The passage of the SHANTI Act in 2025, which permits the private sector to establish and operate nuclear power plants in India, has generated considerable discussion. However, the issue of nuclear energy costs has received less attention.
India’s current nuclear power plants generate electricity competitively, with prices ranging from ₹2.72 to ₹3.87 per kilowatt-hour (kWh). These facilities, however, were constructed several decades ago.
The anticipated cost of new nuclear power plants was highlighted during a recent workshop on the SHANTI Act organized by the Central Electricity Authority. Experts revealed that constructing a pressurized heavy water reactor (PHWR)—of which the Nuclear Power Corporation of India is building 10, each with a capacity of 700 MW—will incur expenses of ₹21 crore per megawatt (MW). When applying the existing pricing formula, which includes a 15.5% return on equity and 2.33% annual depreciation, the resulting tariff is projected at ₹7.77 per kWh. Conversely, a pressurized water reactor is expected to yield a tariff of ₹7.78 per kWh.
The question arises: who will purchase this electricity when renewable energy can be supplied continuously—via batteries or pumped storage—for approximately ₹4 per kWh, with further cost reductions expected?
Discussions during the workshop reflected on this challenge. It was suggested that nuclear power costs could be reduced by 20 paise by lowering the Goods and Services Tax (GST) from 18% to 5%, and by 30 paise through tax elimination—which includes 10 paise for each 1 percentage point decrease in return on investment (ROI) and 15 paise if the normative interest rate is reduced by the same margin. The issue with interest rates complicates matters, as the normative rates are based on a 30-year loan. The absence of such long-term loan options was noted, with the suggested remedy being a refinance or rollover strategy for 30 years, though this would expose projects to uncertainties regarding future interest rates and sustained financing costs. Additionally, operating plants above the normative plant load factor (PLF) of 72.5% could lead to further tariff reductions.
Despite potential avenues for lowering tariffs, nuclear energy remains costly. Furthermore, the indicative tariffs are applicable only in the current context; projects commenced later would see a 10 paise increase in tariffs annually due to normative hikes in operational and maintenance costs. The construction of a nuclear power project requires 13 years.
Another critical aspect involves the expenses associated with nuclear power plants established by the private sector. Historically, the private sector has shown limited engagement in nuclear energy—partly due to the absence of regulatory frameworks. Once these rules are established, private entities may confront market challenges.
Future nuclear projects will rely on imported uranium. To support 50 GW of nuclear power plants, an estimated 6,000 tonnes of uranium will be required annually. Even with the proposed expansion, the Nuclear Fuel Complex in India can only supply about 2,900 tonnes, necessitating reliance on imports to meet the needs of upcoming Nuclear Power Corporation of India (NPCIL) plants. The cost of imported uranium will be subject to fluctuations in global supply, geopolitical dynamics, and exchange rates.
Under the Electricity Act, electricity tariffs are determined either on a cost-plus basis (as outlined in Section 62) or through competitive bidding (as per Section 63). Tariffs for nuclear power plants, however, are set by the Department of Atomic Energy in consultation with the Central Electricity Authority, again based on a cost-plus model. It is challenging to envision these tariffs as competitive against stable renewable energy options.
The landscape becomes even less clear when considering small modular reactors (SMRs), as uncertain cost dynamics complicate projections.
Overall, it remains to be seen if the SHANTI Act will facilitate the development of nuclear power plants capable of elevating India’s nuclear energy capacity from its current 8 GW to 100 GW by 2047.
