Debosree Banerjee, Research Associate of Indian Council for Research on International Economic Relations, India

— Russia has its first mover advantage

On Dec 5, 2008, India and Russia have signed an agreement on Civil Nuclear Cooperation with Prime Minister Manmohan Singh describing it as a ‘new milestone’ in bilateral relations. Russia is already associated with India in two nuclear reactors in Kudankulam nuclear plant in Tamil Nadu and after this agreement it will build four additional atomic reactors in the same place. Besides signing the joint declaration, India and Russia also signed ten agreements on cooperation in various subjects including space, defense, human space programme, tourism etc.

Apart from that, Russian nuclear fuel producer TVEL has signed a $780 million contract for fuel supplies to Indian nuclear power plants. The contract could make Russia the first country to supply nuclear fuel to India since the Nuclear Suppliers Group lifted a three-decade ban on nuclear fuel sales to India on Sept 6, 2008.

India has a large demand for nuclear fuel and if Russia can become a major supplier of nuclear energy, economic ties between the countries will develop further. However, India will still have other partners in the realm of nuclear commerce such as France.

The main barriers to the growth of nuclear energy sector in India include lack of raw material (uranium), finance and technical know-how. India’s uranium reserve is of low grade and price is almost five times higher than that at international level. Therefore, the orders which are likely to materialize soon will bridge the gap between demand and supply of fuel for the Indian nuclear plants.

Apart from that electricity demand in India has been increasing rapidly and per capita figure is expected to almost triple by 2020, with 6.3% annual growth. Coal provides 69% of the electricity at present, but reserves are limited. Therefore, presently India is moving from fossil fuel to nuclear fuel in this regard. Nuclear power supplied 2.5% of India’s electricity in 2007 and this will increase steadily as imported uranium becomes available and new plants come on line.

Following the waiver by the NSG, India has signed civilian cooperation agreements with France, Russia, Kazakhstan and others. This has led to growing competition among them to capture Indian market. However, Russia has a distinct advantage over the other western countries in this regard, i.e. it is a nuclear resource abundant country and therefore the nuclear package that Russia is offering includes different technological support, services etc along with the nuclear fuel. Apart from that, Russia has its first mover advantage and it has already signed the deal with India.