FDI Inflows to Power

The huge size of the market in the power sector in India and high returns on investment are important factors in boosting FDI inflows to power. 100% FDI is permitted to this sector under automatic route in almost all the power sectors in India except the Atomic energy. There are huge opportunities of FDI in power sector in India.

The Power Sector in India-

The power sector in India has grown significantly and is an important part of infrastructure. Investment potential in the power sector of India is huge due to the market size and returns on investment capital. Past few years have witnessed an outstanding growth in the power sector especially the sectors based on renewable sources of energy. The total installed capacity of the electric power generation stations in India according to estimates of January 2007 is 128182.47 MW which comprise of the following:

• Thermal - 84149.84 MW
• Hydro - 33941.77 MW
• Nuclear - 3900 MW
• Renewable Energy Sources (RES) - 6190.86 MW

The government of India aims at reaching 2, 00,000 MW by the year 2012. The regional transmission network along with inter-regional capacity to transmit power will be expanded to ensure this growth. The total power generation in India has increased from 264.3 Billion Units (BUs) during 1990-91 to 551.7 Billion Units during 2006-07(up to Jan.'07). The investments required in the execution of this task will be generated from public-private partnerships in the sector.

Opportunities of FDI in the Power Sector in India

Opportunities of Foreign Direct Investment (FDI) in the Power Sector in India exist in -

• Hydro Projects
• Captive Power
• Ultra Mega Power Projects
• Nuclear Power
• National Grid Program
• Rural Electrification
• Trading
• Renewables

FDI Inflows to Power

100% FDI is allowed in the power sector under the automatic route in India with the exception of Atomic Energy. Important aspects of FDI in the power sector of India are -

• 100 percent Foreign Direct Investment is allowed under automatic route in almost all the power sectors in India except the Atomic Energy


• Power projects involving generation and distribution tasks are allowed in all types and sizes
• As per the Electricity Act 2003, trading in power is activated
• A duration of 30 years will given as a renewable license period
• Thermal power plants will get a return of 16 percent on equity and will get 68.5 percent PLF
• The import of equipments will be entitled to 20 percent of import duty
• Power generating projects will have a five year tax holiday with five more years which will have a deduction of 30 percent taxable profits.

Last Updated on 4/23/2011