* Police clear protest site, workers return
* Government wants to increase nuclear generation
By S. Murari
CHENNAI, India, March 20 (Reuters) - Work to start up a large nuclear power plant on the southern tip on India resumed on Tuesday after police arrested dozens of protesters who had blocked access to the site for months, in a breakthrough for the power-short emerging economy.
The Kudankulam project will initially provide 2 gigawatts of electricity - enough to power 20 million Indian homes.
Twenty-four years in the making, the Russian-built plant was supposed to be switched on last year, but protesters surrounded it after the nuclear accident in Japan.
India suffers from a peak-hour power deficit of about 12 percent, slowing the economy and causing blackouts in much of the country. About 40 percent of Indians, or 500 million people, lack electricity.
When the plant reaches full capacity - in about six months if there are no more delays - it will be a victory for the government of Prime Minister Manmohan Singh, who has been under fire from the private sector over the country's power crisis.
The government of Tamil Nadu, the southern state where Kudankulam is located, dropped its support for the protests on Monday and gave a green light for the project to be completed.
"Immediate steps will be taken for the speedy commissioning of the nuclear power plant at Kudankulam," Tamil Nadu Chief Minister Jayalalitha said.
Project director Kasinath Balaji told Reuters the 1,000-strong workforce began shifts on Tuesday.
Jayalalitha said local people had nothing to fear from the power station, and promised a $100 million budget for developing infrastructure near the coastal plant. Police secured the roads around the protest site and stopped fishing boats sailing in, arresting about a hundred people.
India plans to add 63 gigawatts of nuclear power by building 30 reactors by 2032. Nuclear accounts for less than 3 percent of total capacity, and protests have slowed progress at other projects.
Atomic energy will become increasingly important as India struggles to meet growing demand. Environmental and land use restrictions mean thermal power producers are having difficulty securing coal, which accounts for 60 percent of India's energy use. Low natural gas output is another restraint.
Singh staked his political career on a 2008 deal with the United States that ended India's nuclear isolation dating to its 1974 test of a nuclear device, opening up a $150 billion civilian nuclear market.
Soon after the earthquake and tsunami that crippled the plant at Fukushima in Japan last year, triggering a global rethink of nuclear power, Singh said India's atomic energy programme was on track but regulators would review safety systems to ensure that plants could withstand similar natural disasters. (Reporting By Frank Jack Daniel; Editing by John Chalmers and Daniel Magnowski)