US embassy cable - 05NEWDELHI6294

C O N F I D E N T I A L  NEW DELHI 006294 
 
SIPDIS 
 
 
PASS TO NRC 
 
E.O. 12958: DECL: 11/20/2012 
TAGS: ENRG, ETRD, IN, KNNP, PREL, IAEA, US-India Streatgic Partnership 
SUBJECT: THE US-INDIA NUCLEAR DEAL: SHAPING PUBLIC OPINION 
 
REF: A. NEW DELHI 5680 
     B. NEW DELHI 5879 
     C. NEW DELHI 6011 
     D. NEW DELHI 6079 
     E. NEW DELHI 4793 
 
Classified By: SCI-COUNS M. DICAPUA FOR REASONS 1.5 (B) and (D) 
 
1.  (C) Summary:  Prime Minister Singh,s appearances before 
Parliament (Ref. A, B and C) and our contacts in the Indian 
scientific community allow an early assessment of how the GOI 
interprets the July 18 Joint Statement (JS) on civil nuclear 
cooperation and where challenges are likely to arise in 
implementation.  The PM views the nuclear deal as an 
opportunity to achieve energy security while preserving 
India,s nuclear strategic options.  The separation of 
civilian and military activities within the nuclear 
establishment, the risk that the agreement may bring India,s 
quest for nuclear self-sufficiency to an abrupt end, a 
shortage of fuel for the current civilian program, and the 
massive investment in an ambitious nuclear program are the 
issues that the PM, members of Parliament, and analysts have 
brought up.  There is the distinct possibility that the Prime 
Minister will announce attainment of full power of operation 
of Tarapur-4 on August 15th, India's Independence Day.  In 
keeping with the Joint Statement issued by the President and 
Prime Minister, it will be important for USG officials to 
emphasize that the US and India will implement the agreement 
in a phased and reciprocal manner.  End Summary. 
 
India,s Parliamentary Nuclear Debate 
------------------------------------ 
 
2.  (C) PM Singh told the Lok Sabha (LS, Lower House of 
Parliament) on July 29 (Ref. B) that India desires to 
&attain energy security to enable us to leapfrog stages of 
economic development obtained at the least possible cost.8 
Singh said that nothing in the JS limits India's strategic 
nuclear weapons program and assured Parliament that India 
retains complete and autonomous control.  Thus, Singh 
rejected criticism that the JS would fatally constrain 
India,s strategic options. 
 
3.  (C) Singh further assured the LS on August 3, 2005 that 
the GOI will &Not allow any fissile material shortages or 
any other material limitations on India,s strategic programs 
in order to meet current or future requirements."  Singh 
reaffirmed India's commitment to the three-stage nuclear 
power program consisting of Pressurized Heavy Water Reactors 
(PHWRs), fast breeder reactors and thorium reactors.8 
http://pmindia.nic.in/lspeech.asp?id=155 
 
India,s Uranium Supplies Place India in a Tight Corner 
--------------------------------------------- -- 
 
4.  (C) The public debate on the JS has brought the shortage 
of natural uranium for India,s nuclear power program out in 
the open.  One expert, M. R. Srinivasan, says that the high 
operating factors the Nuclear Power Corporation of India 
Limited (NPCIL) achieved last year are starting to decline 
because of inadequate supplies of natural uranium. 
 
5.  (U) According to another nuclear expert and strategic 
analyst, G. Balachandran, the poor quality uranium ore at 
Jaduguda in Jharkand is close to exhaustion.  Mining 
operations in the Nalgonda District of Andhra Pradesh and 
Domiasiat at Meghalaya have not begun due to electoral 
sensitivities and NGO agitation.  R. Ramachandran, reports in 
Frontline (12 August 2005) that the Planning Commission, in 
its mid-term appraisal, states that the development of 
uranium mines in India has not kept pace with the addition of 
generating capacity. 
 
6.  (SBU) In agreement with Srinivasan, Ramachandran says 
that the capacity factor of operating nuclear plants is being 
lowered by as much as 10 percent because there may not be 
sufficient fuel to upload four plants that are coming on line 
(RAPS 5 and 6 and Kaiga 3 and 4).  Our contact at the Atomic 
Energy Regulatory Board (AERB) has confirmed that NPCIL is 
now attempting to recycle fuel through several twin-unit 
 
reactors to sustain optimal operation in a fuel-scarce 
environment. 
 
7.  (U) Even Anil Kakodkar, the Chairman of the Department of 
Atomic Energy (DAE), told the Energy Coordination Committee 
(ECC) at its first meeting on August 6 that domestically 
mined uranium is four to five times more expensive than 
uranium in world markets.  According to press reports, 
Kakodkar (Hindustan Times, 7 August 2005) made a special 
reference to the recent Indo-US JS that would enable India to 
import the uranium it requires for nuclear power projects. 
 
PM Singh Owns Up to Shortcomings of Nuclear Program 
--------------------------------------------- ------ 
 
8.  (U) In his Rajya Sabha (RS, Upper House of Parliament) 
address, PM Singh stated, &I was a Member of the Atomic 
Energy Commission, when I was Secretary in the Ministry of 
Finance, way back in 1970.  At that time, we had prepared a 
plan to reach the target of 10,000 Megawatt for nuclear 
capacity.  We are today 30 years away from that period.  Our 
total capacity is about 3,000 Megawatt.  In the next five or 
six years, it can at best rise to about 6,000 Megawatt.  But, 
even for these, we do not have fuels.  We have problems in 
mining uranium in the areas where domestic deposits are 
found.  As far as imported fuel is concerned, once again, 
because of the restrictive international regime, which the 
United States and other countries have erected, we are not 
able to access those sources or supplies.8 
 
Reciprocal Cooperation Paramount in its Implementation 
--------------------------------------------- --------- 
 
9.  (C) Singh, in his 29 July LS address said, &Reciprocity 
is key to the implementation of all the steps enumerated in 
the JS.  We expect a close co-relation between the actions to 
be taken at appropriate points in time, consistent with our 
national security interests... Hence phased action, in terms 
of identification and separation of civilian nuclear 
facilities based solely on our own duly calibrated national 
decisions will be taken at appropriate points in time, 
consistent with our national security interests.8 
 
10.  (C) In the 04 August RS debate, PM Singh said, &The 
separation of civilian and military nuclear facilities, I 
have been told by our nuclear establishment, can be done.  I 
have not studied the details, but competent observers have 
told me that the Father of India's Nuclear Program, Dr. Raja 
Ramanna, himself had proposed, long ago, that such a division 
should be made.  Our nuclear establishment has told me that 
this can be done, but it will have to be done in a phased 
manner.  And, therefore, we put it to the US Government that 
this separation will be done in a phased manner.  It will be 
an autonomous Indian decision as to what is 'civilian' and 
what is 'military.' Nobody outside will tell us what is 
'civilian' and what is 'military'.8 
 
11.  (C) Feasibility notwithstanding, the GOI will have to 
meet the tangible and intangible costs associated with the 
separation efforts.  According to Balachandran, the tangible 
costs arise from the need to establish separate facilities 
for civil and military purposes where, at present, one or 
more facilities may have been engaged in both types of work. 
A similar issue arises with human resources where currently 
there may be technical personnel who may be engaged in both 
types of activities.  There are also intangible costs 
associated with delays that separation-of-facilities will 
Qe in programs already underway. 
 
Separation of Nuclear Facilities 
-------------------------------- 
 
12.  (C) Balachandran envisions that the Indian commitment to 
separate its nuclear facilities and programs into civil and 
military programs, and putting civilian facilities under IAEA 
safeguards could be contentious in India and a time consuming 
aspect of the JS. 
 
13.  (C) Balachandran predicted that the CIRUS and Dhruva 
reactors, as well as the Rare Materials Project at Mysore 
 
will most likely fall in the military category as they 
provide the basic fissile material for India's weapons 
program. 
 
14.  (C) According to Balachandran, civil facilities easily 
identified are the Atomic Minerals Directorate (AMD), the 
Variable Energy Cyclotron Center (VECC), and the Center for 
Advanced Technology (CAT), the various grant-in-aid 
institutions maintained by DAE such as the Tata Institute of 
Fundamental Research (TIFR), and the Tata Memorial Center. 
The civilian list will likely include the two corporations 
involved in the construction and operation of nuclear power 
plants, NPCIL and BHAVINI, the consortium that is building 
the Fast Breeder Test Reactor.  The Electronics Corporation 
of India Ltd. (ECIL), the Indian Rare Earth Ltd. and the 
Board of Radiation and Isotope Technology are outside the 
purview of safeguards and thus do not represent a problem. 
Others, such as the Radiation Medicine Center, the Beryllium 
Plant and the Low Radiation Research Laboratory at Kollam are 
also civil in nature. 
 
Some Components Will Present a Challenge 
---------------------------------------- 
 
15.  (C) According to Balachandran, three industrial 
facilities with both military and civilian components are the 
Uranium Corporation of India Ltd., the Heavy Water Board 
(HWB), and the Nuclear Fuel Complex (NFC).  Among these, 
Balachandran considers that only some of the component 
facilities of these entities may have to be declared as 
military. 
 
16.  (C) The HWB operates seven out of India's eight heavy 
water plants.  Depending on requirements, only two of these 
plants may need to come under the umbrella of military 
facilities wiQe others designated as civilian, with 
end-users being nuclear power plants. 
 
17.  (C) There are three reprocessing plants in operation, at 
Trombay, Tarapur and Kalpakkam.  Balachandran says that any 
one of these can be designated as military and the remainder 
as civilian without adversely impacting the accumulation of 
fissile material for strategic purposes. 
 
18.  (C) One would be led to think that NFC can present 
problems in separation of military and civilian facilities. 
However, the NFC, even though not under full facility 
safeguards, has come under activity specific safeguards when 
it has been engaged in fabrication of fuel rods from 
safeguarded imported enriched uranium fuel for the existing 
Tarapur nuclear power plant. 
 
19.  (C) The Bhabha Atomic Research Center (BARC) and its 
constituent establishments are engaged in both civil and 
military programs.  Thus, it will be the separation at the 
main BARC premises at Trombay that will require some 
institutional and location rearrangement.  As BARC is the 
cradle of India,s nuclear program, separation of military 
and civilian activities at BARC may present the biggest 
challenge as programs and personnel there are heavily 
intertwined, according to Balachandran. 
 
How to Deal with the Fast Breeder Reactor Program 
--------------------------------------------- ---- 
 
20.  (C) Indian nuclear scientists argue whether India will 
be able to continue development of the fast breeder reactor 
(Ref. E) and thorium fuel cycle if IAEA,s &intrusive8 
inspections are put in place.  Should India choose the option 
to place the Prototype Fast Breeder Reactor (PFBR) program 
under IAEA safeguards, this program, which is a critical 
element leading to India,s civilian fissile material 
self-sufficiency, would stand to benefit the most from 
international cooperation.  According to Balachandran, 
however, putting the breeder reactor with its plutonium in 
place under safeguards would remove a substantial amount of 
currently unsafeguarded plutonium from weapon's program 
access.  In a second more farfetched option, India could 
offer to place the breeder reactor under safeguards, and fuel 
it with safeguarded plutonium brought from abroad.  In this 
 
scheme, India would get to retain the stock of unsafeguarded 
plutonium for its weapon's program.  In a third option, India 
would place the breeder program in the military category. 
This could cause problems downstream when the time comes to 
negotiate and implement a Fissile Materials Cut-off Treaty 
(FMCT). 
 
21.  (C) Balachandran told us that the PM,s commitment to 
the continuity of India,s breeder program is a political 
imperative.  Otherwise, critics may point out that the JS 
could become a backdoor approach to bring India's three stage 
civil nuclear program to an end.  (Comment:  The breeder 
program, which has yet to deliver its promise of unlimited 
supplies of U233 for the civilian nuclear power program was 
first formulated by the Indian nuclear pioneer, Homi Bhabha, 
in 1944 and formally adopted in 1958.  India has been 
obsessive about the breeder program since, thus the PM 
commitment to it in paragraph 3.  End comment.) 
 
Power Projections in India 
-------------------------- 
 
22.  (C) Some analysts say that India may look to global 
giants in nuclear power and investment to meet energy 
requirements.  The 10th Plan Mid Term Appraisal Document 
states that &India must seek at least 20,000 MW of 
additional nuclear power capacity on a turn key basis, based 
on a competitive power tariff, to be built over the next 10 
to 12 years.8  Thus, some industry analysts hope that the JS 
will become the catalyst to attract Foreign Direct Investment 
(FDI) in India,s nuclear power sector. 
 
23.  (C) Srinivasan provided a projection of India,s energy 
requirements in 2052.  He indicated that the total installed 
capacity will have to be about 1350 GW and total output of 
8000 TW hours, which is about ten times India's installed 
capacity (139 GW) and output (640 TW hours) in 2002, which 
includes captive capacity.  In this scenario, the nuclear 
component would have to rise from the current three percent 
to about 26 percent with an installed capacity of 275 GW, 
about 100 times the present operating capacity.  If one were 
to look at 275 GW of nuclear power by 2052 at a current price 
of $1.2 billion per GW for Indian pressurized heavy water 
reactor units, this implies a staggering investment of $330 
billion.  In his Rajya Sabha address, PM Singh pointed to an 
initial investment required for infrastructure of $150 
billion in the next five years. 
 
24.  (C) Some analysts have gone so far as to say that the 
nuclear sector should emulate the oil sector and begin to 
look for resources abroad.  In this scenario, India ought to 
look for opportunities to acquire sites where it could 
undertake uranium mining either through sole or joint 
investment.  In their view, these options will be the only 
chance India will have to lay the groundwork for growth and 
self-sufficiency of its nuclear industry. 
 
The Role of the Private Sector 
------------------------------ 
 
25.  (U) There has been talk in the press about a possible 
role of the private sector in nuclear power generation in 
India.  On August 4, according to press reports, (Business 
Standard, 6-7 August 2005), the Chairman of Tata Power, Ratan 
Tata, said that his company was ready to foray into this area 
"if and when the government allowed it."  As Tata had a 
ringside seat during the Washington visit of PM Singh where 
the JS was signed, it does not surprise us that he would be 
looking at nuclear power in Indian as an area for investment. 
 
26.  (U) An editorial in The Hindu Business Line (9 August 
2005) rightly suggests that now that technology barriers have 
been overcome, the private sector could provide the financial 
and organizational energy to move this program at a faster 
pace.  The editorial draws an analogy between the booming 
growth of the telecom sector which "landscape has changed 
unrecognizably in just ten years with energetic private 
sector participation."  The idea of private sector 
participation in the nuclear energy field first surfaced in 
November 2004 when Reliance Energy indicated that it was 
 
looking at the possibility of setting up nuclear power 
stations.  Reliance officials in May also told EconCouns that 
Reliance wanted to invest in the nuclear energy sector if the 
GOI lifted restrictions. 
 
27.  (U) At this moment, we have yet to hear an official view 
on private investments in the nuclear sector.  On August 6 
and 7, the Business Standard reported that the GOI is not 
favorably inclined towards allowing the private sector to set 
up nuclear power plants in India at the moment.  The report 
quotes a government official as saying "there has been a 
demand from the private sector, but there is no decision to 
change the present framework." 
 
28.  (U) Even the staid public sector thermal power companies 
are making noises about getting into the nuclear power 
generation business.  According to the Hindustan Times (9 
August 2005), the National Thermal Power Corporation of India 
Ltd (NTPC) Chairman C. P. Jain told the media that NTPC "as a 
power company, we need to look at alternate sources of fuel, 
and nuclear power is definitely an area we are interested in 
getting into.  But there is no immediate plan." 
 
Hunt On for India,s Nuclear Helmsman 
------------------------------------ 
 
29.  (U) A helmsman will be required to steer India through 
the critical period of selecting the facilities that will be 
part of the military program and those that will remain on 
the civilian side under safeguards.  M.R. Srinivasan, in an 
Op-Ed in &The Hindu8, 02 August 2005, opines that there is 
a lot of work to be done in India and there are &tough 
negotiations ahead with our international partners.8  In his 
view, these negotiations &cannot be left to diplomats and 
civil servants, and must be entrusted to acknowledged leaders 
in the nuclear field.8 
 
Limited Options for Choice of Leader 
------------------------------------ 
 
30.  (U) According to Balachandran, there is no clear answer 
as to who India might choose to lead the challenging task of 
separating civilian and military nuclear facilities.  The 
internal debate will likely involve the Cabinet Committee on 
Security, the National Security Advisory Board, the Atomic 
Energy Commission, or an ad-hoc body created for the task. 
While a leader will have to emerge to steer the process, in 
Balachandran,s view, there is a shortage of nuclear experts 
who can sort the technological, economic, and political 
implications of decisions that JS implementation requires. 
Entities such as the Institute for Defense Studies and 
Analyses (IDSA) exist to elaborate the security rationale for 
India's strategic programs.  However they lack top leadership 
who can define overarching directions for research and 
analysis. 
 
AEC Chairman Kakodkar Speaks For The Record 
------------------------------------------- 
 
31.  (U) Atomic Energy Commission (AEC) Chairman Anil 
Kakodkar gave an interview for the record to The Hindu which 
appeared on 12 August 2005.  In this interview, Kakodkar, who 
was part of PM Singh's delegation to the US said that: 
-- A massive uranium mining program is already underway at 
Banduhurang and Turamdih in Jharkhand. 
-- DAE is still pursuing the issue of uranium mining at 
Nalgonda with the Andhra Pradesh government and at Domiasiat 
with the Meghalaya government. 
-- India would reach the 10,000 MWe power level generation by 
2012 with no qualification made on the availability of 
natural uranium to fuel the program. 
-- India would determine which facilities are civil and 
military "looking at the national requirements which exist 
from time to time.  India's committed to this three-stage 
program which will continue according to plan." 
-- Growth in civilian nuclear power generation would rely on 
"external inputs as additionalities." 
-- The prototype fast breeder reactor will not come under 
safeguards but "when technology becomes mature, it is a 
different story." 
 
-- Moreover, "any research and development program India has 
will not be put under safeguards and that includes the Indira 
Ghandi Centre for Atomic Research at Kalpakkam." 
-- Decisions on imports of light water reactors will depend 
on the financial package offered by the vendors and by how 
much value addition to the projects can take place in India. 
 
Comment: Skillful Leadership Has Kept the Debate Positive 
--------------------------------------------- ------------ 
 
32.  (C) The President's bold proposal to engage in nuclear 
cooperation with India following a series of phased 
reciprocal actions has engendered a lively public debate 
about the future of civil nuclear energy and the scope of 
India's nuclear weapons program.  The foregoing analysis 
reflects the positive tone of the debate that the leadership 
of PM Singh (Ref. A) has channeled into productive directions 
notwithstanding some efforts to derail it (Ref. C and D).  As 
both sides implement the proposed nuclear agreement, it will 
be crucial to continue to emphasize both publicly and 
privately the intention of each side to implement the 
agreement in a phased, reciprocal manner that will build 
confidence and confound the skeptics. 
 
33.  (C) Our Atomic Energy Regulatory Board (AERB) contacts 
told us that, as an Independence Day gift to the nation, the 
PM, on August 15, will announce that the Tarapur-4 reactor 
will have attained full power connection (540 MWe) to the 
grid.  If, indeed, such an announcement takes place, it will 
be part of the PM's campaign to keep nuclear power very much 
in the public eye. 
 
BLAKE 
 
 
NNNN