Renewable energy blows in foreign direct investment

While renewable energy may be relatively new elsewhere, India has long used this source. It is free and abundant, being replenished as required by natural means.

The government, through the National Green Hydrogen Mission, aims to produce 5 million tonnes of green hydrogen, making India a global hub for its production, utilisation and export. India’s administration hopes to attract INR8 trillion (USD97 billion) in investment by 2030. The Ministry of New and Renewable Energy (MNRE) has developed a national portal, through which residential customers can apply for rooftop solar installations without waiting for distribution companies to finalise their tenders. A national bio-energy programme of several separate schemes was launched in 2022 to use waste, biomass and biogas. A green energy corridor was established, its target of 3,200 circuit kilometres of transmission lines and 17,000 megavolt amperes capacity sub-stations being achieved in 2020.

The government has waived interstate transmission system charges for the interstate sale of solar and wind power from projects commissioned by 30 June 2025. A Commission for Additional Sources of Energy was established by the government in 1981. Its mission is to advance research in and development of renewable energy. To encourage farmers to use solar energy, the Cabinet Committee on Economic Affairs distributed financial help of USD6.5 billion up to 2022.

The second phase of the Atal Jyoti Yojana programme was launched in 2018, providing financial assistance for installing more than 3 million solar-powered streetlights in underserved locations. Further, to promote large-grid-connected wind-solar PV hybrid systems for the effective and efficient use of land and transmission infrastructure, the MNRE introduced its national wind-solar hybrid policy in 2018. The government imposed a safeguard duty on solar panels to encourage domestic solar cell manufacture. State commissions are required to encourage the production of electricity from renewable sources.

India has a target to derive 50% of installed electricity capacity from renewable energy sources by 2030. It aims to reach 500GW of non-fossil fuel energy capacity by the same year.

By placing such importance on renewable energy, India is trying to reduce its greenhouse gas emissions. India is number four in the world for total installed renewable energy. It has the same ranking in wind power capacity and in solar power capacity, according to NMRE’s 2022 review. The country is the third-largest global market for new solar photovoltaic supply.

Foreign investors may invest up to 100% capital in the renewable energy sector through the automatic method, making it a desirable destination. In the year ending in August 2022, India added 13GW of installed renewable energy capacity. This led to the reduction of more than 606GW of coal-generated power in 2021 and 2022, a significant step towards a cleaner tomorrow. Solar power tariffs have been reduced by more than 75% through a plug-and-play model. India plans to generate 30,000MW from offshore wind installations.

India, the US, China and Brazil are in talks over forming a global biofuels alliance to increase the use of renewable energy and sustainable fuels in the transportation industry. Emissions have been reduced by 28% from 2005 levels, with a target of 35% by 2030. India has received more than USD13 billion of foreign direct investment (FDI) in the past 22 years for the domestic non-conventional energy sector. The Indian Renewable Energy Development Agency plans to finance renewable energy projects in foreign currency. An overseas office is apparently being prepared in the Gujarat International Finance Tec-City in Gandhinagar. From April 2000 to March 2023, the cumulative FDI equity inflow in the non-conventional energy industry was USD14.12 billion, making up 2.22% of total FDI received in all sectors. Such developments have transformed the treatment of FDI, leading to India being given preferred investment destination status by the global investment community.

The government has tried to make its FDI policies investor-friendly and further aims to eliminate policy bottlenecks that hinder investment inflows. The steps it has taken so far have already successfully increased the volume of FDI into India.

Anindya Mazumdar is a partner and Mehak Verma is an associate at Singhania & Co.