The Government of India said that it would allow 100% Foreign Direct Investment (FDI) in the renewable energy sector, as reported by RTTNews.

 

The FDI inflow has been rising for past many years in the Indian renewable energy industry, particularly wind. The Government has also charted a generation based incentive plan in wind power projects to encourage foreign investors who could not avail advantages of accelerated depreciation as the domestic investors have enjoyed.

 

The total foreign direct investment in the Indian renewable energy industry during 2006-07 had stood at $2.11 Million, which later rose to $43.15 Million in 2007-08 and $85.27 Million in 2008-09.

 

India has allowed 100% FDI in the sector to meet its consistently soaring energy requirement. At present, the country relies on expensive diesel generation capacity of 25 GW that may lead to peak power shortage of around 60 GW by 2020. Under such gloomy prospect, renewable energy could only be rescuer for the country and therefore, foreign companies’ investment is essential to boost the renewable energy sector.

 

India has set the target of 20,000 MW power generations in its solar mission for 2022. But the experts believe that the commercial financing of the solar mission is uncertain and could pose the biggest stumbling block in coming years. High FDI inflow could solve the financing issue and help to meet the set target.

 

Some of the Indian regions like Gujarat, West Bengal and Rajasthan will be the key participants in the National Solar Mission by alone generating nearly 30% of the targeted 20,000 MW of power by 2022.

 

West Bengal has set the target of generating 110 MW of solar energy by 2013, which involves investment of 1500 Crore by several companies. Similarly, Rajasthan and Gujarat are expected to generate solar power of 100 MW and 130 MW respectively in the next three years.

 

According to a Research Analyst at RNCOS, “India has joined the league of world’s countries showing interest in the deployment of equipments to harvest abundant renewable energy resources. However, it is far behind to other countries and lacks financial resources to fully exploit its potential. Thus, it is inevitable to sought new paths of keeping pace with developed countries such as FDI and incentive schemes for MNCs.”