As per NITI Aayog’s estimates, India will need $250bn to reach 100GW of nuclear capacity by 2047. But climate finance has already been a challenge. Given the policy uncertainty around India’s Nuclear Mission, how are we planning to fund nuclear projects?
India’s renewable energy sector has witnessed phenomenal growth over the past decade, with the installed generation capacity tripling and positioning the country as the fourth largest globally. This remarkable progress has been enabled by a favourable policy environment and the active participation of both public and private sector developers and financiers such as PFC. Over the years, PFC has significantly scaled up its financing of clean and renewable energy projects, including hydro, solar, wind, hybrid and energy storage, emerging as the largest clean-energy financier in India, with loan assets exceeding ₹85,000 crore.
Looking ahead, India’s nuclear energy ambitions are equally transformative, targeting an expansion of installed capacity from the current 8GW to 100GW by 2047. At present, only government-owned entities are permitted to establish nuclear power plants, with NPCIL [Nuclear Power Corporation of India] being the primary developer and NTPC [National Thermal Power Corporation] recently entering the space. The government is considering amendments to key legislations to allow private sector participation in nuclear power. Such reforms are expected to accelerate capacity addition, reduce costs and drive technological innovation.
PFC is committed to playing a pivotal role in financing India’s nuclear power mission. Even today, we can finance conventional nuclear power plants based on proven technology. We have in the past supported NPCIL through the sanction of a term loan for Kakrapar Atomic Power Station Units 3 and 4. We are well positioned to handle the long-term funding requirements of such projects with higher exposure. As the sector opens up to new players and technologies, we remain committed to financing techno-commercially viable projects in both the government and private sectors.
Given the high upfront cost requirement of SMRs, what kind of financing mechanisms will play a major role? Will blended mechanisms such as sovereign guarantees or viability gap funding help reduce investor risk and attract private capital? Also, what are PFC’s plans to finance SMR projects?
Any new technology, during its initial phase of adoption, tends to be expensive and requires government support to enhance its commercial viability. The government has historically played a proactive role in enabling such transitions by introducing policy measures to reduce costs and ensure the marketability of end products, with solar PV [photovoltaic] power generation and battery energy-storage systems being successful examples.
SMRs are still at a nascent stage, with multiple designs and concepts under development across the globe. Achieving cost competitiveness remains a major challenge, which can only be addressed through sustained R&D, establishment of robust supply chains and scaling up of manufacturing to bring down unit costs. Recognising this, the government has allocated ₹20,000 crore in the Union Budget 2025–26 specifically for R&D in SMRs. To improve the financial viability of early-stage SMR projects, measures such as viability gap funding, subsidised loans and assured offtake arrangements will play a crucial role.
PFC has consistently extended financing to commercially viable projects in emerging sectors. In the case of SMRs as well, we remain open to supporting projects that meet our internal eligibility criteria.
Since SMRs are still at a nascent stage in India, what kind of risk coverage mechanisms would be necessary before investors can extend large-scale financing?
From a lender’s perspective, any project must be technically robust and commercially viable. It should have a financially strong promoter with demonstrated capability in executing large infrastructure projects. Given the high gestation period of such projects and the associated risks of time and cost overruns, the promoter must have the financial capacity and experience to infuse additional funds if required. The technology must be proven and backed by firm contractual arrangements for project implementation with credible and experienced counterparts.
Regulatory readiness is another essential requirement, including all requisite clearances and firm tie-ups for critical project inputs such as fuel supply, O&M arrangements and mechanisms for spent fuel storage and disposal. Long-term power offtake agreements are equally vital to ensure stable revenue visibility over the project life cycle.
To de-risk SMR projects, several measures can be considered. Independent technical appraisal of projects, technology and vendors by a sector specialist such as the AERB [Atomic Energy Regulatory Board] or another designated government agency would be important. Targeted financial interventions like viability gap funding, concessional financing or other cost-reduction mechanisms could also help. A single-window clearance mechanism would expedite approvals and facilitate access to project inputs. Mandated power purchase obligations for utilities would ensure assured long-term offtake, providing lenders and investors greater comfort.
31 October 2025
Get the latest issue of Outlook Business
Currently, nuclear projects under NPCIL are financed through 70% debt and 30% equity, with no government grants. In your view, would this same model be viable for SMRs?
In my view, the debt-to-equity ratio should not be assessed in isolation but rather in the context of the overall project structure. That said, a 70:30 gearing is generally considered appropriate for infrastructure projects, as it balances large capital requirements with a reasonable equity stake from the project developer. Likewise, government grants should be assessed holistically, alongside other forms of support such as concessional financing and mandated procurement obligations.
