Concept:
In nuclear fission, fast neutrons are produced with very high kinetic energy. These neutrons must be slowed down to thermal energies to increase probability of further fission in U-235.
Heavy water acts as a moderator because it slows neutrons via elastic collisions without absorbing them significantly.
Step 1: Role of moderator
Fast neutrons collide with deuterium nuclei and lose energy gradually.
Step 2: Why slowing is important
Thermal neutrons have higher fission cross-section, sustaining chain reaction.
Thus, correct option is (C).