India's Nuclear Ambition: FDI Needed Amid Costly Expansion Hurdles

The Investment Push and Policy Overhaul

India's nuclear power sector is set for a major shift with the new SHANTI Act, 2025. This law aims to end the long-standing state monopoly and encourage private and foreign direct investment (FDI) to reach the ambitious goal of 100 gigawatts (GW) of nuclear capacity by 2047. Key changes include revised liability rules, particularly easing supplier liability. This is intended to reassure international vendors who previously cited unlimited risk exposure as a concern. Seema Jain, Member (Finance) at the Department of Atomic Energy (DAE), confirmed the Atomic Energy Commission has approved an FDI policy. This policy is now under inter-ministerial review to help raise the estimated ₹20 lakh crore required for expansion, a figure that a power ministry committee projects could reach around $217 billion.

Technological Diversification and Cost Concerns

A key strategic goal is developing domestic Light Water Reactor (LWR) technology. While India is proficient in Pressurised Heavy Water Reactor (PHWR) and Fast Breeder Reactor (FBR) designs, LWRs are the standard globally. Building local LWR expertise is vital for India to join global supply chains, strengthen its position with foreign suppliers, and boost export potential. However, this technological shift brings significant economic challenges. Older nuclear plants in India currently generate electricity at tariffs between 272 to 387 paisa per unit. New plants, especially LWRs, are projected to have tariffs between 5.50 to 6.50 paisa per unit. These figures, along with high upfront costs, mean new nuclear power is expected to be far more expensive than existing nuclear capacity and often more costly than alternatives. For example, the levelized cost of electricity for Pressurized Water Reactors (PWRs) is estimated at ₹6-6.60 per kWh, significantly higher than solar power's ₹3 per kWh. Globally, nuclear power can be competitive with a 3% discount rate, but its economic viability drops sharply at higher rates typical for infrastructure projects, facing strong competition from falling renewable energy prices.

Long Project Timelines

Project execution timelines add to the financial hurdles. The complete process, from getting regulatory approvals to finishing a project, currently takes about 13 years. While the government hopes to shorten this to 8-9 years, international benchmarks show construction alone can last 11-12 years. Projects often face delays due to evolving designs and regulatory requirements. Even when using standardized designs for faster building, initial execution remains slow. These long development times and the associated risks make raising capital difficult, particularly as government funds are needed for other sectors.

Key Challenges Remain

Despite the SHANTI Act's legislative progress, significant risks challenge India's nuclear expansion plans. The main issue is the large cost difference between new and existing nuclear power generation. New plants, especially LWRs, are expected to have electricity tariffs much higher than older facilities, making them costlier than coal and considerably more expensive than solar power based on levelized cost of energy. While the Act aims to attract FDI, private sector interest appears subdued. This is likely due to the inherent economic difficulties and the massive upfront capital required, which might demand long-term power purchase agreements or viability gap funding. Additionally, weakening supplier liability, though intended to attract foreign companies, has drawn criticism for potentially reducing accountability and transferring catastrophic risk to taxpayers. India's Atomic Energy Regulatory Board (AERB) operates under the Department of Atomic Energy (DAE), leading to questions about its independence in overseeing both government and private sector operations, a crucial factor for investor trust. Countries like China and South Korea have shown more consistent cost control in their nuclear projects, often benefiting from standardized, serial construction and government backing. In contrast, India's LWR development is in its early stages, facing hurdles with technology access, intellectual property, and limited domestic experience. The ambitious target of 100 GW by 2047, estimated to cost ₹20 lakh crore, appears highly optimistic given these ongoing economic and execution challenges. The average capital cost of India's 700 MW PHWRs is estimated at $2 million per MW, which is low globally, but this figure does not reflect the higher costs associated with new LWR technologies. Achieving this capacity target faces the risk that proposed policy changes may not fully counteract the key economic drawbacks of new nuclear builds in today's changing energy market.

Future Outlook

India's nuclear expansion success depends on bridging the wide economic gap between current and future electricity generation costs. While the SHANTI Act offers a legal structure, effective implementation needs new financing methods, strong cost-cutting efforts, and a smoother regulatory process to cut down long project timelines. The government's goal to shorten approval times from 13 to 8-9 years is positive, but further improvements are essential. The high projected costs for new plants remain a major obstacle, indicating that private sector involvement will probably depend heavily on government support or long-term power purchase deals to reduce investment risk. Analysts generally view India's clean energy efforts positively but often point out the high capital needs and long payback periods for nuclear projects. The sector's capacity to draw in the required private and foreign investment will determine if these ambitious targets are realistic or just wishes.