The foreign direct investment (FDI) in India’s renewable energy (non-conventional) sector stood at $1.18 billion (~₹89.68 billion) for the first nine months (9M) of the financial year (FY) 2021-22.

The growing renewable sector has been witnessing a steady inflow of FDI in the past few years, increasing from $1.2 billion (~₹92.05 billion) in FY 2017-18 to $1.44 billion (~₹110.53 billion) in FY 2018-19 and $1.4 billion (~₹97.73 billion) in FY 2019-20.

However, the investments dipped due to the pandemic with $797.21 million (~₹58.87 billion) in FY 2020-21.

FDI up to 100% is allowed in the renewable energy industry under the automatic route, with no prior government approval needed, which has helped boost the flow of capital into the sector. This allows foreign investors to enter into joint ventures with Indian partners for financial or technical collaboration and to set up renewable energy-based power generation projects.

The cumulative FDI in the renewable sector stood at $10.39 billion (~₹782.37 billion) between April 2010 and December 2021.

There has been no FDI into coal production in the last decade, except for 2013-14., which shows a clear shift in the energy choices of the investors.

The Ministry of New and Renewable Energy (MNRE) has reduced the lock-in period for controlling shareholding (51%) in project special purpose vehicles (SPVs) to enable investment flow for solar power projects. Earlier, the shareholding in the SPV or company executing the power purchase agreement (PPA) was not allowed to fall below 51% for three years from the project’s commercial operation date (COD). This has now been cut down to one year. The stakeholders Mercom spoke to previously said that reducing or removing the lock-in period can enhance foreign investment in the Indian solar market.

The recent budget emphasis on domestic manufacturing of renewable components and the introduction of the basic customs duty, is expected to attract foreign players to invest in India.

Recently, the Parliamentary Standing Committee on Energy, in its twenty-first report on ‘Financial Constraints in the Renewable Energy Sector, noted that India would need an annual investment of ₹1.5-₹2 trillion (~$19.72-~$26.29 billion) in the renewable energy sector until 2030, compared to the ₹750 billion (~$9.86 billion) estimated in the last few years. The Committee found a considerable gap between the required and actual investment and suggests the government create an enabling framework to bridge this gap.