Dr. E A S Sarma

Former Union Power Secretary, Govt of India

Know more about Dr. Sarma HERE.

Lack of transparency and safety in nuke energy may cost Rs3.90 lakh crore

[Moneylife.com]

EAS Sarma, former power and finance secretary, fears for safety of nuclear energy because he feels the Department of Atomic Energy that is planning for 60,000 MW has not been transparent and it would eventually cost Rs3.90 lakh crore to Indian taxpayers!EAS Sarma, former secretary of the government of India (GoI), fears that the Department of Atomic Energy’s (DAE) ambitious program to build several nuclear reactors in the country will come at a price of safety. He believes that the DAE, along with the Nuclear Power Corporation of India (NPCIL), has indulged in impropriety in its dealings with multinationals companies (MNCs) who are assisting DAE in building reactors. By adopting single-vendor purchases from different MNCs, the Indian taxpayer could be forced to pay the price dictated by the MNCs which could run into as much as Rs3.90 lakh crore, he claimed.

Mr Sarma, in a letter to the prime minister, says: “Procurement of reactors through single-vendor purchases precludes accurate price discovery. In the case of imported nuclear reactors, the problem is severely compounded by the fact that India is then compelled to buy not only the reactors but also the accompanying fuel, the price of which is in itself open-ended and is further subject to escalation beyond India’s control. In a competitive bidding procedure, India would have been in an eminent position to set down the specifications of the reactors, their threshold safety features and the parameters that could regulate the price escalations in a transparent manner. By resorting to non-transparent, single-vendor procurement of imported nuclear reactors and the accompanying fuel, I feel that DAE and NPCIL have openly flouted the General Financial Rules (GFRs), in particular GFR 137 and the guidelines issued by the CVC.”

A competitive bidding system as opposed to a single-vendor purchase would mean pricediscovery and reduced prices as MNCs (as well as locals) would vie for prestigious contracts. Furthermore, a competitive bidding system would ensure that norms are strictly adhered to on the basis of competence and past track record. This would ensure pre-qualification of certain vendors who are capable of building nuclear reactors that complies with the highest safety and quality protocols.

Further more, under GFRs, it states: “every authority delegated with the financial powers of procuring goods in public interest shall have the responsibility and accountability to bring efficiency, economy, transparency in matters relating to public procurement and for fair and equitable treatment of suppliers and promotion of competition in public procurement”.

EAS Sarma had pointed out in his letter to the PM that the DAE and NPCIL have not complied with the said regulation and therefore demanded an investigation be made to bring about forth in their dealings with MNCs in a transparent manner. He has also called for independent audits by the CAG (Comptroller and Auditor General of India) as well as the Central Vigilance Commission (CVC) to investigate possible vigilant angle in DAE and NPCIL dealings with multinationals.

Earlier, even the CAG had come down heavily on the nuclear establishment, especially on its regulator, Atomic Energy Regulatory Board (AERB), and some startling facts were discovered. Apparently, the CAG has found several deficiencies in the way AERB is operated, with hardly any tooth, and which could even affect nuclear plant workers. We had written about this earlier over here: Widespread support for CAG findings on nuclear technology from activists

This is not the first time that Mr Sarma had written to the PM. On 17 December 2011, he had written to PM about the civil nuclear liability law. He had stated: “DAE’s latest move to enact the rules under the civil liability law went beyond the ambit of the law itself, placing an artificial limit on the time span beyond which the operating company could pass on the liability of an accident to the reactor supplier. In other words, if a Fukushima-like accident takes place during the life cycle of a reactor, say, after five or ten years of its installation, the Indian operator cannot pass on the liability to the reactor supplier, thereby shifting the burden to the Indian taxpayer.”

The DAE’s ambitions to set up as 60,000 MW of nuclear power is so mindboggling that it could predate strict safety and compliance standards required to ensure that nuclear plants do not leak or meltdown. Since DAE and NPCIL will have to import reactors and fuels from one vendor, Indian taxpayers could be asked to fork over as much as Rs3.90 lakh crore towards nuclear power alone! By bending backwards to MNC pressure vis-à-vis single vendor agreement, there could be chance that reactor design may compromise safety standards, especially post Fukushima nuclear fallout in Japan after the tsunami.

E.A.S.Sarma
14-40-4/1 Gokhale Road
Maharanipeta
Visakhapatnam 530002
Email: [email protected]

To
Dr. Manmohan Singh
Prime Minister

Dear Dr. Manmohan Singh,

Subject:- Impropriety in the purchase of imported nuclear reactors and the huge cost to the Indian tax payer- Demand for an investigation

  • My letters dated 17-12-2011 and 6-5-12 addressed to you
  • My letter dated 14-2-2013 addressed to C&AG
  • My article, “Weaken the regulator; compromise safety- The case of nuclear technology in India” published on DiaNuke.org on 24-8-2012
  • DAE’s statement on the high cost of imported reactors reported by Times of India on 1-5-2012
  • Economic Times report dated 19-3-2013 quoting US administration officials hailing non-transparency in India’s nuclear reactor purchases

I refer to my two letters 1st cited addressed to you and my letter 2nd cited addressed to C&AG on the non-transparent manner in which DAE is purchasing imported nuclear reactors and the incremental cost burden for the Indian tax payer. My article 3rd cited and DAE’s own statement 4th cited corroborate my concerns.

There are serious safety concerns about the indiscriminate nuclear power development programme taken up by DAE/ NPCIL, especially keeping in view the post-Fukushima perception of that technology. It is imprudent on the part of the government to allow DAE to proceed with its plans to add 60,000 Mwe to nuclear power generation, as planned.

Subject to the above, I wish to caution DAE on the serious improprieties involved in the way NPCIL has gone about placing orders for imported reactors.

Being a PSU, under Article 12 of the Constitution, NPCIL should be deemed to be an arm of the government. NPCIL is therefore bound by the financial norms laid down for all equipment purchases within the ambit of the government. The General Financial Rules (GFR), 2005 are applicable to all such purchases. CVC has also issued clear guidelines in conformity with these GFRs.

Under Rule 136 of GFR, any industrial plant, including a nuclear reactor, comes within the definition of “Goods”. Rule 137 has laid down the fundamental principles of public buying of goods and services. This Rule requires that “every authority delegated with the financial powers of procuring

goods in public interest shall have the responsibility and accountability to bring efficiency, economy, transparency in matters relating to public procurement and for fair and equitable treatment of suppliers and promotion of competition in public procurement”.

I am afraid that DAE/ NPCIL have not complied with this requirement, as they have placed orders on foreign companies without adopting transparent, competitive bidding procedures.

Procurement of reactors through single-vendor purchases precludes accurate price discovery. In the case of imported nuclear reactors, the problem is severely compounded by the fact that India is then compelled to buy not only the reactors but also the accompanying fuel, the price of which is in itself open-ended and is further subject to open-ended escalation beyond India’s control. In a competitive bidding procedure, India would have been in an eminent position to set down the specifications of the reactors, their threshold safety features and the parameters that could regulate the price escalations in a transparent manner. By resorting to non-transparent, single-vendor procurement of imported nuclear reactors and the accompanying fuel, I feel that DAE and NPCIL have openly flouted the GFRs ( in particular, GFR 137) and the guidelines issued by CVC.

Non-competitive procurement of imported nuclear reactors is not in the public interest for several reasons. It certainly creates an enormous space for outright corruption and quid pro quos at the cost of both price and quality. It can compromise the safety of the reactors. The argument that the reactor design will be subject to scrutiny by AERB does not hold water as, in its present set up and as envisaged by the new law proposed by DAE, the regulator is subject to control by DAE.

This problem has got compounded by the liberal, one-sided civil nuclear liability law and rules enacted by the government under pressure from the very same MNCs from whom the reactors are being bought.

Considering that DAE has indicated a capacity addition of the order of 60,000MWe, the apparent cost differential that will burden the domestic tax payer can be mind boggling. On the basis of DAE’s own admission reported in the reference 4th cited, the burden will be around Rs.3,90,000 crores, not taking into account the additional costs arising from imported fuel and the contingent liabilities resulting from Fukushima-like accidents.

In the emerging global nuclear market, India is perhaps the only country that has chosen to adopt such a highly non-transparent procurement procedure to the advantage of the MNCs! I cite below the statements reported to have been made unwittingly by Vijay K Sazawal, a recently appointed advisor to the Obama administration (see report 5th cited).

“It (India) is possibly the only nuclear market where vendors will not be asked to compete against each other to provide the lowest bid. Each vendor works with the customer (NPCIL) using a win-win approach for success”

“Indians can be reasonable in settling bilateral disputes and issues of contention. But the process may involve a higher degree of flexibility and ingenuity than what a vendor has experienced elsewhere…………It is advisable to invest in local businesses and learn from local entrepreneurs who deal with India’s cumbersome bureaucracy and legal system, and still make good money along the way”

In other words, the parent countries from where India is importing the reactors are jubilant, for good reasons, that DAE, for reasons best known to it, has chosen to deviate from the well established transparent competitive bidding procedure adopted by the other countries and, instead, opted in favour of a bidding approach to suit the interests of the MNCs! This certainly calls for a national debate, an independent probe and a special audit by C&AG.

Corruption has assumed serious proportions internationally. No wonder that the United Nations (UN), concerned at the scourge of corruption, adopted the global “Convention against Corruption” on 31-10-2003. The Convention became operational w.e.f. 14-12-2005. India ratified the Convention on 9-5-2011. Article 9 of the Convention deals with “public procurement and management of public finances”. Clause 1 of this Article reads as follows.

“Each State Party shall, in accordance with the fundamental principles

of its legal system, take the necessary steps to establish appropriate systems of

procurement, based on transparency, competition and objective criteria in

decision-making, that are effective, inter alia, in preventing corruption. Such

systems, which may take into account appropriate threshold values in their

application, shall address, inter alia

  • (a)The public distribution of information relating to procurement procedures and contracts, including information on invitations to tender and relevant or pertinent information on the award of contracts, allowing potential tenderers sufficient time to prepare and submit their tenders;
  • (b) The establishment, in advance, of conditions for participation, including selection and award criteria and tendering rules, and their publication;
  • (c) The use of objective and predetermined criteria for public procurement decisions, in order to facilitate the subsequent verification of the correct application of the rules or procedures;
  • (d) An effective system of domestic review, including an effective system of appeal, to ensure legal recourse and remedies in the event that the rules or procedures established pursuant to this paragraph are not followed;”

Since India has ratified this Convention, Articles 73(1)(b) and 253 mandate the executive’s compliance with it, apart from the fact that the Convention rightly mandates something that India ought to do on its own in order to promote the public interest.

I am afraid, Mr. Prime Minister, that DAE has proceeded in this matter in a way that is in total conflict with the well established rules of propriety and prudence. Any responsible government would question it and order a thorough probe. Especially against the background of several scams that have unfolded in the recent times, I would sincerely appeal to you to treat this as a matter of urgency and order an investigation by an independent agency. Pending the investigation, you should direct DAE not to go ahead with its plans to import reactors on a nomination basis.

I am marking copies of this correspondence to C&AG and CVC to ponder over what I have said and proceed objectively, keeping in view the overarching public interest.

Regards,

Yours sincerely,
E.A.S.Sarma
Former Secretary to GOI
Visakhapatnam
21-3-2013