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US reactors, fighters to benefit first

Even as the N-deal enters the homestretch, US firms are already negotiating with Indian firms to secure the commercial benefits of the deal, reports Pramit Pal Chaudhuri.

world Updated: Aug 11, 2007 06:04 IST
Pramit Pal Chaudhuri

Even as the Indo-US civilian nuclear deal enters the homestretch, US companies are already negotiating with Indian firms to secure the commercial benefits of the deal. Says a report on the Wharton School of Business knowledge@wharton website, the immediate gains will be in two areas — nuclear power plants and defence equipment.

Prime Minister Manmohan Singh is known to want to dramatically increase nuclear power production in India from its present 3,500 MW to 60,000 MW over the next 30 years. This will be big money: $150 billion estimates the US-India Business Council.

Nuclear Power Corporation of India chairman SK Jain is quoted saying the first batch of new nuclear power plant contracts would be shared between French, Russian, US and Japanese firms. US officials have long known the bulk of reactor deals would be given to foreign firms. Most US reactor firms were bought out by the Japanese and Europeans. But firms like GE expect to win contracts for turbines and ancillary equipment.

The foreign nuclear firms are expected to sign up Indian firms as partners when they bid for the contracts. The frontrunners for such deals include Hindustan Construction Company — which has built most of India's existing reactors, Larsen & Toubro, BHEL and Gammon India.

The big shift will be when the government amends the Indian Atomic Energy Act to allow private Indian firms into the nuclear power generation business. This is presently a public sector monopoly. Ratan Tata has publicly said Tata Power "would be certainly interested in operating a nuclear power plant." Reliance Energy and Tata Power have both been hiring executives from the Nuclear Power Corporation of India.

The second area where US firms hope to land big contracts is defence. Until now, because of the dual-use technology sanctions required by the Nuclear Nonproliferation Treaty, India was denied access to the best US defence technology. The nuclear deal also buries the Cold War legacy of suspicion between India and the US. Washington has indicated India could have access to defence technology only available to countries like Israel and the UK.

India expects to spend $10.5 billion on military equipment — 70 per cent in the form of imports —this year alone.

Indian firms are slated to benefit. Offset rules require foreign defence providers to invest 30 per cent of the worth of their contract inside India.