Industry Overview in India
India's renewable energy sector has emerged as one of the most dynamic and fastest-growing markets globally. The country's installed non-fossil fuel capacity has surged from 81 GW before 2014 to over 250 GW as of September 2025, placing India 4th globally in renewable energy installed capacity. The sector achieved a record 22 GW of capacity addition in the first half of 2025 alone, the highest-ever six-month installation period in the country's history.
The India renewable energy market was valued at approximately USD 26 billion in 2025 and is projected to grow to USD 80 billion by 2035, representing a CAGR of 7.36%. In terms of installed capacity, India is expected to grow from 241 GW in 2025 to 486 GW by 2030, at a CAGR of 15.04%. Wind power currently dominates with a 33% market share, while solar has seen the most aggressive growth trajectory.
The sector spans several sub-segments, each attracting distinct types of foreign investment. Solar power (both utility-scale and rooftop) accounts for the largest share of new capacity additions, followed by onshore wind, offshore wind (an emerging frontier with India's first offshore wind tenders launched in 2023), biomass and waste-to-energy, small hydro (below 25 MW), and green hydrogen production. Battery energy storage systems (BESS) represent another rapidly growing sub-segment, with India targeting 125 GWh of storage capacity by 2032.
Foreign participation has been substantial, with the renewable energy sector receiving USD 23 billion in FDI between April 2020 and June 2025. India's commitment to achieving 500 GW of non-fossil fuel capacity by 2030 and net-zero emissions by 2070 continues to attract global investors, developers, and foreign direct investment into the sector. The International Solar Alliance, headquartered in India, further reinforces the country's position as a global leader in clean energy transition.
FDI Policy & Entry Routes
India permits 100% FDI under the automatic route for renewable energy generation, transmission, and distribution. This means foreign investors can set up operations without prior government approval, making the sector one of the most accessible for international companies.
Key aspects of the FDI framework for renewable energy include:
- 100% FDI permitted under automatic route for electricity generation (except atomic energy), transmission, distribution, and trading
- 100% FDI permitted for renewable energy manufacturing (solar panels, wind turbines, battery storage, inverters)
- No minimum capital requirements prescribed specifically for the sector
- Investments from countries sharing a land border with India require prior government approval under Press Note 3 (2020)
- All FDI inflows must be reported via Form FC-GPR to the Reserve Bank of India within 30 days of allotment
The liberalized FDI regime has made India a top destination for global renewable energy companies seeking to establish manufacturing bases, develop utility-scale projects, or set up engineering and R&D centres. Foreign companies can enter through a wholly-owned subsidiary, a joint venture, or via project-specific SPVs.
It is important to note that while the FDI policy is liberal, pricing guidelines under FEMA still apply. Shares issued to foreign investors must be priced at or above the fair market value determined by a SEBI-registered merchant banker using internationally accepted valuation methodologies. Additionally, all foreign investments must comply with downstream investment rules if the Indian entity further invests in other Indian companies. Companies should also be aware of transfer pricing obligations on all transactions with related parties abroad, including technology licensing, management fees, and equipment procurement.
Required Licenses & Regulatory Bodies
One of the major advantages of India's renewable energy framework is that electricity generation is a de-licensed activity under Section 7 of the Electricity Act, 2003. This means no specific generation licence is required from electricity regulators, significantly reducing entry barriers for foreign developers.
However, de-licensing does not mean zero regulatory compliance. Developers must obtain multiple approvals from central, state, and local authorities:
| License / Approval | Issuing Body | Timeline |
|---|---|---|
| State Nodal Agency Approval | State Renewable Energy Development Agency | 30-60 days |
| Grid Connectivity Approval | SERC / State Load Despatch Centre | 60-90 days |
| Environmental Clearance (large projects) | MoEFCC | 90-180 days |
| CEA Techno-Economic Clearance (projects > Rs 1,000 Cr) | Central Electricity Authority | 60-120 days |
| Power Purchase Agreement | SERC / CERC | 30-90 days |
| Land Use Conversion | State Revenue Department | 60-180 days |
| Factory License (manufacturing) | State Factory Inspectorate | 30-45 days |
| Fire Safety Certificate | State Fire Services | 15-30 days |
Solar PV projects are generally exempt from Environmental Impact Assessment (EIA) requirements, while wind projects may need clearance if located in ecologically sensitive areas. Hydroelectric projects above 25 MW always require environmental clearance from MoEFCC.
The key regulatory bodies overseeing the sector include the Ministry of New and Renewable Energy (MNRE), the Central Electricity Authority (CEA), the Central Electricity Regulatory Commission (CERC), and State Electricity Regulatory Commissions (SERCs).
Entity Structure Options
Foreign investors entering India's renewable energy sector typically choose from the following entity structures:
- Private Limited Company (Pvt. Ltd.) — the most common choice for foreign investors. Allows 100% foreign ownership, limited liability, and easy transfer of shares. Ideal for both project development and manufacturing.
- Limited Liability Partnership (LLP) — suitable for consulting, engineering, and advisory operations. 100% FDI allowed under automatic route. However, LLPs cannot access external commercial borrowings (ECBs).
- Joint Venture (JV) — useful when partnering with an Indian developer who brings land access, grid connectivity relationships, and local regulatory know-how.
- Special Purpose Vehicle (SPV) — project-specific entities are standard practice in renewable energy. Each project (solar park, wind farm) is housed in a separate SPV for ring-fenced liability and financing.
- Branch Office — for foreign companies executing specific project contracts in India without establishing a subsidiary.
Most large-scale renewable energy developers use a holding company structure with multiple project SPVs underneath. This allows independent financing for each project and clean exits from individual assets. For a detailed comparison of entity types, see our guide on Private Limited Company vs LLP.
Tax Incentives & Government Schemes
India offers a comprehensive set of fiscal incentives designed to accelerate renewable energy deployment and manufacturing:
PLI Scheme for Solar PV Modules
The Production Linked Incentive (PLI) scheme for high-efficiency solar PV modules has a total outlay of approximately Rs 13,937 crore, disbursed over 5 years post-commissioning. Under PLI Tranche I and II combined, the scheme aims to create nearly 48 GW of fully integrated manufacturing capacity. As of June 2025, investments worth Rs 48,120 crore have been committed, generating nearly 38,500 direct jobs.
Accelerated Depreciation
Renewable energy assets qualify for 40% accelerated depreciation, allowing companies to write off a significant portion of capital expenditure in the first year itself. This benefit is available for solar, wind, biomass, and small hydro equipment.
Concessional Corporate Tax
New manufacturing companies can avail a concessional corporate tax rate of 15% (effective rate approximately 17.16% including surcharge and cess) under Section 115BAB of the Income Tax Act, compared to the standard rate of 25.17%.
SEZ Benefits
Renewable energy manufacturing units established in Special Economic Zones (SEZs) are eligible for 100% income tax exemption for the first 5 years, 50% for the next 5 years, and 50% of ploughed-back export profits for another 5 years.
Green Energy Corridor
The Government of India has allocated Rs 12,031 crore for the Green Energy Corridor Phase-II to strengthen intra-state transmission infrastructure for evacuating power from renewable energy zones, directly benefiting project developers.
Viability Gap Funding (VGF)
The government provides VGF support for offshore wind energy projects and battery energy storage systems to bridge the economic gap between project costs and revenues. For offshore wind, VGF of up to Rs 7,453 crore has been earmarked for the initial 1 GW capacity in Gujarat and Tamil Nadu. BESS projects can access VGF to make storage economics viable alongside renewable energy generation.
PM-KUSUM Scheme
The Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme supports decentralized solar installations for agricultural use, including solar pumps and grid-connected solar on agricultural land. Foreign companies supplying solar equipment to PM-KUSUM projects benefit from the guaranteed demand pipeline of 30.8 GW.
Key Compliance Requirements
Beyond general company law compliance, renewable energy companies in India must adhere to several sector-specific regulations:
- Renewable Purchase Obligation (RPO): Distribution companies and large consumers must purchase a specified percentage of electricity from renewable sources. Compliance is monitored by SERCs.
- Renewable Energy Certificates (RECs): Generators can sell RECs on power exchanges as an alternative revenue mechanism when selling power at average pool cost.
- CEA Technical Standards: All generating plants must comply with technical standards issued by the CEA under Section 73 of the Electricity Act, covering construction, safety, and grid connection.
- Grid Code Compliance: Connectivity to the national or state grid requires adherence to Indian Electricity Grid Code (IEGC) and state grid codes, including frequency regulation, reactive power management, and forecasting and scheduling requirements.
- Environmental Compliance: Projects must comply with the Environment Protection Act, air and water pollution control norms, and waste management regulations (particularly for solar panel end-of-life disposal).
- FEMA Compliance: All foreign investment transactions must be reported to the RBI. Annual FLA returns and FC-GPR filings are mandatory.
- Land Revenue Compliance: Agricultural land conversion for solar/wind projects requires state-level approvals and payment of conversion fees.
- Forecasting and Scheduling: Wind and solar generators connected to the grid must comply with forecasting and scheduling regulations issued by CERC and SERCs. Deviations from scheduled generation attract penalties, making accurate weather forecasting critical for project economics.
- Open Access Regulations: Developers selling power through open access must comply with state-specific open access regulations, including payment of cross-subsidy surcharge, additional surcharge, and wheeling charges to the local distribution company.
- Waste Management: Solar panel manufacturers must comply with e-waste management rules and Extended Producer Responsibility (EPR) guidelines for end-of-life solar modules. The BRSR (Business Responsibility and Sustainability Reporting) framework requires listed companies to disclose their environmental impact metrics.
Setting Up Operations
Here is a practical step-by-step guide for a foreign company looking to set up renewable energy operations in India:
Phase 1: Pre-Entry (Weeks 1-4)
- Conduct feasibility study and site identification (solar irradiance, wind data, land availability)
- Engage an India entry strategy advisor to navigate regulatory landscape
- Obtain Digital Signature Certificates (DSC) and Director Identification Numbers (DIN) for directors
Phase 2: Entity Setup (Weeks 4-8)
- Incorporate a Private Limited Company via SPICe+ portal
- Open an Indian bank account and bring in initial capital
- File FC-GPR with RBI within 30 days of share allotment
- Register for GST, PAN, and TAN
Phase 3: Project Development (Weeks 8-24)
- Secure land lease or purchase (through SPV structure)
- Apply for grid connectivity through state nodal agency
- Obtain necessary environmental and local body approvals
- Negotiate and execute Power Purchase Agreement (PPA) or participate in SECI/NTPC tenders
- Arrange project financing (debt from Indian banks, ECBs, green bonds)
Phase 4: Construction & Commissioning (Weeks 24-52)
- Appoint EPC contractor and begin construction
- Complete grid connection and testing
- Obtain commissioning certificate from CEA / state nodal agency
- Begin commercial operations and power supply
Typical timeline: 6-12 months from incorporation to commissioning for a mid-scale solar project (10-50 MW). Larger projects may take 12-18 months.
Typical costs: Solar project costs range from Rs 3.5-4.5 crore per MW installed, while wind projects cost approximately Rs 6-7 crore per MW. Company incorporation and initial setup costs run Rs 2-5 lakh.
Case Studies / Major Foreign Players
Several global companies have established significant renewable energy operations in India, validating the sector's attractiveness:
Sembcorp Industries (Singapore)
Sembcorp Energy India Limited, a subsidiary of Singapore-based Sembcorp Industries, was established in 2008 and is headquartered in Hyderabad. The company has built a diversified portfolio of wind and solar projects across multiple Indian states, demonstrating the viability of the 100% FDI automatic route for foreign energy companies.
SoftBank Energy (Japan)
SoftBank Group, through SB Energy (now Avaada Energy), made one of the largest foreign investments in Indian renewable energy. The JV between SoftBank, Bharti Enterprises, and Foxconn initially targeted 20 GW of solar capacity, driving large-scale project development across Rajasthan, Andhra Pradesh, and other states.
TotalEnergies (France)
French energy giant TotalEnergies has invested over USD 3 billion in India's renewable energy sector, including a 20% stake in Adani Green Energy. The partnership aims to develop 25 GW of renewable capacity, showcasing how large multinational energy companies are using India as a growth platform.
Masdar (UAE)
Abu Dhabi's Masdar has been actively expanding its Indian renewable energy portfolio, partnering with domestic developers and committing significant capital to solar and wind projects. The UAE-India Comprehensive Economic Partnership Agreement (CEPA) has further facilitated these investments.
Enel Green Power (Italy)
Enel Green Power, through its Indian subsidiary, has developed and operated solar and wind projects across India. The company leverages its global engineering expertise while using India's 100% FDI automatic route for project ownership and development.
