Foreign Direct Investment (FDI) in the Renewable Energy Sector FDI in India
FDI in India Energy is the basic need of all sectors, which is why the energy sector plays an important role in the overall economic development of a country. The energy sector in India includes both renewable as well as non-renewable sources of energy. The sources of renewable energy include solar, wind, small hydro and biomass while sources of non-renewable energy comprise of natural gas, petroleum, coal etc.
The energy sector in India has shown growth in order to meet all sorts of demands of a developing nation. The energy sector has shown growth in terms of technological sophistication and size. It is one of the more diversified fields in the world.
The important sources of electricity generation range from commercial sources such as nuclear, hydro, oil, natural gas, lignite, coal power to non-conventional sources such as agriculture waste, solar and wind power. Most of the public, private and foreign players are coming up with some effective plans to grab the potential opportunities with the support of government initiatives and policies. In order to tap the hidden potential of the Indian energy sector, most of the foreign players are focusing on some important aspects in which they have an edge like wind power, solar power and hydropower.
The Indian government has initiated several important reforms in the energy sector to encourage foreign investors to invest in India. Some of them are described hereunder.
- Foreign Direct Investment up to 100% is allowed under automatic route for projects such as transmission, power trading, distribution, natural gas exploration, and petroleum products.
- Foreign Direct Investment up to 100% is permitted in the coal and lignite mining for captive consumption in the power generation sector, and FDI inflows up to 74 per cent are permitted for exploration and mining of captive consumption coal and lignite.
- In petroleum refining, 49 per cent FDI is allowed under the government route while in renewable energy, 100 per cent FDI is permitted through automatic route.
- The Government of India has exempted the units established in Special Economic Zones from the obligation of Net Foreign Exchange which is applicable to the regular units.
- The Government of India has taken significant steps to boost up infrastructure in the power sector. The government is planning to renovate all its existing power plants by taking the help of private and foreign players.
- A Memorandum of Understanding (MOU) for development of new and renewable energy sector has been signed by the Ministry of New and Renewable Energy of India and the Government of Denmark.
The energy sector of India is proposed to meet the global stipulations through hi-tech innovations in alliance with global partners. The Indian energy sector has been growing at a remarkable rate and is projected to develop further in the future years. To meet the rising demand for electricity, enormous foreign support is required, which would help the energy sector in India perform better. As India possesses enormous natural resources, large-scale investment opportunities and attractive Government policies can go a long way in contributing to the growth of the energy sector.