Should Nuclear Power Get Green Finance Status? India’s Funding Push Explained

Access to green capital: Nuclear developers want existing financing frameworks to recognise qualifying nuclear projects as eligible low-carbon investments. That could potentially enable them to raise money through green bonds, utilise bank credit linked to green financing, and participate in blended-finance arrangements.

Not a demand for a subsidy alone: The request is broader than asking the government to directly fund reactors. Private developers are concerned about the cost of capital—the interest and expected return that must be paid to lenders and investors over the life of a project.

Three frameworks under focus: The discussion principally concerns the Ministry of Finance’s Sovereign Green Bond Framework, RBI’s green-deposit framework and SEBI-regulated green debt securities.

Infrastructure clarification: Participants have separately sought infrastructure status for nuclear projects. NITI Aayog’s position reported at the event is that nuclear electricity generation is already capable of falling within the Harmonised Master List because “electricity generation” is an infrastructure sub-sector.

Basic meaning: Green finance refers to financial flows directed towards activities that contribute to climate-change mitigation, adaptation, environmental protection or related sustainability objectives.

Green bond: It is a debt instrument in which the proceeds are earmarked for projects satisfying specified environmental eligibility criteria.

Green loan: It is lending whose proceeds are similarly restricted to qualifying green activities or projects.

Green deposit: Under RBI’s framework, a regulated institution accepts an interest-bearing deposit and commits to use its proceeds for specified eligible green activities.

Blended finance: Blended finance combines commercial private capital with public, concessional, development-finance or risk-mitigation resources. The purpose is usually to reduce risks sufficiently to attract investors who would otherwise consider a project too expensive or uncertain.

Why taxonomy matters: Before investors can treat an activity as “green”, there must usually be a classification or eligibility framework. Such a classification system is commonly described as a green or sustainable taxonomy.

Capital-intensive technology: Nuclear plants require very large expenditure before they generate their first unit of electricity. Interest accumulates during the construction period, so financing costs can strongly influence the eventual tariff.

Long gestation: Large reactors require site development, multiple regulatory approvals, specialised equipment, construction, testing and commissioning. A delay of several years can materially raise financing costs.

Long asset life: Once commissioned, however, reactors can operate for decades. The ideal financing instrument is therefore often long-term, relatively stable capital rather than short-maturity commercial credit.

Risk perception: Investors price construction risk, regulatory risk, technology risk, liability risk and political/public-acceptance risk into the interest rate or required return.

Possible effect of green status: Inclusion could broaden the investor base and improve access to specialised sustainable-finance pools. But it does not guarantee cheap finance: investors may retain their own nuclear exclusions and will continue to examine project economics and safety.

Purpose: India introduced its sovereign green-bond framework to mobilise resources for public-sector activities that reduce carbon intensity and advance environmental objectives.

Eligible areas: Its major categories include renewable energy, energy efficiency, clean transport, pollution control, green buildings, sustainable water and waste management, climate adaptation and biodiversity-related activities.

Nuclear exclusion: Nuclear power generation is expressly excluded, along with specified activities such as fossil-fuel projects, direct waste incineration, certain industries, landfill projects and hydropower plants above the prescribed threshold.

Why this matters: Even though nuclear generation has very low operational carbon emissions, the framework was designed with wider environmental and investor-acceptability considerations, not carbon intensity alone.

Institutional mechanism: Eligible government projects are evaluated through a Green Finance Working Committee involving the Ministry of Finance and representatives from relevant ministries and NITI Aayog.

Framework objective: RBI’s Framework for Acceptance of Green Deposits seeks to help banks and specified NBFCs mobilise deposits whose proceeds are used only for green activities while also reducing the danger of “greenwashing”.

Greenwashing: This means representing a financial product, company or project as environmentally sustainable when its actual environmental characteristics do not justify that claim.

Current treatment: Pending a comprehensive official Indian green taxonomy, RBI provided an interim list of eligible activities.

Explicit exclusion: Nuclear power generation appears in RBI’s exclusion list. The framework also excludes fossil-fuel extraction and distribution, direct waste incineration and several other activities.

Implication: A bank can finance a nuclear project through its ordinary balance sheet subject to applicable rules, but it cannot currently label allocation from RBI-framework green deposits to that nuclear project as eligible green finance.

Capital-market regulator: SEBI regulates the issuance and listing of green debt securities by companies and other eligible issuers.

Eligible purpose: The green-debt definition covers activities including renewable and sustainable energy, clean transport, energy efficiency, water management, waste management, sustainable land use and biodiversity conservation.

Disclosure framework: Issuers must explain the environmental objective of the issue, eligibility criteria, use of proceeds, project-selection process and relevant taxonomies or standards. SEBI has also prescribed measures designed to reduce greenwashing.

Nuclear question: Unlike RBI’s green-deposit rules, the relevant SEBI definition does not contain the same simple nuclear-specific exclusion wording in the provision cited above. However, nuclear is also not expressly identified as an eligible category, generating the demand for clearer regulatory treatment.

Policy significance: If India changes only one of the three major frameworks while the others retain uncertainty or exclusion, developers may still face a fragmented green-finance environment.

Low-carbon character: Nuclear reactors produce electricity through fission rather than combustion. They therefore have essentially no direct carbon dioxide emissions from burning fossil fuel during electricity generation.

Life-cycle perspective: Mining, fuel processing, construction and decommissioning do generate emissions. Nevertheless, major scientific assessments have generally placed nuclear among low-life-cycle-emission electricity technologies.

Firm power: Unlike solar and wind, nuclear is not dependent on the immediate availability of sunshine or wind. It can provide large quantities of firm low-carbon power, which becomes increasingly valuable as the share of variable renewable energy rises.

Renewable versus green: Nuclear should not automatically be described as renewable energy. Uranium and other nuclear fuels are finite mineral resources. “Green”, “low-carbon”, “renewable” and “sustainable” are related but legally and technically distinct classifications.

Environmental concerns: A complete sustainability assessment must also consider uranium mining, water requirements, radioactive waste, accident consequences, spent-fuel management and decommissioning.

This explains why the controversy is not resolved simply by observing that reactors have low operational carbon emissions.

Rising electricity demand: Industrialisation, urbanisation, electric mobility, cooling, data centres and greater household consumption will substantially increase electricity requirements.

Energy-transition role: India must simultaneously meet development needs and its net-zero emissions objective. NITI Aayog’s recent long-term energy scenarios identify nuclear power as an important source of reliable low-carbon electricity alongside massive renewable deployment.

Present base: India’s installed commercial nuclear capacity is only 8.78 GW across 24 reactors, contributing roughly 3.1% of national electricity generation.

Long-term target: The Nuclear Energy Mission seeks 100 GW by 2047. This is more than an eleven-fold increase from present capacity.

Complement to renewables: Nuclear can provide round-the-clock generation when solar or wind output is low, reducing the amount of fossil-fuel backup otherwise needed.

Industrial decarbonisation: Small reactors are also being considered for captive industrial power, replacing ageing fossil-fuel plants and supplying process heat or hydrogen in hard-to-abate sectors.

Budget announcement: The Union Budget 2025-26 announced a Nuclear Energy Mission with the long-term objective of achieving 100 GW of nuclear capacity by 2047.

SMR component: The government provided ₹20,000 crore for research, development and deployment of Small Modular Reactors, with the objective of operationalising at least five indigenous SMRs by 2033.

Current designs: BARC is working on a 220-MWe Bharat Small Modular Reactor, a 55-MWe SMR and a high-temperature gas-cooled reactor intended to provide heat that can support hydrogen production.

Why SMRs matter: Small Modular Reactors are smaller nuclear reactors designed with a greater degree of factory manufacture and modular construction than conventional large plants. Their supporters expect this to reduce construction risk and make nuclear power suitable for industrial, brownfield and remote applications.

Qualification: Many advanced SMR designs globally are still at development or demonstration stages. Their final cost advantage over large reactors has therefore not yet been demonstrated universally.

Earlier system: The Atomic Energy Act framework largely reserved ownership and operation of nuclear power plants for government-controlled entities. Private Indian companies played important roles as suppliers and contractors but could not independently become ordinary nuclear-power operators.

New legal framework: The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India Act consolidates and replaces the earlier atomic-energy and nuclear-liability legislative framework and enables wider participation by eligible private entities.

Licensing: Private participation remains tightly regulated. Setting up and operating a nuclear facility requires a licence from the Central Government together with the necessary safety authorisation.

Safety regulator: The law gives statutory recognition to the Atomic Energy Regulatory Board, strengthening the legal basis of nuclear safety regulation.

Strategic activities: Liberalisation does not mean complete privatisation of the nuclear fuel cycle. Sensitive activities involving areas such as high-level spent-fuel management and other strategically reserved nuclear functions remain subject to strong Central control.

Liability: The new framework provides graded operator liability linked to reactor categories while retaining broader national responsibility for nuclear-damage compensation. Liability arrangements are important to lenders because they affect insurance and risk allocation.

Legal opening versus operational opening: This distinction is important. Parliament has enacted the framework allowing wider private participation, but private companies cannot simply begin constructing reactors immediately.

Rules still required: In July, the Department of Atomic Energy told Parliament that rules were still being drafted and that private licence applications would be considered after notification through the prescribed process.

Current consultation: DAE has now released draft SHANTI Rules and Regulations for public consultation. Comments are being accepted until 4 September 2026.

UPSC takeaway: India has therefore opened the sector legally in principle, while operationalisation depends on subordinate legislation, licensing procedures and detailed regulatory standards.

First stage: Projects already under implementation are intended to raise capacity to roughly 22 GW by 2031-32.

NPCIL contribution: The government’s roadmap envisages NPCIL eventually reaching around 54 GW by 2047 through indigenous PHWRs and other reactor technologies.

New participants: The remaining approximately 46 GW is expected to come from other Central or State public enterprises, State Governments, joint ventures and private entities using different business models.

Fleet-mode construction: Standardised reactor designs—particularly India’s indigenous 700-MWe PHWR programme—can reduce repeated design work, improve supply chains and potentially shorten construction schedules.

New sites: Expansion on this scale requires land, cooling-water availability, evacuation infrastructure, environmental clearance, local acceptance and regulatory capacity at many more locations.

Human resources: The consultation also highlighted shortages of trained nuclear engineers, safety professionals, operators, welders and specialised manufacturing personnel. Financing alone cannot solve this capacity constraint.

Harmonised Master List: The Department of Economic Affairs maintains the Harmonised Master List of Infrastructure Sub-sectors. It includes electricity generation under the energy category.

Financing advantage: Infrastructure classification can improve access to longer-tenor lending, external commercial borrowings, insurance and pension capital and specialised infrastructure financing channels. DEA itself notes these financing benefits for sectors included in the list.

Current dispute: According to NITI Aayog’s view reported at the consultation, nuclear electricity generation already falls within the general electricity-generation category.

Why clarification may still help: Lenders often prefer explicit regulatory certainty for highly specialised projects. A formal clarification could reduce doubts over whether every infrastructure financing concession applicable to power generation extends to privately developed nuclear assets.

Large upfront expenditure: Nuclear plants incur much of their total expenditure years before commercial electricity sales begin.

Interest during construction: If a project costs ₹1 lakh crore and takes many years to complete, even a seemingly small difference in annual financing cost compounds substantially.

Construction-risk premium: Investors demand higher returns where there is a risk of delays, regulatory redesign, legal disputes or cost overruns.

Long-term revenue: Nuclear plants can operate for decades after commissioning, so their economics improve if the initial capital is financed through affordable long-term debt.

Green-finance argument: Industry therefore sees sustainable-finance pools as one method of reducing financing costs and matching long-duration assets with long-duration capital.

But no guarantee: A green label will not compensate for an economically weak project. Reactor standardisation, execution discipline, assured offtake and regulatory certainty remain essential.

Not necessarily: The price of nuclear electricity depends on construction cost, financing cost, capacity utilisation, fuel cost, maintenance, insurance, decommissioning provisions, waste-management liabilities and project delays.

Possible “greenium”: Some green securities can obtain slightly more favourable borrowing terms when demand from ESG investors is strong. This pricing benefit is often called a greenium.

Investor exclusions: Some ESG funds independently exclude nuclear power regardless of government classification. Those investors would not automatically buy Indian nuclear green bonds even if regulations changed.

Bankability first: The strongest route to cheaper finance is therefore a combination of green eligibility, predictable regulation, credible safety institutions, standardised reactor designs and strong project execution.

World Bank: In 2025, the World Bank Group and IAEA formalised cooperation on nuclear energy, marking the Bank’s first concrete re-engagement with nuclear power in decades. Its focus includes regulatory capacity, safe lifetime extension of existing plants and development of SMRs.

ADB: The Asian Development Bank amended its energy policy in November 2025, removing its previous prohibition on financing nuclear investment. Support is subject to rigorous economic, institutional, safety, security and environmental assessment and alignment with IAEA requirements.

Why it matters for India: Multilateral participation can provide not just money but project due diligence, risk-sharing, technical standards and confidence to other institutional investors.

Global trend: These changes strengthen the argument that nuclear power is increasingly being considered within low-carbon finance, though they do not mean that international institutions regard every nuclear project as automatically sustainable.

Conditional inclusion: The European Union included certain nuclear activities within its taxonomy under its Complementary Climate Delegated Act, applicable from 2023.

Not blanket “green” approval: Eligible nuclear activities are subject to stringent technical screening, nuclear-safety, radioactive-waste, decommissioning and disclosure conditions.

Transitional character: Certain activities are recognised as transitional—capable of supporting movement toward climate neutrality where specified criteria are satisfied.

Important lesson for India: The EU model demonstrates a middle path between complete exclusion and unrestricted eligibility.

India could similarly decide that nuclear finance qualifies only where a project satisfies a clearly defined Do No Significant Harm-type standard covering safety, waste, water, decommissioning and environmental obligations.

Climate mitigation: Nuclear power generates low-carbon electricity and can displace coal-based generation.

Grid reliability: Firm nuclear generation complements variable solar and wind, particularly during periods of low renewable output.

Energy security: Diversifying India’s power system reduces dependence on a single energy source and may improve resilience.

Industrial decarbonisation: Nuclear and SMRs may provide reliable electricity and process heat for steel, aluminium, chemicals, hydrogen and other energy-intensive activities.

Financing requirement: Achieving 100 GW will require investment far beyond what traditional public-sector financing alone is likely to provide.

Level playing field: Supporters argue that if sustainable finance is intended to reduce emissions, excluding a low-carbon source purely because it is nuclear may distort technology-neutral investment decisions.

Global precedent: World Bank and ADB policy changes and conditional EU taxonomy treatment indicate growing institutional acceptance of nuclear as part of the low-carbon transition.

Radioactive waste: High-level radioactive materials require isolation, monitoring and long-term institutional stewardship. India follows treatment, vitrification and controlled storage systems, but long-duration waste management remains a major sustainability consideration.

Accident risk: Severe nuclear accidents are rare but can have extremely high social, environmental and economic consequences.

Decommissioning: Reactors must eventually be dismantled and radioactive components safely managed. Provisioning for these costs must begin during operation rather than being passed to future taxpayers.

Water stress: Large reactors can require significant quantities of cooling water, making site selection and climate resilience important.

Uranium mining: Low-carbon generation at the plant does not remove the environmental effects associated with mining and fuel-cycle activities.

Greenwashing risk: If nuclear were included without strong conditions, investors might argue that India had weakened its green taxonomy merely to mobilise cheaper capital.

Opportunity cost: Public guarantees or concessional finance used for expensive nuclear projects cannot simultaneously be used for grids, renewables, storage, energy efficiency or other climate investments.

Long project timelines: Nuclear investment does not necessarily provide the fastest emissions reduction per rupee in every location. Technology choice must therefore depend on system needs rather than ideology.

Resource rationale: India has historically pursued a three-stage nuclear programme because domestic high-grade uranium resources are relatively constrained while the country has significant thorium resources.

Three stages: The broad strategy moves from uranium-fuelled Pressurised Heavy Water Reactors to fast breeder reactors and ultimately toward greater utilisation of thorium-derived fuel.

Energy security: Thorium is therefore strategically important to reducing very long-term dependence on imported uranium.

Current limitation: Thorium does not provide an immediate substitute for the uranium requirements of India’s planned near-term reactor expansion. Commercial thorium fuel cycles require complex breeding, fuel fabrication and reprocessing technologies.

Recent government position: DAE continues to identify India’s three-stage programme and development of thorium capabilities as important to long-term nuclear sustainability.

Project preparation: Sites should be identified and prepared before expensive construction contracts are committed.

Standardisation: Repeated construction of proven designs can create fleet-level economies in procurement, licensing and workforce training.

Regulatory capacity: A much larger nuclear fleet requires a proportionately larger pool of independent inspectors, safety analysts and technical experts.

Supply chains: Heavy engineering, forgings, pumps, pressure vessels, control systems, specialised construction and nuclear-grade materials need long-term order visibility.

Human capital: Universities, ITIs, engineering institutes, utilities and manufacturers need structured nuclear training programmes.

Fuel security: Uranium procurement, enrichment where relevant, domestic fuel fabrication and the long-term thorium programme need to expand with reactor capacity.

Public acceptance: Local communities require credible safety information, transparent environmental assessment, emergency planning and fair rehabilitation and benefit-sharing.

Grid integration: Even firm nuclear generation must operate within an electricity system increasingly dominated by flexible renewables, storage and responsive demand.

Economy and infrastructure: The issue links infrastructure financing, long-term debt markets, green bonds, capital costs and private-sector participation.

Science and technology: It involves reactor technology, SMRs, PHWRs, nuclear fuel cycles and thorium.

Environment: Aspirants must understand the distinction between renewable, low-carbon and environmentally sustainable energy.

Governance: The SHANTI framework raises questions concerning regulatory independence, liability, licensing, transparency and private participation in a strategic sector.

Energy security: The issue connects India’s growing electricity demand, fossil-fuel dependence and diversification of the power mix.

Create a science-based sustainable taxonomy: India should evaluate nuclear power on lifecycle emissions, safety, waste management, water requirements and environmental impacts rather than treating “green” and “renewable” as interchangeable concepts.

Prefer conditional rather than blanket inclusion: If nuclear is admitted to green-finance frameworks, eligibility should depend on measurable technical screening criteria concerning safety, radioactive-waste management, decommissioning provisioning, environmental clearance and regulatory compliance.

Harmonise the three financing frameworks: The Ministry of Finance, RBI and SEBI should avoid contradictory definitions that create regulatory arbitrage. A common or mutually recognised green taxonomy would give investors greater certainty.

Protect taxonomy credibility: Projects receiving a green label should undergo independent verification, regular disclosure and impact reporting. This is important because a credible taxonomy is itself a national financial asset.

Separate infrastructure status from green status: Nuclear power can be infrastructure because it is electricity generation without necessarily being automatically classified as environmentally sustainable. The two policy questions should be assessed independently.

Operationalise the SHANTI framework carefully: Final rules should clearly allocate responsibilities among the Central Government, AERB, operators, suppliers and financiers while ensuring that commercial pressure cannot dilute safety standards.

Reduce construction risk before reducing financing cost: Standardised reactor fleets, predictable approvals, prepared sites, skilled manpower and mature supply chains will do more to improve project bankability than financial reclassification alone.

Develop long-tenor financing instruments: Nuclear plants are long-lived assets. Infrastructure debt funds, institutional investors, development-finance institutions and appropriate credit-enhancement mechanisms can help align financing maturity with asset life.

Expand SMRs through demonstration first: Public support should initially focus on proving indigenous designs, construction schedules, safety and cost performance before assuming mass commercial deployment.

Strengthen human-capital capacity: Universities, technical institutes, AERB, DAE facilities and the private sector need a coordinated workforce programme covering reactor engineering, radiation protection, construction, quality assurance and waste management.

Preserve public accountability: Private participation should be accompanied by transparent safety reporting, environmental monitoring, emergency-preparedness systems and meaningful engagement with host communities.

Retain a diversified energy strategy: Nuclear power should complement—not displace—India’s expansion of solar, wind, hydropower, storage, transmission, efficiency and demand-side management. The objective should be an affordable, reliable and low-carbon electricity system rather than promotion of any single technology.