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Most hydro and thermal power stations in India operate at 87 percent load factor, while nuclear power plants operate at 50 percent load factor due to a shortage of uranium. It is likely that the Indo-U.S. nuclear deal will die in its infancy unless a huge effort is made to change the Communist Party’s mindset. Failing that, India’s choices will be limited to natural gas and maybe coal.

India’s installed power generation capacity in 2007 was 138 gigawatts. In about five years the country will need another 60 to 70 GW of power. For the Indian economy to grow at the rate of 9 percent a year, an additional capacity of 60 GW must be added every five years, requiring roughly US$100 billion in investment every five years. This is a huge demand on national resources.

Today, India generates 65 percent (87 GW) of its power by thermal power plants, which run on coal (54 percent), on gas (10 percent) and a tiny amount on fuel oil (1 percent). The remaining power is generated from hydroelectric (37 GW), nuclear (4 GW) and renewable (10 GW) sources. The power available at the bus is less as the load factor varies. India adds about 30-35 GW of power capacity every five years, which is about half the planned amount. This shortfall has resulted in power cuts and load shedding all over the country.

In order to add 60 GW of capacity every five years for the next 25 years, some choices must be made today. India could go for coal for its thermal power plants, import gas in a big way or go for nuclear energy. Each has its merits and demerits.

Coal-based power generation will create acid rain, add huge amounts of greenhouse gases and produce China-like smog. Natural gas is a better choice, but would have to be imported in large quantities through hostile territory. Some greenhouse gases will still be added with natural gas usage, but its acid rain content will be low. Nuclear energy is full of promise, but India does not have the complete know-how or the necessary uranium to exercise this option in a big way.

Hence India is in a bind as far as its power options are concerned. Coal should be the last option. China opted for coal for the last 20 years and has ended up with smog and acid rain, and is adding to global warming and greenhouse gases. This example is not worth repeating in India. In its rush for development China made bad choices. With so much installed capacity based on coal, China cannot go back and rectify its mistakes.

There is a limit to hydroelectric power. India has exploited the bulk of this capability in the last 50 years, with remaining resources in difficult places. Global warming is impacting river flow, which is detrimental to power generation. Also a hydroelectric and irrigation project is about three times more expensive to build and takes twice as long. With the rapid melting of glaciers that feed the northern rivers, river flow is likely to decrease in the next 30 to 40 years, making power generation with water flow a bit less attractive.

In short, India has only two options: natural gas or nuclear energy. The best option would be a combination of the two. Coal-based plants and hydroelectric power together with renewable energy sources are options to be exploited where building a nuclear power plant is difficult or natural gas cannot be piped easily.

Political debate over nuclear energy has paralyzed the decision-making process of the present government. The political make-up of the current government is such that without Communist support the deal will be voted down in Parliament. The rightwing Bharatiya Janata Party, which forms the main opposition, is also dead set against the deal for flimsy reasons. Its politicians see the present government’s inaction as their ticket for success in the upcoming elections. They also do not like the idea of piping gas through Pakistani territory at high expense. Therefore, they effectively are ruling out all options.

What is in the Indo-U.S. nuclear deal, which is upsetting so many people?

Simplistically, the deal is a trade-off for nuclear energy, which India urgently needs, by accepting certain restrictions on the ultimate usage and disposition of nuclear technology and nuclear materials. No deals have ever been struck without give and take. Rather, the United States has been gracious enough to let India have a US$100 billion loan on easy terms to set up 30 nuclear power plants. For its part, India has to agree not to detonate a new nuclear bomb or sell any of the nuclear materials and technology it will obtain under the deal.

The deal paves the way for the immediate import of uranium, the lack of which is keeping existing nuclear power plants at half the rated capacity. Also, a tremendous amount of proprietary sub-technologies will be available to India to run the nuclear power plants safely. As it stands today, many countries will participate with their own proprietary technologies to build nuclear plants. These technologies will also be available to India to design and build its own nuclear power plants.

What is bothering the Communists in India is that India may become subservient to the United States with the nuclear deal. Also, they do not like the idea of India emerging as a major power to challenge China in the Indian Ocean. It is a view from the 1960s. Today China has emerged as a major power only with U.S. money and U.S. market access, but this has not made China subservient to the United States. As for India’s role as a major power in the Indian Ocean, all depends on China’s intentions.

No matter how much anybody argues with India’s communists, they have set their mind on sabotaging the deal.

The BJP has very minor and flimsy arguments against the deal. They argue that the deal restricts India from conducting further nuclear tests, although they welcome India-U.S. economic cooperation. It has been clarified both by the Indian government and U.S. negotiators that there would be consequences if India conducted a nuclear test, but escape clauses in the operating rules (the 123 Agreement) have sufficient leeway to permit India to do so if its security was threatened. Hence the BJP position is simply posturing ahead of elections.

Back to the natural gas issue; India in the next three to four years will be able to meet only 30 percent of its natural gas requirements with internal gas discoveries. Preference will be given to domestic use, especially fertilizer production. The remaining gas will have to be imported in large quantities. To build let us say 40 GW of gas-based power plants, that is three out of five every five years, India has to find 40 to 50 million cubic meters per day (mmcm/d) of natural gas at a low enough price that power plants could be commercially successful. The supplier has to be reliable and delivery uninterrupted. This supply has to be increased progressively as more and more power plants are built. It is estimated that as much as 150 mmcm/d of gas will be required by India by 2035.

Iran, which is willing to supply the initial amount of 50-60 mmcm/d of gas has at times shown a disinclination to provide this supply. It reneged on a 2005 agreement to supply 20 million tons of liquid petroleum gas because the price negotiated at that time was too low. Also the routing of the proposed pipeline through Pakistan is a key security risk for India. It places India’s jugular in enemy hands. Pakistan could interrupt the supply or terrorist groups operating against Pakistan could sabotage the pipeline at will, jeopardizing India’s economy.

One solution that has been suggested to this dilemma is for India to set up power plants at the India-Pakistan border and supply electricity to Pakistan. If the gas supply was interrupted for any reason, Pakistan would suffer as much as India. The alternate proposal of a sea route for the pipeline does not have Pakistan’s support as it would lose the transit fees.

It is an open question which of the two options India will accept. It would appear that the nuclear option is a better choice. The two political groups that are holding up the deal in Parliament should rethink their positions. India needs power and needs it now. A delay means reliance on coal-based power plants or a slowing of the Indian economy. It would be better for India not to get into either of these modes.

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(Hari Sud is a retired vice president of C-I-L Inc., a former investment strategies analyst and international relations manager. A graduate of Punjab University and the University of Missouri, he has lived in Canada for the past 34 years. ©Copyright Hari Sud.)