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RUEHCG/AMCONSUL CHENNAI 1287

UNCLAS SECTION 01 OF 03 MUMBAI 002068 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
DEPT. OF ENERGY FOR U/S GARMAN, S. JOHNSON, T. CUTLER, A. SCHEINEMAN 
DEPT OF COMMERCE FOR U/S F. LAVIN, A/S VINEYARD,J.NEUHOF 
 
E.O. 12958: N/A 
TAGS: PREL PARM TSPL KNNP ETTC ENRG TRGY PGOV ECON
BEXP, IN 
SUBJECT: CIVIL NUCLEAR COOPERATION MUST NOT CONSTRAIN INDIA'S 
THREE-STAGE PROGRAM, KAKODKAR TELLS U/S LAVIN 
 
REF: MUMBAI 2064 
 
MUMBAI 00002068  001.2 OF 003 
 
 
Summary 
 
------- 
 
¶1. (SBU) Anil Kakodkar, chairman of India's Atomic Energy 
Commission, told Commerce Undersecretary Frank Lavin and U.S. 
nuclear industry leaders on December 2 that the planned 
U.S.-India civil nuclear initiative must not constrain India's 
planned three stage program that will establish a closed nuclear 
fuel cycle.  To help bridge the country's power needs before the 
closed fuel model became reality, India would import foreign 
reactors in significant numbers once the civil nuclear deal was 
implemented, he said.  India expected that foreign vendors 
understood the country's determination to transfer technology 
and indigenize development and construction of nuclear 
technology initially purchased abroad, he emphasized.  Kakodkar 
said public/private partnerships, including partnerships with 
foreign companies, in the nuclear power business were already 
possible under existing Indian law as long as a state-owned 
Indian company maintains the majority.  Regulatory issues needed 
to be worked out, but India was open to foreign participation in 
the nuclear generation business, he said.  U/S Lavin invited 
Kakodkar and representatives from the Indian nuclear industry to 
Washington to share their perspective with U.S. decision makers. 
Kakodkar suggested the two sides stage a conference on export 
control procedures and policy issues relating to the planned 
civil nuclear cooperation.  End summary. 
 
India's Growing Power Needs 
 
--------------------------- 
 
¶2. (SBU) After introducing representatives of the U.S. nuclear 
industry (see paragraph 12) Commerce Undersecretary Lavin opened 
his December 2 discussion with Dr. Anil Kakodkar, chairman of 
India's Atomic Energy Commission, with a mention of the historic 
quality of the Business Development Mission.  He said that the 
Congressional support for the civil nuclear legislation was 
overwhelmingly positive, demonstrating broad and deep bipartisan 
support for a deeper strategic partnership between the U.S. and 
India. 
 
¶3. (SBU) Kakodkar said India currently had a power generation 
capacity of 132,000 MW.  Conservative studies conducted by the 
AEC show there was a need to expand this capacity 11 - 12 times. 
 Despite this growth, an energy deficit will remain.  Ideally, 
nuclear power should make up 25 percent of the country's power 
mix.   Achieving that goal would ultimately require the 
installation of 100 times the current nuclear capacity - or 
350,000 MW. Fuel is a problem, however, since there was only 
enough fuel to generate 10,000 MW. 
 
No Constraints on India's Fast Breeder Program, Kakodkar Insists 
 
------- 
 
¶4. (SBU) To meet the described growth requirements, the AEC was 
pursuing a three-stage strategy which will include fast breeder 
technology - keeping in view the country's wealth of thorium 
reserves.  R&D was proceeding smoothly; the first experimental 
500 MW fast breeder reactor would become commercially viable 
soon.  This first generation thorium reactor would utilize oxide 
fuel.  The breeder program, Kakodkar said, was a must for India 
- and this was the imperative of his concerns about the 
U.S.-India nuclear agreement. Nothing should constrain India's 
 
MUMBAI 00002068  002.2 OF 003 
 
 
growth plans in this field. 
 
Imported Technology Will Be "Indigenized" 
 
---------------------------------------- 
 
¶5. (SBU) In the near term, Kakodkar said, there was a need for 
the NPCIL to augment its capacity with additional reactors from 
international vendors. The bedrock of this cooperation must be 
what he called "mutual respect", and an appreciation for India's 
desire to indigenize technology and develop local supply chains. 
 
¶6. (SBU) Kakodkar said he believed the U.S. will embrace India's 
plans for a closed fuel cycle from the standpoint of sound 
engineering and to meet the environmental challenges resulting 
from spent fuel.  For the initial power plants using foreign 
technology, however, the spent fuel will either need to be 
reprocessed or shipped back to the supplier. In all cases, there 
must be reliable fuel and technology supplies, Kakodkar told 
Lavin. 
 
¶7. (SBU) Initially, India will purchase foreign reactors for 
four "nuclear island" projects identified on the east coast of 
India. (Note: A day earlier, officials of the Nuclear Power 
Corporation of India told the delegation they had identified six 
locations, two of which were on India's west coast. See reftel). 
 Each unit will require 6 to 8 reactors, and each island will 
have a capacity of 6,000-10,000 MW. Kakodkar said that the final 
price of electricity generated could not be the criteria for the 
selection of a technology if everything will be imported.  There 
will not be open bids for these projects, but rather direct 
negotiations with individual vendors.  Selection criteria will 
focus on the technology and, more importantly, the ability to 
develop, in country, an indigenous support capability and supply 
chain.  Therefore, the concept of co-production, technology 
transfer, and development of critical spares in-country will 
figure highly in the final negotiations and selection.  Kakodkar 
said India had no preference for which technology it imports. 
Cost efficiency and indigenization were the main drivers in the 
selection process. 
 
Private Participation in the Nuclear Power Industry 
 
--------------------------------------------- ------ 
 
¶8. (SBU) Kakodkar clarified India's plans for private section 
participation in the nuclear power industry.  As long as the 
majority stake was held by a public sector company (namely the 
two GOI nuclear enterprises, NPCIL and Bhavini), private 
participation was possible.  Kakodkar used the theoretical 
example of Larsen & Toubro (a large and respected Indian 
engineering and construction firm) and a U.S. utility teaming 
with majority shareholder NPCIL as a model that would be 
permissible under current law. (Note:  In New Delhi the T. 
Sankarlingam, managing director of the state-owned National 
Thermal Power Corporation, told the delegation that his company 
could also conceivably team up with a foreign vendor to operate 
a nuclear power plant.  End note.)  Kakodkar said that 
regulatory and policy issues needed to be addressed, but this 
was achievable so long that the U.S.-India civilian nuclear 
initiative passed the U.S. Congress. 
 
All U.S. Industry Supports Civil Nuclear Deal 
 
--------------------------------------------- 
 
 
MUMBAI 00002068  003.2 OF 003 
 
 
¶9. (SBU) USIBC President Ron Somers, who accompanied U/S Lavin 
to the meeting, made the point that all U.S. industry supported 
the civil nuclear initiative, including those industries 
unrelated to nuclear power.  Moreover, this was the first time 
that the Indian American community mobilized in unanimous 
support, since the legislation was seen by them as a test of 
trust and mutual respect.   Somers also underscored the 
Undersecretary's argument that whatever the flaws of the final 
legislation, it was important for the two countries and both 
must focus on the long term view and make the initiative work. 
Waiting for better legislation in the 110th Congress would be a 
folly, Somers said, since the authors of the troubling 
provisions were from the party that will soon control both 
houses of Congress; they would unlikely offer a better bill. 
 
¶10. (SBU) Kakodkar asked about Westinghouse's status and its new 
Japanese shareholders.  Likewise, he queried about GE's tie-up 
with Hitachi.  The U.S. delegation assured him that equipment 
could be sourced from around the globe to assure reliable supply 
at lowest cost - and that these new tie-ups were to enable just 
that. 
 
¶11. (SBU) Under Secretary Lavin offered the vision of a global 
partnership to develop projects outside India in third 
countries. He also invited Kakodkar and the NPCIL team to come 
to Washington to share their perspective with U.S. decision 
makers.  Kakodkar ended by indicating an interest in organizing 
a discussion and conference on export control procedures and 
policy issues relating to U.S. cooperation with India. 
 
Participants 
 
------------ 
 
¶12. (U) United States: 
 
-- Frank Lavin, Undersecretary of Commerce for International 
Trade 
 
-- Joe Neuhoff, Director, Office of Energy and Environmental 
Industries, Department of Commerce (notetaker) 
 
-- Ron Somers, President, U.S. India Business Council 
 
-- Pramod Joshi, Marketing Director - India Region, General 
Electric 
 
-- Omer Brown, Contractors International Group on Nuclear 
Liability 
 
India 
 
-- Dr. Anil Kakodkar, Chairman, Indian Atomic Energy Commission 
and Secretary, Department of Atomic Energy 
 
-- Dr. Nandhini Iyer Krishna, Joint Secretary (MEA), Department 
of Atomic Energy 
 
-- Dr. Ravi Grover, Director, Strategic Planning Group, 
Department of Atomic Energy. 
 
¶13. (U) Embassy New Delhi and DOC/FCS New Delhi cleared this 
cable. 
OWEN