People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 23

June 10, 2007

Heady Times Or Crazy Times?


Dipankar Mukherjee


NICOLAS Burns, US Under Secretary for Political Affairs in a recent article titled “Why these are heady times for India and the Unites States” in the Washington Post, lists out the strategic benefits for the two countries in the ‘heady times’ ahead.


Naturally, he starts with the nuclear agreement saying the agreement will “help alleviate the chronic power shortage that hinder India’s economic particularly Dr Manmohan Singh’s drive to raise the quality of life for estimated 700 million Indians still living in dire poverty”. It is not clear whether either the Singhs (Manmohan & Montek) or Chidambaram would agree with the strategic partner’s assessment of 700 millions living in dire poverty in the country. After all, their assessment of Indians in BPL category does not exceed 250 million! Keeping that debate aside here, let us see how nuclear power helps these 700 million people of our country.




The government of India is proudly proclaiming the Ultra Mega Power Projects (UMPP) to usher in a low tariff power regime in the country. The lowest power tariffs offered for Sasan UMPP in the range of Rs 1.19 to Rs 1.30 per unit are being cited to justify the claim. Even presently, the cost of power generated by NTPC in its Vindyachal and Talcher power plants is Rs 1.31 and Rs 1.33 per unit respectively. What would be the cost of nuclear power? Let us go by the figures estimated by the much acclaimed Massachusetts Institute of Technology (MIT), USA in 2003 and University of Chicago, USA in 2004. As per MIT report, the levelised cost of nuclear power is 6.7 cent per unit, which means roughly Rs 2.75 per unit at present currency conversion rate. As per the University of Chicago estimate, it is 6.2 cent per unit which means Rs 2.54 per unit (Source: Science for Democratic Action, published by Institute for Energy & Environmental Research, US)


It may be a fashionable slogan in “Walk the Talk” shows or among elite circles that “costly power is better than no power” but 700 million Indians living under dire poverty simply cannot afford to go for Rs 2.74 per unit generation cost instead Rs 1.19 to raise their quality of life. Nuclear power can be supplementary to the existing power generation to certain extent, but it cannot be a substitute for coal or hydro-based power generation, particularly in India which is richly endowed with these two energy resources.


As for USA, it has been more than 25 years since a nuclear reactor was last ordered for civilian nuclear industry in the country. Obviously nuclear power was not preferred vis-à-vis coal or gas in United States. But then Burns is quite candid when he says in the article “We expect American companies will be among the first to invest in and profit from this gigantic energy market. We hope India will move quickly to help us complete a final bilateral agreement to make this a reality”.


This is the reality picture – investment and profit for reactor and uranium suppliers in USA. Heady times indeed for American business! As a matter of fact nuclear power based on imported reactors and uranium would escalate the power cost progressively much beyond the estimated Rs 2.50 and Rs 2.75 per unit benchmark. Accompanying this would be an increasing dependence on American businesses on the score. What is the quantum of nuclear power we are planning to generate? About 20,000 MW or so by next to 10 to 12 years. Compare this with the country’s power requirements as estimated by the government itself. As per the 17th Electric Power Survey (EPS), it is estimated to be more than 2.5 lakh MW within this same period. Thus the nuclear power share of less than 10 per cent is supposed to “alleviate the chronic power shortage”. This crazy idea unfortunately is being propagated not only by Burns & Co, but also by the prime minister and others in the name of energy security. Actually, for energy security, nuclear source must be only supplementary, that too based on indigenous reactors and indigenous source of uranium and thorium. But it is really crazy to befool the people that the Indo-US nuclear agreement would immediately bring power to tide over the nation’s power deficit, with nuclear power as an alternative source.




Apart from the nuclear energy source, Burns sermonises about the other energy option i.e. gas and oil. He says “We are working with Delhi to encourage energy-rich Central Asian states such as Kazakhstan and Turkmenistan to establish oil and gas trade with Afghanistan, Pakistan and India, thereby reducing the lure of long-term contracts with Iran.”


So, USA will dictate even the source of gas and oil to India in these “heady times”. But at what cost? The Integrated Energy Policy, formulated by the Planning Commission envisages Natural Gas/LNG as clean fuel to replace existing fuel in the following sectors, both for feed stock as well as for energy purposes:


But the substitution will depend upon relative price of gas with respect to other fuels like coal for power and naptha/fuel oil for fertilizer and petrochemical sector. Today’s craze for gas in India is because of administrative price of natural gas, supplied by much maligned PSUs i.e. ONGC and Oil India Limited which are relatively cheaper. As on date basic price of gas in India is as follows:


Gas Type                Price in dollar/million btu*


Gas in North East                 1.10

(Administered Price)
Gas in other areas               1.83
(Administered Price)
Joint/Private companies    3.4 – 4.75
LNG import                          3.86


* btu – British Thermal Unit i.e. the heat value of gas


The share of administered priced gas supplied by the PSUs is today about 85 per cent of production. The private sector is already charging double the price for its share of 15 per cent. However, most of the new gas finds (nearly 80 per cent) are now with the private sector, especially with M/s Reliance after the introduction of New Exploration Licensing Policy (NELP). Price situation would undergo a big change with private sector grabbing a major share in the coming days. Within next 2 to 5 years public sector i.e. administered price will cover only 50 per cent of the production. What would be gas price of the other half? Will it remain economic vis-à-vis other fuels? The answer is a big “NO” unless the pricing is administered by the government. Reliance group is already flexing its muscle to increase the gas price by artificially inflating its capital investment cost in KG basin recently approved by the government. The approved gas price becomes more than 4 dollar per million btu, based on cost plus basis. Reliance has already backed out of its commitment as per the global bid to supply gas to NTPC for Gandhar in Gujarat at the rate of 2.97 dollar/million btu citing this reason.




Burns, by setting his own terms on sourcing of gas/oil supply, wants to nullify whatever manoeuvring position India now has on pricing of gas and is trying to bring it under US domain. Montek Singh Aluwaliah, deputy chairman of Planning Commission, is already talking of market-based gas pricing, which in other words means import parity pricing of gas, under the dictates of US multinationals. This prescription will be immediately lapped up by Indian private sector in oil and gas sector because then the gas price can be jacked up to 7 to 8 dollar per million btu. And the same game of dismantling APM in gas sector in line with oil sector will follow. Gas pricing beyond 3 dollar per million btu would make gas prohibitive vis-à-vis coal in power sector and vis-à-vis fuel oil in fertilizer and petrochem sector. Without administrative pricing, gas would not remain an economically viable fuel for India.


USA, the ‘strategic partner’, wants the junior partner to ensure huge benefits to American businesses by buying costlier nuclear power and costlier gas, of course under the cover of ‘providing energy security’. A nation of 700 millions living under dire poverty has to see the energy affordability and energy sourcing. The corporate editors or TV anchors masquadering as energy experts can ignore this aspect. But it will be crazy time if the national interest is ignored by the Manmohan Singh government only to provide “heady times” for Burns & Co.