[Answered] Examine the economic challenges of unlocking India’s nuclear energy sector through private participation. Analyze how moving away from administered pricing and mandated procurement can protect the fiscal health of State Discoms while attracting sustainable long-term investment.

Introduction

India targets net-zero by 2070, yet nuclear contributes barely 3% of electricity. As per IEA and NITI Aayog, private participation and pricing reform are crucial to scale nuclear energy sustainably.

Context of Nuclear Sector Liberalisation

1. SHANTI Act, 2024: Ends six-decade state monopoly, allows private investment, and grants statutory independence to AERB, marking a structural reform since the Atomic Energy Act, 1962.
2. Strategic importance: Nuclear offers clean baseload power, energy security, and complements intermittent renewables, as highlighted in India Energy Outlook, IEA.

Economic Challenges in Unlocking Nuclear Energy

1. High capital intensity: Nuclear projects involve ₹15–20 crore per MW, long gestation periods, and cost overruns, making them unattractive without predictable revenue streams.
2. Liability-related uncertainty: Pre-SHANTI CLND Act, 2010, especially Section 17(b), deterred foreign OEMs like Westinghouse and EDF, stalling projects at Jaitapur and Kovvada.
3. Regulatory ambiguity: Undefined terms such as “strategic” and “sensitive activities” raise risks for investors, especially SMRs, discouraging R&D and innovation.

Problems with Administered Pricing

1. Distortion of market signals: Section 37 of SHANTI Act overrides the Electricity Act, 2003, creating a parallel tariff regime despite electricity being a fungible commodity.
2. Discom fiscal stress: State Discoms already face losses exceeding ₹5 lakh crore (PFC Report, 2023); mandating procurement of high-cost nuclear power worsens their viability.
3. Moral hazard: Fixed tariffs insulate generators from efficiency pressures, contradicting lessons from renewable energy reforms, where competitive bidding reduced solar tariffs by over 80% since 2010.

Benefits of Moving Away from Mandated Procurement

1. Discom protection: Allowing Discoms to choose power sources prevents forced offtake of expensive baseload, supporting reforms under Revamped Distribution Sector Scheme (RDSS).
2. Market-based efficiency: Competitive contracting encourages cost discipline, innovation, and optimal project sizing, especially relevant for SMRs.
3. Risk sharing: Commercial contracts allocate risks between producers and consumers, rather than transferring them to financially weak public utilities.

Role of Private-to-Private Power Markets

1. Targeted demand matching: Data centres, SEZs, industrial clusters, and GCCs seek reliable, 24×7 clean power and can pay a premium for nuclear baseload.
2. Captive and open access models: Enabled under Electricity Act, these models mirror success of renewables and proposed offshore wind framework.
3. Investment confidence: Long-term PPAs between willing parties improve bankability, a key concern for pension funds and sovereign investors.

Global and Domestic Lessons

1. International experience: Countries like France and UK rely on contract-for-difference or market-linked pricing, not mandatory utility procurement.
2. Indian precedent: Renewable energy growth post-2003 Electricity Act shows regulatory certainty and price discovery attract massive private capital.

Way Forward

1. Tariff reform: Amend or notify exemption under Section 37 for private transactions, retaining price control only for PSU-linked sales.
2. Regulatory clarity: Define supplier roles, strategic activities, and strengthen AERB independence through transparent appointments.
3. Blended finance: Use green bonds, sovereign guarantees, and viability gap funding selectively, not blanket price control.

Conclusion

As Justice B.N. Srikrishna noted, sound regulation balances risk and reward. Echoing NITI Aayog and President Droupadi Murmu’s clean energy vision, market-linked nuclear pricing can ensure fiscal prudence and long-term investment confidence.