New Delhi:In a big setback for India’s landmark deal with the US, crucial to nuclear energy plans, Westinghouse Electric has filed for bankruptcy today with $9.8 billion in liabilities.
The firm is the US nuclear unit of Japanese conglomerate Toshiba.
More than two years ago, Prime Minister Narendra Modi and US President Barack Obama set the parameters to implement a historic nuclear cooperation deal signed between India and the US in 2008. Both sides agreed to work on “finalising contractual arrangements by June 2017” for six nuclear reactors in Andhra Pradesh which were to be built by Westinghouse and the state-run Nuclear Power Corporation of India Ltd (NPCIL).
What the PM and President Obama laid out ended the uncertainty over two important aspects – inspections and liability for a nuclear accident. India agreed to tighter checks by the International Atomic Energy Agency and in return, the US dropped its insistence on tracking fuel consignments.
On liability in case of an accident at a nuclear power plant, India, seared by the Bhopal gas tragedy in 1984, made it clear that a plant operator will be responsible for costs and compensation, but will have secondary recourse against a supplier or equipment provider.
A state-backed insurance pool to cover liability up to Rs. 1,500 crore would be created by India. Any recourse sought by the operator against a supplier could not exceed this figure.
The India-US deal was meant to generate nuclear commerce worth billions of dollars while allowing Delhi access to nuclear technology and fuel without giving up its weapons programme. India wants to triple its nuclear capacity by 2024 to wean Asia’s third-largest economy off polluting fossil fuels like coal.
The Westinghouse-built operators in Andhra Pradesh formed a multi-billion dollar deal and would be operated by NPCIL.They were to be located over 2,000 acres in in the eastern coastal district of Srikakulam.
News agency Reuters reported weeks ago that its financial crisis meant that Westinghouse was likely to only provide reactors for the six units to be built in Andhra Pradesh. It would not carry out civil engineering work to build the entire project – an approach that led to cost overruns at its projects in the United States.
Westinghouse CEO Jose Gutierrez flew to India earlier this month for talks with (NPCIL) and the Department of Atomic Energy that reports to PM Modi, said Reuters. Indian engineering group Larsen & Toubro, a potential partner that has signed a memorandum of understanding with Westinghouse to supply nuclear plant elements and do civil works, still views the India project as viable.
“As long as the guarantees are in place, I see no reason why this won’t go ahead,” Shailendra Roy, head of L&T’s power business, told Reuters, without elaborating on the nature of any such guarantees.
Westinghouse advertises its AP1000 pressurized water reactor, with a generation capacity of 1,110 megawatts, as “the safest and most economical nuclear power plant available”.
Critical to managing costs is ensuring that any overruns on the construction side of the project would be borne by contractors and not Westinghouse, as is the norm in India,