CAG Must Evaluate Costs and Risks of the Nuclear Plants India is Importing: Former Power Secretary’s Letter

Dr. E A S Sarma

Former Union Power Secretary, Govt of India

Know more about Dr. Sarma HERE.

To

Shri Rajiv Mehrishi
CAG

Dear Shri Mehrishi,

Please refer to my letter dated 28-2-2020 (enclosed) on the costs, the risks and the safety of nuclear power technology including the ambitious proposal of the Dept of Atomic Energy (DAE) to import both nuclear reactors and uranium fuel from multi-national companies (MNCs) located in USA, France, Russia and so on.

The office of the CAG derives its authority to audit the public expenditure and the performance of the public institutions in pursuance of Article 149 of the Constitution and the laws and regulations made thereunder. The CAG is the Supreme Audit Institution (SAI) of India. At your website, SAI’s “Vision” has been rightly defined as follows.

“The vision of SAI India represents what we aspire to become: We strive to be a global leader and initiator of national and international best practices in public sector auditing and accounting and recognised for independent, credible, balanced and timely reporting on public finance and governance.”

I find that the CAG of India has also been elected as UN Chair for the Panel of External Auditors for the year 2020.

Therefore, CAG is not only expected to audit the public expenditure in India and provide accurate inputs to the Public Accounts Committee (PAC) of the Parliament but also “strive to be a global leader in the field of public sector auditing”. This is indeed an onerous responsibility.

It is in this context that I appeal to you to critically evaluate the costs and the risks involved in the ambitious proposal of DAE to import a large number of nuclear reactors for power generation and also import the uranium fuel required.

In my letter dated 28-2-2020, I had indicated to you my concerns in this context. The procedure adopted by the DAE in the procurement of the reactors and the fuel is totally opaque, making it difficult to discover their market price. In the event of a Fukushima-like accident with huge consequent liabilities, some of which could be attributed to inadequacies in the design of the reactors, as a result of the domestic legislation, the Civil Liability for Nuclear Damage Act of 2010, almost the entire liability will devolve on the DAE/ Govt of India. Such liabilities can dent the Union Budget in a significant manner.

The existing Atomic Energy Regulatory Board (AERB) which is required to regulate DAE’s nuclear facilities is subordinate to that Department, rendering it virtually ineffective. Had the AERB been provided the necessary regulatory independence, it would have been in a position to examine the safety aspects of the imported reactors in a critical manner and inform the Parliament of the same. Though attempts were made soon after the Fukushima accident to create such an independent regulatory authority, for reasons best known to it, the DAE seems to have dropped that proposal midway.

Specifically with reference to the proposed import of EPR nuclear reactors for the Jaitapur project in Maharashtra, two French PSUs, namely, EDF and Areva are the suppliers. These companies are setting up similar projects in France, UK, Finland and other countries. The regulatory counterparts of the AERB in those countries, being independent unlike the AERB itself, have questioned the safety features of the EPR reactors. The relevant regulatory reports have been made available in the public domain. No such disclosures have been made by the AERB.

The nuclear power projects being set up by the EDF in the UK and Finland have undergone significant time and cost overruns, escalating the reactor costs beyond reasonable levels. France’s Court of Audit, similar to the office of the CAG in India, has raised serious concerns on this, as evident from the enclosed news reports. I have extracted below one such news report.

“France’s Court of Audit, the national public auditor, has cast doubt on the future of the Sizewell C a Bradwell B nuclear energy projects in the UK in a critical report of EDF’s projects in the sector.

In its report issued last Thursday, the auditor said the French firm’s Hinkley Point C project “weighs heavily” on its balance sheet, adding that the company, which is 83.6 per cent owned by the French state, is exposed to 63.5 per cent of the project’s risks. EDF ended 2019 with net debts of €41bn (£37bn), €7.7bn (£7bn) worse than a year earlier. The auditor warned that the eventual profitability of the Hinkley project, which has been revised downwards repeatedly since it was signed off, could fall further still.

It also noted that while the Hinkley Point C project benefits from a favourable guaranteed price for the electricity it will eventually produce, this benefit will not extend to subsequent projects due to criticism in the UK from both the National Audit Office and the Public Accounts Committee”.

What is heartening here is that both France’s Court of Audit and the Natonal Audit Office and the Public Accounts Committee of UK have had no hesitation in raising concerns about the UK projects of EDF for the benefit of the public in both the countries!

Considering that your office has a global role to play in the field of auditing and considering the CAG’s vision to be a global leader in auditing, I feel that your office has the obligation to audit DAE’s plans to import nuclear reactors and fuel and apprise the PAC of the risks and the costs involved.

Once again, I appeal to you to subject the import of nuclear reactors by the DAE to the strictest norms of audit.

Regards,

Yours sincerely,

E A S Sarma

Former Secretary to GOI

Visakhapatnam

15-7-2020

Join discussion: leave a comment