In this question, both statements I and II are individually true. Statement I states that heavy water is used as a moderator in a nuclear reactor, which is correct. A moderator is a substance that slows down fast-moving neutrons, enabling them to sustain a chain reaction in the reactor. Heavy water, which contains deuterium, is an effective moderator because it has a higher probability of slowing down neutrons compared to ordinary water.

Statement II states that thermal neutrons are used for the fission reaction in a reactor, which is also true. Fission reactions, which involve the splitting of atomic nuclei, are typically sustained by thermal neutrons. Thermal neutrons are neutrons that have been slowed down to very low energies by a moderator, allowing them to be readily absorbed by atomic nuclei and initiate fission reactions.

Therefore, statement II is a correct explanation of statement I because heavy water, as a moderator, is responsible for slowing down neutrons to thermal energies, which then facilitate the fission reaction in a nuclear reactor. Hence, the correct answer is option 2.