SHANTI Act Set to Lower Capital Costs for India’s Nuclear Power Projects

New Delhi: India’s nuclear energy sector is poised for a major transformation with the introduction of the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act. According to a recent analysis by BMI, a unit of Fitch Solutions, the new legislation could significantly reduce the cost of capital for nuclear power projects, unlocking fresh investment and accelerating capacity expansion in the coming decade.

Why the SHANTI Act Matters

For decades, India’s nuclear power industry has largely remained state-led, dominated by indigenous Pressurised Heavy Water Reactors (PHWRs) and funded under cost-plus tariff models. While this approach ensured energy security and technological self-reliance, it also resulted in higher financing costs, limited private participation, and slower capacity addition compared to nuclear markets in countries like the US, UK, and France.

The SHANTI Act seeks to address these structural challenges by reducing project risks, particularly those linked to liability exposure, ownership models, and technology selection.

Lower Liability Risk, Lower Capital Costs

One of the most critical provisions of the SHANTI Act is the rationalisation of liability caps for nuclear suppliers and plant operators. Historically, India’s strict nuclear liability framework raised concerns among global reactor suppliers and investors, who demanded a higher risk premium to compensate for potential legal exposure.

According to BMI, these liability caps will reduce perceived project risk, directly lowering the weighted average cost of capital (WACC) for nuclear projects. Lower capital costs can make nuclear power more competitive with renewables and thermal energy, especially for large baseload requirements.

Diversification Beyond PHWR Technology

The report highlights that the SHANTI Act encourages technological diversification, moving beyond an exclusive reliance on PHWRs. The legislation opens the door for:

• Light Water Reactors (LWRs) commonly used globally
• Small Modular Reactors (SMRs), which offer lower upfront costs, modular construction, and faster deployment

This diversification is expected to attract foreign technology providers, improve construction efficiency, and enable scalable nuclear deployment across different regions of India.

Boost for Foreign Investment and Partnerships

With clearer liability norms and flexible ownership structures, India’s nuclear sector could finally witness meaningful foreign participation. BMI expects stronger interest from international reactor suppliers, engineering firms, and institutional investors, who had earlier stayed cautious due to regulatory uncertainties.

New ownership and financing models—such as public-private partnerships (PPPs) or joint ventures—could emerge, reducing the financial burden on the government while improving project execution timelines.

Addressing India’s High Financing Costs

India traditionally faces higher nominal financing costs than advanced economies due to elevated interest rates and country-specific risk factors. Nuclear projects, being capital-intensive with long gestation periods, are particularly sensitive to these costs.

BMI notes that by lowering policy and liability risks, the SHANTI Act can compress risk premia demanded by investors, bringing India’s nuclear financing conditions closer to international benchmarks. This is crucial if nuclear power is to play a larger role in India’s clean energy transition.

Nuclear Energy and India’s Clean Energy Goals

As India targets net-zero emissions by 2070, nuclear energy is increasingly viewed as a reliable complement to renewable sources like solar and wind. Unlike renewables, nuclear power provides stable, round-the-clock electricity, supporting grid stability and industrial demand.

The SHANTI Act aligns nuclear policy with India’s broader climate and energy security objectives, positioning nuclear power as a long-term pillar of the country’s low-carbon strategy.

Challenges Remain

While the SHANTI Act is a significant reform, execution will be key. Land acquisition, public perception, regulatory capacity, and supply-chain readiness remain challenges. Moreover, global nuclear projects have often faced cost overruns and delays, underscoring the need for strong project governance.

However, analysts believe that the Act sends a strong policy signal to markets and investors that India is serious about reforming its nuclear ecosystem.

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