debate on the nuclear deal has elicited three broad positions. First, there are the nuclear hawks who oppose the deal. The nuclear hawks believe that India’s nuclear program is a great success and more than able to take care of itself. They see the deal as imposing unnecessary constraints on the program and making more difficult the creation of the large nuclear arsenal, including thermonuclear weapons (hydrogen bombs), that they believe is essential for India to be a “great power.”

The second position is one espoused by the Indian government as well as most supporters of the nuclear deal. This is essentially a “nuclear nationalist” position — a less ambitious, more traditional perspective that sees the nuclear program as a great national technological achievement and necessary for India’s economic and social development. These people see the deal as offering a way to sustain and expand the nuclear energy program, while not unduly restricting the building of what they see as a “minimum” nuclear weapons arsenal.

A different source of opposition to the deal comes from India’s left-wing parties, who supported the Congress-led government until this issue came to a head. These left-wing parties have traditionally supported the nuclear energy program, but they opposed the 1998 nuclear weapons tests and have pressed for India to play a larger role in global disarmament efforts and to do more to reduce nuclear dangers in the region. But their primary concern is that the deal ties India too closely to U.S. policies.

These positions have by and large dominated the debate so far. There are many problems with all of these views. The first is their shared belief in the success of India’s nuclear energy program and the need to continue with and expand this effort. They fail to recognize that the deal is actually testament to the longstanding, expensive, and large-scale failure of the Indian Department of Atomic Energy and its tremendous but largely hidden costs, in terms of health, safety, environment, and local democracy.

The second belief, primarily shared by the nuclear hawks and the nuclear nationalists, is that nuclear weapons are a source of security. This belief has been extensively debunked. Those who persist in this belief also ignore the essential moral, legal, and criminal questions of what it means to have and be prepared to use nuclear weapons. The only difference between the two camps is on the character and size of the genocidal weapons they aspire to, and how many people in how many cities they are prepared to threaten to kill. The left-wing parties are more ambiguous in this regard; they support disarmament but have not called for India to unilaterally give up its nuclear weapons arsenal and ambitions. Some in the left parties even feel that Indian nuclear weapons are needed to hedge against a more belligerent U.S. exercise of power and influence.


The safeguards agreement that has been submitted to the IAEA is just the latest episode in a saga that began publicly in July 2005 when President George W. Bush and Indian Prime Minister Manmohan Singh issued a joint statement laying the grounds for the resumption of U.S. and international nuclear aid to India. Such international support was crucial to the nuclear infrastructure and capabilities developed by the Department of Atomic Energy. Even the 1974 nuclear weapons test used plutonium resulting from technology and materials supplied by the United States and Canada. These were supplied with the understanding that it would be used only for peaceful purposes. In turn, that provided one reason for the Indian diplomatic effort at trying to make the 1974 test to be a peaceful nuclear explosion; few outside the country bought into that charade.

Following India’s 1974 test, the United States and other countries formed the Nuclear Suppliers Group with the aim of preventing exports for commercial and peaceful purposes from being used to make nuclear weapons. NSG guidelines list specific nuclear materials, equipment, and technologies that are subject to export controls. In 1978 the United States also passed the Nuclear Non Proliferation Act that required any country, other than the five nuclear weapon states, to accept International Atomic Energy Agency safeguards on all its nuclear facilities (“full scope safeguards”) before the United States would engage in any nuclear cooperation with it. Safeguards are merely accountancy mechanisms to make sure that no fissile material (plutonium or enriched uranium) is diverted from electricity production purposes to making nuclear weapons. Despite the name, safeguards have nothing to do with enhancing safety of a reactor, which will continue to be accident prone. The Indian government’s refusal to give up its nuclear weapons and sign the Nuclear Non-proliferation Treaty meant that no NSG state, including the United States, would sell nuclear technology to it. This embargo has not been strictly followed and commercial or other institutional interests have sometimes overridden non proliferation considerations.

The 2005 joint statement requires the United States to amend both its own laws and policies on nuclear technology transfer, and work to adjust international regimes on the supply of nuclear fuel and technology so as to make an exception for India. In exchange, the Indian government has designated, through the separation plan offered in March 2006, several nuclear facilities as civilian, and volunteered them for IAEA inspection in a phased manner. This was followed by the Henry Hyde Act being passed by the United States Congress and now the 123 agreement.

The agreement marks a new phase in the nuclear relationship between United States and India. Both countries have gone against their historical policies, the United States with regard to its stance on nuclear non-proliferation and India with regard to its long standing opposition to having international safeguards at domestically constructed nuclear facilities.

Of Failures and Motivations

On the Indian side, a primary motivation for the deal has been the history of failure of the DAE to produce large quantities of nuclear electricity. In 1954, Homi Bhabha, the founder of the nuclear program, announced that there would be 8000 MW of nuclear power in the country by 1980. As the years progressed, these predictions were to increase. In 1962, the prediction was that nuclear energy would generate 20-25,000 MW by 1987 and in 1969 the DAE predicted that by 2000 there would be 43,500 MW of nuclear generating capacity. All of this was before a single unit of nuclear electricity was produced in the country.

Reality was quite different. Installed capacity in 1979-80 was about 600 MW, about 950 MW in 1987, and 2720 MW in 2000. The only explanation that the Atomic Energy Commission has offered for its failures has been to blame the cessation of foreign cooperation following the 1974 nuclear weapons test. At the same time, these sanctions also provided the DAE with an opportunity: each development, no matter how small or routine, could be portrayed as a heroic success, achieved in the face of staunch opposition by other countries and impossible odds, while any failures could be passed off as a result of the determination of other countries to block and prevent India achieving technological advancement.

Such continued failures were not because of a paucity of resources. Practically all governments have favored nuclear energy and the DAE’s budgets have always been high. The only period when the DAE did not get all that they asked for and therefore consider the dark years were the early 1990s, a period marked by cutbacks on government spending as part of an effort at economic liberalization. But this trend was reversed with the 1998 nuclear weapons tests: since then the DAE’s budget has increased from Rs. 18.4 billions in 1997-98 to Rs. 50.3 billion in 2006-07, i.e., more than doubled even in real terms.

The high allocations for the DAE have come at the cost of promoting other, more sustainable, sources of power. In 2006-07, for example, the DAE’s budget dwarfed in comparison the Rs. 3.87 billions allocated to the Ministry of Renewable Energy, which is in charge of developing solar, wind, small hydro, and biomass based power. Despite the smaller allocations, installed capacity of these sources was 10,400 MW (as compared to 4120 MW of nuclear energy).

While their contribution to actual electricity generated would be smaller since these are intermittent sources of power, they have much lower operations and maintenance costs. Further, most of these programs, like the wind energy program, started in the earnest only in the last decade or two and there is ample scope for improvement. Today, notwithstanding over five decades of sustained and lavish government support, nuclear power amounts to just 4120 MW, less than 3 percent of the country’s total electricity generation capacity.

Despite this less than stellar history and the hand wringing about international sanctions, the DAE has continued to make extravagant predictions. The current projections are for 20,000 MW by the year 2020 and for 207,000 to 275,000 MW by the year 2052. The likelihood of these goals being met is slim at best. But even if they are met, nuclear power would still contribute only about 8-10 percent of the projected electricity capacity in 2020, and about 20 percent in 2052. There is thus little chance of nuclear electricity becoming a significant source of power for India anytime over the next several decades.

The limited nuclear capacity has been expensive. Since nuclear reactors were clearly much costlier than thermal plants, the DAE’s strategy was to compare nuclear power costs with thermal power plants that were situated far away from coal mines, thereby increasing the transport cost of coal and thus the fuelling costs of thermal power.

In 1958, Bhabha projected “the contribution of atomic energy to the power production in India during the next 10 to 15 years” and concluded that “the costs of [nuclear] power [would] compare very favorably with the cost of power from conventional sources in many areas.” (emphasis added). The “many areas” referred to regions that were remote from coalfields, which was estimated as 600 kilometers in the early days. By the 1980s the DAE had changed this distance and stated that the cost of nuclear power “compares quite favorably with coal fired stations located 800 km away from the pithead and in the 1990s would be even cheaper than coal fired stations at pithead.” This projection was not fulfilled and a 1999 Nuclear Power Corporation internal study came to the less optimistic conclusion that the “cost of nuclear electricity generation in India remains competitive with thermal [electricity] for plants located about 1,200 km away from coal pit head, when full credit is given to long term operating cost especially in respect of fuel prices.”

Even this claim does not stand up to detailed analysis. A 2005 study comparing the costs of generating electricity at an atomic power station against a thermal power station located 1,400 km away from the coal mines showed the thermal power station being more cost effective. This, despite the fact that the economic comparison was largely based on assumptions favorable to nuclear power. In particular, following the methodology adopted by the DAE, the costs of dealing with radioactive wastes from nuclear power were not included. Since there is no credible solution to the problem of radioactive waste, the best that can be done is short-term management. The DAE treats spent nuclear fuel by reprocessing it and segregating the waste into different categories on the basis of their radioactivity. As mentioned earlier, reprocessing is expensive. If the estimate of the cost of reprocessing in India is included in the tariff for nuclear power, it would make nuclear power even more expensive than coal. Overall, the study showed that nuclear power would be competitive only with unrealistic assumptions; for a wide range of realistic parameters, nuclear power is significantly more expensive.

Another element that makes the cost of nuclear power appear artificially low in government estimates is the fact that they do not include any provision for insurance liability against accidents — since the government has not required that of nuclear power plants. In the United States, private companies considering the construction of nuclear reactors were concerned that such an accident would likely bankrupt them and tried to get insurance coverage. No insurance company was willing to take on the risk of indemnifying against such a huge liability; nor could they commit to pay beyond their own resources. The U.S. Congress had to introduce the Price-Anderson Act that allowed the government to act as the ultimate insurer, offering in essence a subsidy to the nuclear industry.

It is by no means clear that even with the resumption of international nuclear trade the DAE will be able to generate a significant fraction of the country’s electricity requirements for decades. Further, such electricity is likely to be expensive. In the case of French reactors which are typical of Western supplied power plants, M.R. Srinivasan, former head of the DAE, has stated that, “Recent cost projections show that if an LWR were to be imported from France, the cost of electricity would be too high for the Indian consumer. This is because of the high capital cost of French supplied equipment.” The estimated capital cost of each 1000 MW foreign reactor is about $2 billion or about Rs. 8,000 crores. To this must be added the interest cost during construction, roughly another Rs. 2,000 crores. In all, if one were to think of 10,000 MW of foreign reactors being imported over next decade, the total cost will be Rs. 100,000 crores — no small sum.

These costs will ultimately have to be paid by electricity consumers through their monthly bills or by the tax payer if the government decides to subsidize these costs. Even if a few reactors were built as a result of the deal, it is quite certain that consumers will be unable to pay the high electricity costs and that might result in the reactors being shut down. This is what has happened with the infamous gas plant near Dabhol, Maharashtra that was supplied by Enron.

A second motivation for the deal represents another of DAE’s failures: in ensuring sufficient supplies of uranium to fuel its nuclear reactors. For the reasons mentioned earlier, India has been unable to import uranium for most of its nuclear reactors. Current uranium production within India is far less than the fuel requirements of its reactors if they are run efficiently. DAE has been able to continue to operate its reactors by using uranium stockpiled from when the nuclear capacity was much smaller. This explains DAE’s desperate efforts to open new uranium mines in the country, including in Meghalaya and Andhra Pradesh, which have met with stiff public resistance, primarily because of health impacts of uranium mining and milling on the communities around existing mines.

In the next issue, the author will examine the impact of the nuclear deal on the security issues of India: Will this deal re-ignite the nuclear arms race between India and Pakistan? How are the interests of India served by creating an environment of mistrust, insecurity and instability in the subcontinent? Should India be tied to the strategic interests of the US? How safe are the Indian reactors and what are the costs of an accident?

M.V. Ramana is senior fellow at the Centre for Interdisciplinary Studies in Environment and Development, Bangalore and co-editor of “Prisoners of the Nuclear Dream” (Orient Longman, 2003).


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The Parrot’s Beak: A Sikh American Passage
In this month of India’s Independence, we salute an Indian American heroine. We present an autobiographical sketch by Kartar Dhillon.

False Premise: Indo-U.S. Nuclear Deal
The U.S.-India nuclear accord is actually testament to the large-scale failure of the Indian Department of Atomic Energy, writes M.V. Ramana.

Infotech Nepal: Berkeley Meet
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