“Financing Solar Power Projects In India

Investment Through FDI and FII”

Dissertation (I) submitted to the School of Business in partial
fulfillment For the degree of
MBA- POWER MANAGEMENT

Under the supervision of

Dr. Anil Kumar

Department of Power Management

School of Business, Kandoli,
Dehradun- 248007

BY

Rajat Bhardwaj (500078016)

Batch: 2019-2021
Semester: IV

University of Petroleum & Energy Studies

Knowledge Acres, PO Kandoli
Dehradun (248007)
 Mentor Agreement Form for Dissertation

I Rajat Bhardwaj, student of MBA – Power Management Semester III, with Enrolment
number R130219021 and SAP ID 500078016 will undertake Dissertation in the topic Future
of Grid Balancing by integration of Energy Storage, under the guidance* of Dr. Anil Kumar.

Student Name Mentor Name

Rajat Bhardwaj Dr. Anil Kumar

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 Declaration

I, Rajat Bhardwaj, Roll No. R130219021, MBA (Power management), batch 2019-21 of
University of Petroleum and Energy Studies, Dehradun, hereby declare that the summer
internship report on “Viability of Solar Power Generation in Hilly Areas of India” is an
original work and the same has not been submitted to any institute for the award of any other
degree.

Dr. Anil Kumar

HOD Energy Management Dept.

(Project Mentor)

Rajat Bhardwaj

Countersigned

Prof. (Dr.) Anil Kumar

H.O.D Power and Infrastructure management

UPES Dehradun

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 Contents
Declaration.........................................................................................................................3
Abstract..............................................................................................................................5
1. Introduction........................................................................................................................6
1.1 FDI (Foreign Direct Investment):....................................................................................6
1.2 Working Foreign Direct Investment:...............................................................................6
1.4 Types of Foreign Direct Investment:...............................................................................7
1.6 Market Size:...................................................................................................................10
1.7 Investments/ Developments:..........................................................................................10
1.8 Government initiatives:..................................................................................................12
1.9 Road Ahead:...................................................................................................................14
1.10 Introduction to Solar:...................................................................................................15
1.11 The Promise of Solar Energy:......................................................................................15
The basis of Solar Power: -..................................................................................................16
1.12 Power regulations and policies:...................................................................................17
1.13 FDI in India: FDI & Economic Growth:......................................................................18
2. Need for the work / Justification of Project.....................................................................20
3.1 Economic Growth and Jobs:..........................................................................................20
3.2 Human Resource Development:....................................................................................20
3.3 Finance & Technology:..................................................................................................21
3.4 Exports Increase:............................................................................................................21
3.5 Capital Flow:..................................................................................................................21
3.6 Competitive Market:......................................................................................................21
2. Business Problem.............................................................................................................22
3. Literature Review.............................................................................................................23
2.1 History of solar in India:................................................................................................23
2.2 Electricity Act, 2003:.....................................................................................................24
2.4 Solar technologies:.........................................................................................................26
2.5 Floating Solar PV:..........................................................................................................27
2.6 FDI in the world:............................................................................................................27
2.7 Determinants of FDI in Power Sector:...........................................................................27
2.8 Effective policy and regulatory environment:................................................................28
2.9 Country performance:....................................................................................................29

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 2.10 Pace and sequencing of power sector reforms:............................................................29
2.11 Government guarantees:...............................................................................................30
2.12 Project management process:.......................................................................................30
2.13 Impacts of FDI on Indian Power Sector:......................................................................31
2.14 Greater energy efficiency:............................................................................................32
2.15 Adoption of global best practices:................................................................................32
2.16 Renewable sources of energy.......................................................................................32
2.17 Problems of FDI in Indian retail sector:.......................................................................33
4. Research Gap...................................................................................................................35
4.1 Research Gap.................................................................................................................35
4.2 Limitation of study:........................................................................................................35
5. Research Problem.............................................................................................................36
6. Research Questions & Objectives....................................................................................37
7.1 OBJECTIVES:...............................................................................................................37
7. Research Design & Methodology....................................................................................38
8.1 Research Methodology:.................................................................................................38
8.2 DATA COLLECTION:.................................................................................................38
8.3 RESEARCH DESIGN:..................................................................................................38
8.4 Sample Size:...................................................................................................................38
8. Data Analysis & Findings................................................................................................39
9.1 Findings and suggestions:..............................................................................................39
9.2 Statics:............................................................................................................................40
9.3 Sector policy:.................................................................................................................41
9.4 Financial support:...........................................................................................................41
9.5 Investment opportunities:...............................................................................................42
9.6 Foreign investors:...........................................................................................................42
9.7 Key achievements:.........................................................................................................42
9. Recommendation & Conclusion......................................................................................44
10. Bibliography..................................................................................................................45

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 Abstract

India's economy is one of the world's most promising emerging markets. It was once
considered one of the delicate five, but that is no longer the case. It has risen to become the
world's top international investment destination since 2014, with a substantial increase in
FDI. With the introduction of the New Economic Strategy in 1991, India began the process of
attracting foreign investment, and during the 2000s, India reached unprecedented levels of
FDI. The paper relies on a secondary data-driven sectoral study of India's FDI inflow from
2000 to 2018. The paper will also examine various aspects of positive FDI spillovers in the
region. Many foreign countries are looking at India today because of the large amount of
capital available and the potential for investment. India has been singled out by the retail
industry for stamping its growth, which has resulted in the establishment of numerous retail
outlets. Though it has been argued that it would have an effect on local players, several
organized retail outlets have been brought in and are effectively serving their standard
customers. FDI is viewed as a significant vehicle for economic growth, especially for
developed countries, as a means of reorganizing production facilities around the world. The
Indian government encourages foreign direct investment in the retail sector by offering up to
51% for single brands and 100% for wholesale. It paves the way for multinational retail
behemoths to reach India. This paper focuses on the challenges and opportunities of FDI in
the Indian multiband retail market, with the aim of providing a quick overview of the
ramifications of foreign investments in retail.

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 1. Introduction

1.1 FDI (Foreign Direct Investment):

A foreign direct investment (FDI) is a financial investment made by a company or person
from one country into a company in another country. In general, FDI occurs when a
multinational entity develops foreign business activities or acquires foreign business
properties. FDIs, on the other hand, are distinct from portfolio transactions, in which an
investor simply buys equities in foreign-based businesses.
Key Takeaways: -
 Foreign direct investments (FDI) are investments made by a multinational in another
country.
 For buyers, open markets are more active than closed markets when it comes to FDIs.
 FDIs may be horizontal, vertical, or conglomerate. Horizontal refers to developing the
same form of company in a different region, while vertical refers to a similar but
distinct business venture, and conglomerate refers to a separate business venture.
 The Bureau of Economic Analysis keeps track of FDI into the United States on a
regular basis.
 An example of FDI is Apple's investment in China.

1.2 Working Foreign Direct Investment:

In contrast to closely controlled markets, foreign direct investments are most generally made
in open economies with a trained workforce and above-average growth opportunities for the
investor. Foreign direct investment usually entails more than just a cash outlay. It can also
contain management or technological requirements. The main characteristic of foreign direct
investment is that it maintains either effective ownership over or at least significant power on
a foreign company's decision-making.
At the end of 2019, the Bureau of Economic Analysis (BEA), which monitors foreign direct
investment into U.S. companies, announced gross FDI into U.S. businesses of $4.46 trillion.
With just over 40% of FDI in 2019, manufacturing was the most common sector.
1.3 Definitions:

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  The IMF's Balance of Payment manual describes FDI as an investment made to gain a
long-term stake in a company operating in a country other than the investor's, with the
investor's goal of having a say in the company's management.

 FDI is described by the United Nations World Investment Report (UNICTAD) as an

investment that involves a long-term partnership and reflects a long-term interest and
control of a resident individual in one economy in an enterprise resident in another
economy.

 A foreign company is considered a US foreign partner by the US Department of

Commerce if a single US owner holds at least 10% of the voting shares.

1.4 Types of Foreign Direct Investment:

Green Field Investment:
The word "green-field investment" refers to a company—usually a multinational corporation
(MNC)—starting a business from the ground up, ploughing and prepping a green field. These
are foreign direct investments, or simply direct investments, that give the sponsoring business
the greatest amount of influence. IT is accomplished by establishing subsidiaries in host
countries or investing in the host country firm's equity funds. (Financial collaboration) A
wholly owned company of the parent is one in which the parent owns all of the shares of the
host country business. It's called subsidiary if it's more than half. Otherwise, it's yet another
affiliate.

Brown Field Investment:

They are either a takeover of a foreign running company or a merger with a foreign running
company. When an organization merges, the merging company continues to exist while the
target company ceases to exist. In the event of amalgamation, all companies cease to exist in
favour of a new one. Horizontal and vertical conglomerates are the two types of mergers and
acquisitions. The mechanism of one corporation merging with another is referred to as
mergers and acquisitions (M&A). A merger occurs as one company buys the other outright.
The parent corporation now owns the purchased corporation, which retains its legal name and
structure. A merger is the coming together of two businesses to form a joint legal body with a
single corporate identity. The investment banking business makes a lot of money from

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mergers and acquisitions, but not all of them work out. Some businesses thrive and prosper
after a merger, while others collapse spectacularly.

Merger and Acquisitions(M&A):

When a corporation or government agency purchases or rents existing manufacturing

facilities to begin a new production operation, this is referred to as a brownfield (also known
as "brown-field") investment. This is one foreign-direct investment policy. A greenfield
investment, in which a new plant is built, is an alternative to this. The fact that the houses are
already built is a direct benefit of a brownfield construction plan. As a result, the startup costs
and time will be significantly minimized, and the buildings may even be up to date.
Brownfield property, on the other hand, may have been neglected or left unused for good
reason, such as waste, soil erosion, or the existence of toxic materials, among other things.
Where an organization considers a foreign-direct investment (FDI) alternative, brownfield
investing is popular. Frequently, an organization views facility that are no longer in operation
or are not operating at maximum capacity as potential locations for new or expanded
manufacturing.

1.5 Solar Power Sector in India:

As of 2019, India was ranked sixth in wind energy, fifth in solar energy, and fourth in clean
energy installed capability. The EY Renewable Energy Country Attractive Index 2019 rated
India seventh. Installed renewable power generation capacity has grown at a rapid rate in
recent years, with a CAGR of 17.33% from FY14 to FY20. In FY20, India produced 127.01
billion units (BU) of electricity from renewable energy sources. By 2030, clean energies will
make up 55 percent of overall installed power capacity.

Built renewable energy capability was 92.55 GW as of January 31, 2021, with solar and wind
accounting for 38.79 GW and 38.68 GW, respectively. Biomass and minor hydro fuel,
respectively, accounted for 10.314 GW and 4.76 GW. According to the Ministry of New and
Renewable Energy's year-end assessment (2020), another 49.59 GW of renewable energy
capability is being built, with another 27.41 GW being tendered. This brings the overall
potential of renewable energy projects (completed or under construction) to 167 GW.

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The Indian government aims to create a "green city" in each state that is fueled by renewable
energy. Solar rooftop systems on all of the city's homes, solar parks on the suburbs, waste to
energy plants, and electric mobility-enabled public transportation systems can all be used to
mainstream environmentally friendly electricity. Under the guidance of the Government of
India, the Ministry of New and Renewable Energy has outlined an action plan to achieve a
combined capacity of 60 GW from hydro power and 227 GW from other RES by March
2022, with 114 GW from solar power, 67 GW from wind power, 10 GW from biomass
power, and 5 GW from small hydro power. By 2030, the government wants to construct 523
GW of renewable energy resources (including 73 GW from hydro). This is proving to be a
big thrust for the industry, as business participants are motivated to switch to renewable
energy sources. The government wants to reach 225 GW of renewable energy capacity by
2022, well ahead of the Paris Agreement's target of 175 GW.

The Ministry of New and Renewable Energy was given Rs. 5,753 crores (US$ 788.45
million) in the Union Budget 2021-22. The government has allocated Rs. 1,000 crores (US$
137.04 million) to Solar Energy Corporation of India (SECI) and Rs. 1,500 crores (US$
205.57 million) to Indian Renewable Energy Development Agency in the Union Budget
2021-22.
Renewable energies will play an important role as India attempts to satisfy its own energy
demand, which is projected to exceed 15,820 TWH by 2040. Renewable energy sources are
projected to meet 40% of India's electricity needs by 2030.
Since 2019, India has been constructing the world's largest solar power plant in Rajasthan,
with a capacity of 2,255 megawatts. Along the deserts of Gujarat and Rajasthan, India aims to
add 30 GW of renewable energy potential. Between April and December 2019, private
companies invested about Rs 36,729.49 crore (US$ 5.26 billion) in clean energy generation.

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India's green energy sector has been very appealing to investors, with US$ 9.83 billion in FDI
inflow between April 2000 and December 2020. India ranked third in the world in terms of
clean energy projects and projections in 2020, according to the analytics company British
Business Energy.

According to the Central Electricity Authority (CEA), renewable energy production will rise
from 18 percent to 44 percent by 2029-30, while thermal generation will decrease from 78
percent to 52 percent. The government of Ladakh sanctioned eight 144 MW hydropower
projects over the Indus River and its tributaries in January 2021.

SJVN Limited, a PSU under the Ministry of Power, signed an MoU with Indian Renewable
Energy Development Agency Ltd. (IREDA), a PSU under the Ministry of New & Renewable
Energy, in December 2020, to provide green energy project services to SJVN. The solar
power tariff fell to an all-time low of Rs. 1.99 per unit in December 2020 during a Gujarat
Urja Vikas Nigam Ltd auction of 500 MW projects (GUVNL).

1.6 Market Size:

Built renewable energy capability was 92.55 GW as of January 31, 2021, with solar and wind
accounting for 38.79 GW and 38.68 GW, respectively. Biomass power accounted for 10.31
GW and limited hydro power for 4.76 GW, respectively. Wind power projects totaling
15,100 megawatts (MW) were released by December 2019, with 12,162.50 MW of capacity
already awarded2. In FY20, India produced 127.01 billion units (BU) of electricity from
renewable energy sources.
Northern India is projected to become India's renewable energy center, with a theoretical
capacity of 363 GW and policies focusing on the renewable energy market.

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1.7 Investments/ Developments:
Between April 2000 and December 2020, FDI inflow into India's non-conventional energy
market totaled $9.83 billion, according to data released by the Department for Promotion of
Industry and Internal Trade (DPIIT). Since 2014, more than 42 billion dollars has been
invested in India's clean energy market. In 2018, the country's new renewable energy
spending totaled $11.1 billion. India ranked third in the world in terms of clean energy
projects and projections in 2020, according to the analytics company British Business
Energy.

The following are some big investments and innovations in India's clean energy sector:

 The government of Ladakh sanctioned eight 144 MW hydropower projects over the
Indus River and its tributaries in January 2021.
 SJVN Limited, a PSU under the Ministry of Power, signed an MoU with Indian
Renewable Energy Development Agency Ltd. (IREDA), a PSU under the Ministry of
New & Renewable Energy, in December 2020, to provide green energy project
services to SJVN.
 The solar power tariff fell to an all-time low of Rs. 1.99 per unit in December 2020
during a Gujarat Urja Vikas Nigam Ltd auction of 500 MW projects (GUVNL).
 SunSource Energy announced in November 2020 that it will construct a 4 MW grid-
connected floating solar PV power project in the Andaman and Nicobar Islands, as
well as a 2 MW Battery Energy Storage System (BESS), after winning a tender offer
with the Solar Energy Corporation of India (SECI).
 The Airports Authority of India (AAI) and NTPC Vidyut Vyapar Nigam, an NTPC
affiliate, signed a memorandum of understanding in November 2020 to encourage the
use of electric vehicles and set up solar power plants at its airports.

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  Patel Engineering declared in October 2020 that it had been awarded a contract worth
Rs 1,564.42 crore (US$ 211.15 million) to build the 2,000 MW Subansiri Lower
Hydro Electric Project in Arunachal Pradesh.
 During the COVID-19 pandemic, India added 2,320 MW of solar power between
January and September 2020.
 Tata Power announced plans to construct a 100 MW solar plant in Gujarat's Dholera
Solar Park in October 2020.
 NTPC set up a wholly owned subsidiary for its renewable energy sector, NTPC
Renewable Energy Ltd, in October 2020, after receiving clearance from NITI Aayog
and the Department of Investment and Public Asset Management. By 2032, NTPC
wants to generate 30 percent of its total power output, or 39 GW, from renewable
energy sources.
 The Solar Energy Corporation of India (SECI) held large-scale central auctions for
solar parks, awarding contracts for 47 parks with a total capacity of over 25 GW.
 In a reverse bidding auction in April 2020, Vikram Solar won a 300 megawatt (MW)
solar plant project from National Thermal Power Corporation Ltd (NTPC) under the
CPSU-II scheme for Rs. 1,750 crore (US$ 250.39 million).
 By 2025, Adani Group wants to be the world's largest solar power provider, and by
2030, it wants to be the world's largest clean energy company.
 Private corporations invested about Rs 36,729.49 crore (US$ 5.26 billion) in clean
energy from April to December 2019.
 A 150 MW floating solar power project in Uttar Pradesh will see ReNew Power and
Shapoorji Pallonji spend nearly Rs. 750 crore (US$ 0.11 billion).

1.8 Government initiatives:

 The Ministry of New and Renewable Energy was given Rs. 5,753 crore (US$ 788.45
million) and Rs. 300 crores (US$ 41.12 million) in the Union Budget 2021-22 for the
‘Green Energy Corridor' scheme.
 The government has allocated Rs. 1,000 crores (US$ 137.04 million) to Solar Energy
Corporation of India (SECI) and Rs. 1,500 crores (US$ 205.57 million) to Indian
Renewable Energy Development Agency in the Union Budget 2021-22.
 To stimulate domestic demand, the customs duty on solar inverters has been raised
from 5% to 20%, and the duty on solar lanterns has been raised from 5% to 15%.

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 SJVN Limited, a PSU under the Ministry of Power, signed an MoU with Indian
Renewable Energy Development Agency Ltd. (IREDA), a PSU under the Ministry of
New & Renewable Energy, in December 2020, to provide green energy project
services to SJVN.
 The largest solar power project set up under the central government's 'Make In India'
programme, with a capacity of 1.5 MW, was completed in November 2020 at the Leh
Indian Air Force Station in Ladakh.
 The government launched a production-linked incentive (PLI) scheme worth Rs.
4,500 crores (US$ 610.23 million) for the manufacture of high-efficiency solar PV
modules over a five-year period in November 2020.
 Energy Efficiency Services Limited (EESL), a joint venture of PSUs under the
Ministry of Power and the Department of New and Renewable Energy (DNRE), Goa,
signed a memorandum of understanding on November 17 to negotiate the state's roll-
out of India's first Convergence Project.
 The government declared in October 2020 that it will form an inter-ministerial
committee under NITI Aayog to lead research and report on energy modeling. The
India Energy Modelling Forum (IEMF), which was jointly initiated by NITI Aayog
and the US Agency for International Development, will benefit from this, as well as a
steering committee (USAID).
 In Gujarat and Rajasthan, India plans to add 30 GW of renewable energy potential
along its western frontier.
 The Delhi government has agreed to convert a thermal power plant in Rajghat into a
5,000 KW solar park.
 The Indian government has revealed plans to launch a US$ 238 million national
mission to develop advanced ultra-supercritical technology for cleaner coal use.
 The Ministry of New and Renewable Energy (MNRE) has agreed to provide customs
and excise duty benefits to the solar rooftop market, which will reduce the cost of
installation and power generation, thereby boosting development.
 Indian Railways is stepping up its efforts to reduce emissions by 33 percent by 2030
by implementing long-term energy efficiency policies and maximizing the use of
renewable fuel.

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1.9 Road Ahead:
The government is committed to increasing the use of renewable energy sources and is
currently working on a number of large-scale solar power projects as well as heavily
supporting green energy. Furthermore, renewable energy has the potential to generate a large
number of jobs at all levels, especially in rural areas. The Ministry of New and Renewable
Energy (MNRE) has set a lofty goal of building 227 GW of renewable energy capacity by
2022, with around 114 GW scheduled for solar, 67 GW for wind, and the rest for hydro and
bio, among other things. In the next four years, India's clean energy market is forecast to
draw $80 billion in investment. By 2023, India will have about 5,000 compressed biogas
plants.
By 2040, it is projected that renewable energy will produce about 49% of total power, thanks
to the use of more reliable batteries to store electricity, which will reduce the cost of solar
energy by 66 percent relative to today's cost. * Renewable energy instead of coal would save
India Rs 54,000 crore (US$ 8.43 billion) a year. 3. By 2030, renewable energies will account
for 55% of overall installed power capability.
According to the Central Electricity Authority (CEA), renewable energy production will rise
from 18 percent to 44 percent by 2029-30, while thermal generation will decrease from 78
percent to 52 percent.
According to the Ministry of New and Renewable Energy's year-end assessment (2020),
another 49.59 GW of renewable energy capability is being built, with another 27.41 GW
being tendered. This brings the overall potential of renewable energy projects (completed or
under construction) to 167 GW.
The Indian government aims to create a "green city" in each state that is fueled by renewable
energy. Solar rooftop systems on all of the city's homes, solar parks on the suburbs, waste to

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energy plants, and electric mobility-enabled public transportation systems can all be used to
mainstream environmentally friendly electricity.
Advantage for India:
 Strong demand: Energy usage is expected to rise from 4,926 TWh in 2012 to 15,280
TWh in 2040 as the economy expands. The real estate and transportation industries
would account for the majority of production. In 2019-20, India's per capita electricity
use was 1,208 units.
 Competitive advantage: According to the EY Renewable Energy Country Attractive
Index 2020, India is ranked seventh. India is ranked third in the world for clean
energy projects and strategies, according to British Business Energy.
 Policy support: By 2030, the government intends to construct 523 GW of renewable
energy capacity (including 73 GW from hydro). Growing Investments: The non-
conventional energy market attracted $9.83 billion in foreign direct investment (FDI)
between 2010 and 2015.

1.10 Introduction to Solar:

The Sun is the source of all life on earth. This amazing source irrigates electricity and fuses
hydrogen to helium at its heart, giving us both heat and light. They call the radiation from the
solar system. It hits Earth's surface just about half of the solar radiation. The rest is absorbed,
or reflected in the atmosphere and clouds. Nevertheless, we receive sufficient power from the
sun to meet humanity's demand for power - millions of times. Sun power is a massive,
unending, renewable fuel. solar energy is a sun power.

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 POWER MIX OF INDIA

24%

2%
12% 62%

Thermal Hydro Nuclear RES

1.11 The Promise of Solar Energy:

There's a massive solar resource available. The amount of sunlight that falls on the earth's
surface in an hour and a half is enough to handle the entire world's energy consumption for a
full year, according to the US Department of Energy. Just 18 days of sunshine on Earth
contains the same amount of energy that is stored in all the coal, oil, and natural gas reserves
on the planet. And, once there is a system in place to harness and convert the solar resource
into useful energy, the fuel is free.

The growth potential of Solar Energy: -

The share of the solar rooftop currently amounts in India to only 14 per cent and by
December 2018 to 3,855 megawatts (MW). It is far smaller than anticipated in the audacious
clean energy program for 2015 of the Government of India. In the other hand, substantial
progress had been made and 'learning by doing' was required to develop a constructive
regulatory environment and improve the capabilities of small-scale workers and to inform the
industry in this fairly modern technology. India aims to regulate the sloping Indian regions by
solar power as the Indian government has planes to install the biggest sun-based energy
project in the Ladakh region in the world. The state of Uttarakhand has good Solar Power
capability. Approximately 300 bright days are available in the state that offers brilliant
potential to create Rooftop and other small solar power plants in the state.

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 Source: Bridge to India, Mercom India, IEEFA Estimates

The basis of Solar Power: -

First of all, depending on application and size, solar energy systems vary. The rooftops in the
India have housing arrays, and businesses are beginning g to build solar panels to cover their
electricity costs. Often, the corporations build massive solar power facilities to provide all
consumers linked to the grid with renewable electricity. There are two main types of solar
energy technologies — photovoltaic (PV) and concentrated solar power (CSP)—regardless of
the particulars of a particular system. The solar panels are more and more seen on the top of
buildings or on the tops of buildings placed on the International Space Station make it
familiar to most people. If the sun shines up on one of those sun plates, the cells on the
surface capture the heat, allowing energy to spread through the membranes. PV-installed,
rooftop installed or wall mounted systems can be possible. It can be installed to increase
output and interest indefinitely, or it can be connected to trackers tracking the sun across the
night. Rooftop PV panels provide usable solar power in nearly every region of the India.

1.12 Power regulations and policies:

The federal government mainly controls the power sector by the Ministry of Power and the
Department of New and Renewable Energy (the Ministry of Renewable Energy). At the
moment a single minister responsible for maintaining identification of goals and
symphonizing of priorities and strategies is under the jurisdiction of the ministry of power
and the Ministry of Renewable Energy. The Energy Act 2003 is the key law regulating power
production, storage, sale, and trade. The Electricity Act offers for the design of the National
Electricity Policy 2005, the National Tariff Policy 2016 (the Tariff Policy), the National
Electricity Plan, formation of autonomous Electricity regulatory commissions at the central

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level (the Central Electricity Regulatory Commission (CERC)) and state level (the state
electricity regulatory commissions (SERCs)) and the making of the Appellate Tribunal for
Electricity. Intra-State electricity legislation (including tariffs) is the responsibility of relevant
SERCs, while CERCs are the competent body for all inter-State electricity regulation issues
(including tariffs). In 2016,the updated Tariff Policy was introduced and increase in the solar
Renewable Purchase Obligation(RPO) to 8 per cent by 2022 was the primary highlight,
immunity on the payment of interstate transmission charges for wind and solar power
developments, application of RPOs on co-generation power plants, waste to energy plants has
to mandatory procurement by distribution companies of 100 per cent power in the respective
state and expansion of intrastate transmission developments through a competitive bidding
method for developments exceeding a particular development cost limit, to be decided by the
SERCs.
1600
1400
Generation in BU
1200
1000
800
600
400
200
0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

1.13 FDI in India: FDI & Economic Growth:

The origins of foreign direct investment in India can be traced back to the British East India
Company. During Britain's colonial period in India, British capital arrived in India. However,
due to a lack of sufficient and reliable data, researchers were unable to depict the entire
history of FDI inflows into India. Until democracy, British corporations provided the
majority of FDI. Despite the fact that Japanese firms entered the Indian market after WWII
and expanded their trade with India, the United Kingdom remained India's most powerful
investor. Following independence, policymakers began to pay attention to concerns related to
international capital and MNC activities.

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The FDI strategy was formulated with national interests in mind, and it seeks to use FDI as a
means of importing advanced technologies and mobilizing foreign exchange capital.
International investment was deemed "necessary" by India's first Prime Minister, not only to
augment domestic resources but also to secure science, technological, and industrial expertise
and capital equipment. During the second five-year plan, though, the nation was hit by two
major crises: foreign exchange and financial capital mobilization (1956 -61). 
As a result, the government took a more liberal stance, encouraging international companies
to participate in equity more often and accepting equity capital in technological partnerships.
The FDI policy has changed over time and according to economic and political regimes.
MNCs were permitted to venture into India by technological cooperation under the 1965
industrial policy. To further raise FDI inflows, the government offered a variety of benefits,
including tax breaks, simplified licensing processes, and the de-reservation of some
businesses, such as medications, aluminium, heavy electrical machinery, fertilizers, and
others.
This government's liberal stance toward international capital attracts buyers from other
industrialized countries such as the United States, Japan, and Germany, among others.
However, in the 1970s, the government was forced to pursue a strict foreign policy due to a
large outflow of foreign assets in the form of dividends, revenues, royalties, and other
remittances. During this time, the government pursued a limited and highly restrictive foreign
policy in terms of foreign capital, FDI types, and foreign company ownership. In comparison
to previous decades, the rate and trend of FDI flow from developing countries to EMEs has
changed dramatically in the 1980s and 1990s.
Developing countries' once aggressive stance toward foreign investment has softened during
this time of transformation. Liberalization and market-based reforms in EMEs encouraged
FDI. Deregulation of the banking market and changes to industrial policies opened the way
for further foreign spending. The spectacular growth of FDI in the global economic arena has
been one of the most phenomenal trends in the last 20 years. Starting from a low point of less
than a billion dollars in 1990, according to a recent UNCTAD survey, India will be the
second most significant FDI destination for transnational companies (after China) between
2010 and 2012. Services, telecommunications, building activities, and computer software and
hardware were the sectors that attracted the most inflows, according to the results. Mauritius,
Singapore, the United States, and the United Kingdom were among the top FDI sources in the
world. In 2013, the government eased FDI restrictions in a number of industries, including
telecommunications, defense, PSU oil refineries, power exchanges, and stock exchanges.

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21 | P a g e
 2. Need for the work / Justification of Project

Why FDI is needed in India?

Foreign direct investment (FDI) is a strategy used by Indian multinationals to expand their
presence and business activities in developing consumer and growth markets. It may obtain
access to a variety of resources, both small and large, as well as qualifying and unsolicited
management and technologies, including fossil fuels and precious metals. FDI also helps an
organization to reduce production costs by leveraging low-cost goods and going directly to
the raw materials supplier rather than importing them from third parties. In addition, a
company's FDI benefits from a variety of tax advantages. This would depend on whether the
country of origin has a tax deduction for foreign salaries or whether the recipient country
provides FDI organizations with tax breaks and incentives.
Indian power sector is at the brink of the change as we are moving towards a more
sustainable future by implementing more and more renewable power sources which need a
lot of funding and new technologies and FDI had the potential to overcome all of these
challenges thus this the golden time and the government is also working towards promotion
of renewable energy sources and the FDI thus the project taken on this type of issue is
knowledgeable as well as fruitful as it can help us see what will be the future trends in the
Indian power sector.

Here are some benefits of FDI:-

3.1 Economic Growth and Jobs:

The most obvious advantage of FDI is the advancement of jobs. It is also one of the primary
reasons why a country, especially a developing country, seeks FDI. Increased FDI benefits
both the construction and service industries. As a result, opportunities for talented young
people around the world – both professionals and unqualified jobs – are expanding, and
unemployment is decreasing.

3.2 Human Resource Development:

This is one of the less obvious advantages of FDI. It's never overstated, but it's crucial.
Human resources refer to employees' knowledge and abilities. Training and experience
learned, as well as developed capabilities, contribute to the improvement of schooling and the
country's human capital share.

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3.3 Finance & Technology:
Recipient organizations have access to cutting-edge financial technologies, technologies, and
organizational practices from all around the globe. In the long run, the local economy will
benefit from the introduction of new, applied technologies and practices, resulting in
increased business competitiveness and production.

3.4 Exports Increase:

Not all of FDI's goods are meant for domestic use. Many of these products have international
audiences. FDI investors have also aided in the creation of 100 percent export-driven units
and industrial zones, which have continued to increase their exports to other countries.

3.5 Capital Flow:

Capital inflows are particularly beneficial to countries with small domestic resources and
little opportunities to raise funds on global capital markets.

3.6 Competitive Market:

By allowing foreign organizations to enter the domestic market, FDI helps to create a
competitive environment and break down domestic monopolies. A healthy market climate
allows companies to refine their products and processes on a regular basis, which fosters
innovation. Consumers now have a wider range of items to choose from at more reasonable
cost.

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 2. Business Problem

Foreign Direct Investment (FDI) is the dispersal and optimization of resource packages like
human, financial, knowledge, physical and reputational resources. The motivational factors
such as natural resources, market resources, strategic resources, efficiency resources,
locational advantages, etc., influenced Multinational Enterprises (MNEs) to perform various
activities in the host countries. MNEs internationalize business mainly to acquire intangible
assets and for balancing resources which they do not possess. India is in receipt of continuous
capital flow due to favorable policy management and a strong business environment.
Globally, Indian corporations continually display significantly better equity earnings over
other countries both developed and emerging. The Government of India is very keen in
simplifying FDI rules with an ultimate aim to attract more investors with zero hazards.
The problems regarding how to bring FDI in India are–
1) Land acquisition issues are the challenges in foreign direct investment in India
requires more investment in upcoming years and renovated infrastructure stimulate
growth,
2) Resource challenge,
3) Equity challenge,
4) Stringent labor laws,
5) Government Policies,
6) Strict laws regarding the FDI,
7) Disappearance of small-scale industries,
8) Exchange crisis,
9) Cultural erosion,
10) Political corruption,
11) Inflation in the Economy,
12) Trade Deficit,

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 3. Literature Review

2.1 History of solar in India:

Renewable energy policy infrastructure in India took shape with the establishment in 1981 of
the Department of Commission of Alternate Source of Energy (CASE). In 1982 it became an
independent New Energy Sources Ministry and in 1992 it was a full-service ministry.(Kapoor
et al., 2014)
(a)National Solar Mission:
India’s National Action Plan on Climate Change (NAPCC) is the front of renewable and
climate change in India and Jawaharlal Nehru National Solar Mission (JNNSM) 2010 also
known as the Solar Mission is a part of that bigger umbrella. The mission was divided into
three phases:(Government Policies and Regulations for Solar Energy in India | Solarify, n.d.)
Phase I (2010–12),
Phase II (2013–17),
Phase III (2017–22)

Under Phase I, the Rooftop solar and small solar power plants were the main focus and this
was named: Rooftop PV and Small-Scale Generation Programme (RPSSGP). The aim was to
encourage the development of small-scale ground mounted solar PV power plants and also
the rooftop solar PV.
The government of India in 2014 updated the solar plan. It aims to produce 100 GW of solar
power by 2022. The government has proposed a number of initiatives to encourage renewable
energy to accomplish this ambitious goal.

(b) Impact of Policies and regulations on Solar Sector:

The EA (2003) provides a framework for the overall growth of India's electricity sector. It
lays down priority thresholds and targets for clean energy alternatives. Compulsory provision
and facilitation of grid connections for renewable energy for distribution licensors is
implemented.

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 (Government Policies and Regulations for Solar Energy in India | Solarify, n.d.)

2.2 Electricity Act, 2003:

Electricity Act 2003 is said to be the sum of the power reforms that started in early 1990s in
Indian Power sector. The legislation provides a framework for the overall growth of India's
electricity sector. It lays down priority thresholds and targets for clean energy alternatives.
Compulsory provision and facilitation of grid connections for renewable energy for
distribution licensors is implemented. Reforms in the Indian electricity sector began in the
early 1990's with private players entering power generation. National and foreign
corporations were sponsored to set up Independent Power Producer (IPP) ventures by central
and state governments. Examples include Enron in Maharashtra, GVK & Spectrum in AP,
and Essar in Gujarat, etc.

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Major Milestones in India Power Reforms:
India power reforms Major milestones
Year Milestone
1991 IPP Process
1996 Orissa Reform Act
1998 Central Electricity Regulatory Commissions Act
1999 RCs in many States, Distribution Privatization in
Orissa
2002 Privatization of Distribution in Delhi
2003 Electricity Act

The initial response was quite good, but only few plants were ultimately installed and many
were contested. It is now clear that the IPP process has resulted not only in high cost projects,
but has not solved the problem of capacity deficiency. In FY 2002 the PPIs made barely 3%
of the national generation (MU 15,000), following a decade of policy emphasis. In contrast,
during this decade the improved plant performance contributed 3.5 times more than IPPs!
(The Electricity Act, 2003)

(d) Summary of the Electricity Act:

The Electricity Act 2003 is a 100-page document covering 185 parts (the E-Act 2003). Up to
now, three laws regulated the power supply industry in India:
 The Indian Electricity Act 1910
 The Electricity (Supply) Act 1948 and
 The Electricity Regulatory Commissions Act 1998.
The Act of 1910 presented the sector with the foundational structure. It envisaged growth by
private licensees and made licensees available for supply of a certain area. The Law of 1948
required the establishment of State Electricity Commissions (SEBs), which were responsible
for the management of the national electric power supply. The 1998 Act established the CRC
and established the law framework for the establishment of State Regulatory Commissions.
(Chandel & Sarkar, 2015) This law is replaced by the Electricity Act 2003 and it is said that it
will harmonize the provisions by means of a new full law that addresses reform-related
matters such as trade, competition etc. Eight States-Orissa (1996), Haryana (1997) and
Andhra Pradesh (1998), Uttar Pradesh (1999), Karnataka (1999), Rajasthan (1999, Delhi

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(2000) and Madhya Pradesh (2000)-had already passed State reforms to the electricity sector
before 2003. In such state laws which are inconsistent with the E Act, provisions will be
changed so that provisions of the E Act will prevail.
2.3 Solar potential in Himalayan region:
The data bases of NASA SSE and NREL SUNY in time-tested, practical models available in
user-friendly formats supplied higher spatial and temporal data on solar radiation. GHI data
sets for Himachal Pradesh's complex terrain were collected, confronted, validated and
reproduced using GIS. Spatial analysis of such data contributed to the quantification of solar
potential in the hill state even at district level with low surface measurements. It's there.
Himachal Pradesh earned an estimated annual GHI greater than 4.5 kWh / m2 / day
3.5 Village scale solar electrification:
More and more homes, companies and government agencies are seeking ways to migrate
their power from conventional off-grid options such as kerosene, paraffin candles and diesel
generators using solar photovoltaic (PV) resources at different stages, like mini grids.
However, only a limited number of people without traditional electricity connections still
benefit from solar PV technologies. In comparison, the increase of solar power usage has
been restricted largely to smaller structures that offer essential services, of particular light and
mobile charging

2.4 Solar technologies:

(a) First-generation (fully commercial):
These use the wafer-based crystalline silicon (c-Si) technology, either single crystalline (sc-
Si) or multi-crystalline (mc-Si)
(b) Second-generation PV systems (early market deployment):
These based on thin-film PV technologies and generally include three main families: 1)
amorphous (a-Si) and micro morph silicon (a-Si/μc-Si); 2) Cadmium-Telluride (CdTe); and
3) Copper- Indium-Selenide (CIS) and Copper-Indium-Gallium-Diselenide (CIGS).

(c) Third-generation PV systems:

Include technologies, such as concentrating PV (CPV) and organic PV cells that are still
under demonstration or have not yet been widely commercialised, as well as novel
concepts under development.

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2.5 Floating Solar PV:
FPV emerges as a solution to alleviate the above-mentioned challenges in this context, for
example, by using idle areas and avoiding conflicts, e.g. agricultural use or tourism. For
densely populated countries, FPV offers an enticing alternative, where land availabilities can
help raise their procurement costs, with a negative effect on the economic feasibility of
ground-mounted solar projects. FPV is therefore able to turn untapped surfaces into
commercial solar projects that are profitable and cost efficient
Hybrid Storage systems
The energy storage is associated with a HESS in various ways. The direct DC relation of two
storage components is a easy solution. Simplicity and cost savings are the biggest benefit. In
addition, only small variations occur in the DC-bus voltage. Main disadvantage is a lack of
power flow control and power management possibilities and the resulting inefficient storage
utilization (for example, only a small percentage of Super-Cap power can be used in a Super-
Cap / battery HESS with direct connection when it is operated inside the battery's narrow
tension band)

2.6 FDI in the world:

World Investment Report (2018) stated that there has been a decline in global FDI by 23 per
cent, i.e. $1.43 trillion. Even with this decline the FDI to developing economies remained
stable at $671 billion in 2017. Asia was the largest recipient of FDI in the World with a total
of $476 billion inflows in 2017. point out India has emerged as a major recipient of FDI in
South Asia. It is a resourceful country having an adequate market for both capital and
consumer goods. Large number of natural resources in the country as well as excellent
market surroundings provide a better platform for investments as stated by Singh (2009). FDI
has been a major driver of economic growth in India. It is also a major source of non-debt
financial resource for the development of the country. Ever since the New Economic Policy
of 1991, foreign investments have been flowing into the economy. (Shikha, 2019)explains
that the liberalization phase in Indian economy has paid rich dividends to the country.
Foreign companies are eager to invest in India in order to take advantage of lower wages, tax
exemptions etc. This has generated employment and has helped the economy in upgrading to
higher and better technology.(Bank et al., 2005)

2.7 Determinants of FDI in Power Sector:

An integrative methodology was used to analyze the Determinants of FDI in the Indian
Power Sector, which included macro-, micro-, and meso-economic variables. The macro-

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level encompasses the whole economy, the micro-level refers to businesses, and the meso-
level refers to organizations that link the two, such as government departments that issue
investment policies to businesses. Integrative FDI theory differs from previous hypotheses in
that it places a greater emphasis on the meso-level, the sphere where macro- and micro
factors collide and the public and private sectors intersect. This is where government
programs are developed and enacted.(Five et al., n.d.). As a result, the meso-level is critical to
the effective execution of government policies. Day-to-day problems in FDI policy
formulation and systemic rigidities are exposed at the meso-level. Structural rigidities can
manifest themselves in phenomena such as graft and bureaucracy, which can be alleviated by
public-sector preparation and compensation. The meso-level, despite its significance, has not
gotten the recognition it deserves because scholars are not always mindful of the everyday
difficulties that developed countries face in introducing economic and investment reforms.
Policymakers, on the other hand, are often unable to speak out due to local sensitivities.
Global investors, unfortunately, face significant differences between published and operating
laws, as well as between the legislation on the books and the law as interpreted by regulators.
The disparity between official and unofficial market activities seems to have deterred many
prospective foreign investors from developing an FDI project until they began dealing with a
country's governmental institutions.(Mahbub & Jongwanich, 2019)

2.8 Effective policy and regulatory environment:

Policy reforms, in combination with the legal system, offer a driving mechanism for
developed country reform. Argentina and Brazil are almost textbook models of power sector
restructuring, according to a comparison of policy and regulatory environments in the power
sector in Argentina, Brazil, China, India, Mexico, and Thailand. In both situations, the
complexities associated with the sector's changing policy and regulatory climate were
negligible since crucial reform measures were implemented almost simultaneously. India,
China, Mexico, and Thailand continue to face policy setbacks.. (FDI in Thermal Power
Sector _ Power Trading - FDI India, n.d.) the Indian approach to power sector reforms is
more haphazard than Singapore's and Latin America's more orderly and responsive
development models. Respondents to our survey echoed this sentiment. It is beneficial to
develop an FDI approach and stick to strategies that will help you accomplish that strategy.
Furthermore, the sector's credible policies and predictable enforcement tend to mitigate risk
for investors..(Power Sector in India - FDI & Future of Power Industry in India, n.d.)

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2.9 Country performance:
Investors in the power industry make a long-term investment, expecting to repay debt and
generate a profit over the project's lifetime. Global investment inflows into developed
countries are aided by stable macroeconomic policies. To ensure that the considerable foreign
interest in investing in India is converted into real investment flows to the state, there needs
to be more cooperation between the center and the states. Countries that have found the
political will to drop a long tradition of subsidized tariffs and create regulatory mechanisms
that provide reliable assurances to investors have been the most successful.. Further, good
infrastructure (ports, roads, railways, water pipelines, electricity, telecommunications, etc.)
helps to attract more FDI flows(Satyanand, 2011). In addition, our
study finds that
I. Political will and consensus for legislation have an impact on FDI flows in the power
sector
II. labor law inflexibility has an impact on FDI flows in the power sector.

2.10 Pace and sequencing of power sector reforms:

Our results support previous research that suggests integrating private sector participation in
generation without first — or at least simultaneously — introducing deeper sectoral changes
may be problematic..(Latief & Lefen, 2019) The timing and sequencing of major policy
proposals have an impact on the viability, acceptability, continuity, and efficacy of the reform
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process. The dilemma is that if delivery changes are not enforced, private investment in
generation will collapse (which would ultimately necessitate privatization in order to
maintain the reforms). As a consequence, power distribution is seen as both the nucleus of the
industry's economic transformations and a critical part of the supply chain.(IGI, n.d.)

2.11 Government guarantees:

Private investors would want guarantees that the required contractual underpinnings (PPAs,
fuel buying agreements, sovereign commitments, and so on) would be respected, that legal
disputes will be resolved easily and fairly, with international arbitration as a backup, and that
their purchasers will be creditworthy. On the legal front, good governance requires the
creation of mechanisms that fairly resolve disputes, carry out contracts, sanction corruption,
and safeguard property rights. The risk-reward trade-off has an effect on investors. In the
developing world's power market, they expect returns that are equal to the cost of doing
business. The IPPs were to sell power to the State Electricity Boards at a unit price adjusted
for cost of capital and exchange rate uncertainties, which was especially important given that
the majority of the fuel would be imported. In the case of Dabhol Power Company, the
government's promises were not fulfilled.(The FDI Problem | Business Standard Editorials,
n.d.)
As a result of its past experiences, the Indian government has adopted a host of initiatives and
services. Recent legislative and regulatory mechanisms have focused on introducing
innovation, private sector participation, and autonomous control, as guided by the provisions
of the Electricity Act of 2003. The recent proposal to grant large-scale UMPPs (Ultra Mega
Power Projects) to private developers by competitive bidding is showing promise. These
projects are attractive as they address concerns such as Power Purchase Agreements and Fuel
Supply Agreements (gas-linkages, allotment of captive coal fields, or allowing coal imports),
as well as water interconnection and environmental effect studies. Government guarantees
seem to be no longer a consideration in FDI.. (Meenakshi et al., 2013). As a result of recent
developments in the Indian power market, the groups of Indian owners, politicians, and
regulators in this study are significantly different from one another.

2.12 Project management process:

Other clearances and permits, such as company registration, environmental and forest
clearance, permit for the import of plants and machinery, land acquisition, power and water
link, and so on, are required in addition to the FDI approval.(TREND AND CHALLENGES

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OF FOREIGN DIRECT INVESTMENT IN INDIA : IN PRESENT SCENARIO, n.d.). It's
possible that it'll be needed if you want to start a company in India. Land acquisition issues
have caused major delays in a number of infrastructure programs. The development of shell
companies, in a kind of reverse turnkey project where the initial groundwork such as land
acquisition, coal linkage/allotment of coal blocks, water linkage, environmental impact
assessments, and the preparation of feasibility reports is to be performed by the shell
companies prior to inviting private interest for Ultra Mega Power Project (UMPP), is a recent
strategy to attract private interest for UMPP. (CEA, 2007). Other fuel sectors can be
deregulated concurrently to optimize the advantages of deregulation, such that power
generators can use the most cost-effective fuel for power production and prevent the
possibility of stranding their assets as other fuel sectors become more efficient as a result of
market opening.(Khan & Moin Khan, 2015). For proper and productive investment attraction,
proper consultation and cooperation processes between central and state governments must
be improved at both the approval and project implementation levels. Otherwise, the project's
financial feasibility is jeopardized due to time and expense overruns. After all, good returns
on investment are essential to foreign investors. Despite the global economic slowdown,
India's economy continues to rise at an impressive pace. Investors, on the other hand, would
seek higher and safer returns before investing in markets where there is both country and
commercial risk associated with any power investment. Most of the literature on the
determinants of FDI in the power sector is supported by the results of the first part of the
report. It emphasizes that countries must bid for FDI not only by changing their politics and
economic determinants, but also by putting in place proactive investment facilitation policies
that go beyond policy liberalization. The effective facilitation and execution of investment
programs, as well as ensuring that local investment rules and practices are compliant with
central government priorities, legislation, and regulations, should be accompanied by
effective FDI attraction.(Domestic & Introduction, n.d.)

2.13 Impacts of FDI on Indian Power Sector:

Attracting FDI into the power sector is critical because it has the potential to boost long-term
economic growth. The following five possible FDI impacts were established through factor
review of the second set of results. Out of thirty variables, these five parameters account for
70.734 percent of the variation in the initial data collection..(Challenges Faced by Foreign
Direct Investments in India | Great Lakes, n.d.)

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2.14 Greater energy efficiency:
The entire activity in the power sector will revolve around improved supply of quality power
and effective energy storage while ensuring environmental friendliness at all times. It is
impossible to transform energy technologies immediately, owing to the fact that technology
is represented in old capital stock, which must be substituted in order for new technology to
become available. Since FDI is the global accelerator for technology transfer to developed
countries, it must be increased. In general, technologies transferred to developing countries as
part of FDI are more advanced, energy-efficient, and climate-friendly than what is available
domestically, potentially lowering the business-as-usual emissions benchmark.(FDI in India:
Foreign Direct Investment Opportunities, Policy | IBEF, n.d.)

2.15 Adoption of global best practices:

Foreign investment in power has a number of benefits, but it also has a number of drawbacks.
The benefit is that it adds best practices in contracting and quality (both in building and
operation) to the country's energy supply sector, putting pressure on it to clean up, overhaul,
and develop sensible regulatory bodies and tariff setting practices.(Decoding Slowdown: FDI
Inflows Trend Shows All’s Not Well; Growth Drops to Single Digits, n.d.). The downside is
that since sovereign and regulatory risk are seen as severe, the cost of financing is expected to
be high. Foreign investment in a company raises its production and competitiveness in a
meaningful and productive way. However, in order to increase efficiency, competition in
electricity production is more necessary than privatization or the creation of autonomous
control. Greater environmental dedication will also result in long-term organizational
benefits, such as increased productivity and improved practice consistency. Such benefits are
anticipated as a result of increased FDI flows in the power sector, which, according to our
research, would pave the way for a more environmentally sustainable, reliable, and
inexpensive energy scenario..(Foreign Investment Issues for Project Companies in India -
Lexology, n.d.)

2.16 Renewable sources of energy

In the face of growing domestic demand for electricity, renewable energy has piqued India's
interest. Renewable energy's rising success and appetite has spawned new market prospects
for investors looking for fast returns. Government policies could promote more private

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investment in the commercialization of renewable energy technologies and the growth of
business infrastructure.(Malhotra, 2014). Since India produces such large amounts of
municipal solid waste and industrial waste, CDM projects for power generation are extremely
feasible. Such programs will be very beneficial to the country's economy. It would not only
contribute to the total power generation capacity's viability, but it would also have a strong
return on investment, in addition to improving the ecosystem. FDI may be a useful, if
imperfect, predictor of future CDM flows. It is unequivocally accepted by the stakeholders of
this report. For many low-demand consumers, distributed generation may offer a cost-
effective alternative to grid expansion, as well as an increasing market niche for small forms.
companies that provide electricity to remote areas.(Teli, 2014)

2.17 Problems of FDI in Indian retail sector:

(1) Adverse Impact on the Employment:
In the absence of a significant increase in our country's industrial industries' capacity to
generate employment, international money entering the retail market is likely to disrupt
millions of people's lives. Even if the average Indian retailer in the unorganized sector is
unprepared, no Indian retailer in the organized sector will be able to withstand the onslaught
of a company like Wal-Mart until it is fully operational. Wal-Mart will be able to endure
losses for several years before its direct rivalry is washed out thanks to its enormous cash
reserves.
A quick back-of-the-envelope estimate will back up the argument. India, for example, has 35
towns with populations of over one million people each. If Wal-Mart opened an average Wal-
Mart store in each of these cities and achieved the average Wal-Mart results per store, the
company will generate over Rs.80, 330 million in revenue with just 10,195 employees.
Extrapolating this to India's average trend, it would mean displacing around 4,32,000 people,
and assuming that major FDI-driven retailers account for 20% of the retail trade, it would
mean a turnover of Rs. 800 billion and the displacement of eight million people from the
unorganized retail market.
(2) Threat on Organized Retail Players:
Global players will increase internal competition among players rather than promote overall
industry business. Because of their economies of scale, they would be able to lower their
margins to offer value for money goods at the beginning, allowing them to capture market
share that domestic players would not be able to do due to their large investment. Since

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organized retail in India is still in its infancy, the majority of Indian players are yet to break
even.
(3) Huge Spread of Retail Chain Stores:
Financially powerful behemoths would extend their functions around many locations in order to serve the
largest number of markets with complete facilities, which is impossible for a domestic player to provide.

(4) Practices of the Multinational Retail Chains:

The argument for FDI in retail is frequently made that India needs to develop modern supply chains in terms of
storage and warehousing, distribution, logistics, and support services, especially to meet the needs of the
agriculture and food processing industries. Although infrastructure and technologies are unquestionably
important, the notion that global food stores are the only way to achieve these objectives is unfounded.

(5) Setback to The Trade Balance:

Large international retailers may choose to source the bulk of their goods internationally
rather than investing in local markets, so FDI in retailing will disrupt the import balance.

(6) Effect on Real Estate Prices:

Global players' entrance may have a huge effect on real estate markets. With the increased
competition for space in towns, real estate prices could skyrocket, which may be detrimental
for domestic players.

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 4. Research Gap

4.1 Research Gap

After going through all the research papers, I feel that following research gaps are found in
the respective papers.
1) Only Secondary Data is available,
2) Unknown Effect of FDI of Economy in longer run,
3) Some papers are outdated and also the data is obsolete,
4) A suitable country who had successfully implement the FDI in power sector in
comparison to India,
5) Ratings of the investors can be misleading,
6) Interests of the investing country,

4.2 Limitation of study:

 There aren’t many FDI run power projects to identify the exact effect of these
Investments.
 There is a higher dependency on secondary data so the research can be biased.
 Since secondary data will be collected from the government website, confidential data
such as the area study, the exact terrain and location etc. cannot be extracted.
 Primary data will typically be based upon the opinions of the personnel and the
energy department students.

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 5. Research Problem

As Indian Government is more focused on the growth of the Renewable in the country the
main focus is on Solar. But to achieve these goals Indian Power Sector needs more
investments which can help it grow the needed infrastructure to became the self-sufficient
sector and this FDI and FII is a better option as it will grow the Indian economy size and also
it will be clean investment. But India is a close economy for many decades and it is not so
much friendly for the foreign investors thus it is a challenge for the FDI to successfully
implement in the country.

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 6. Research Questions & Objectives
 

7.1 OBJECTIVES:
• To Study the Current Trends & Issues associated with FDI in Indian Economy.
• To Analyze Problems and give their solutions related to FDI in Indian economy.
• To find out the future prospects of FDI in Indian economy.
• To study FDI in Indian Solar power sector,
• How to bring FDI in Indian solar power sector,
• Analyzing the FDI policies and find the solution for the smooth investment
• Comparing different investment scenarios.
• Identify the challenges regarding how to bring FDI and FII in India.

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 7. Research Design & Methodology

8.1 Research Methodology:

This study is of analytical nature and makes use of secondary data. The required& relevant
secondary data are collected from various publications of Government of India, Reserve
Bank of India, World Investment Reports, Publications from Ministry of Commerce &from
the websites of Dept. of Industrial Policy &Promotions (Govt. of India), World Bank, IMF,
WTO, RBI, UNCTAD, etc. The time series data and the relevant data have been collected for
the period 1991 to 2015.

8.2 DATA COLLECTION:

The data used for the purpose of research comprises of both the primary as well as secondary
data.
Primary data:

For the purpose of primary data collection, Qualitative data in the form of responses against
the questions asked from the Energy personnel would be recorded.
Secondary data:

Data would also be extracted from various other secondary sources such as published
journals, surveys that have been conducted previously by other researchers, data published on
websites, census, etc.

8.3 RESEARCH DESIGN:

The purpose of the research is to establish a cause-and-effect relationship and study the same.

Population:
The population selected for the purpose of collecting the data are Energy Personnel, Energy
Department students.

8.4 Sample Size:

About 50 respondents’ feedback would be recorded and used for the purpose of research. The
type of data to be collected from them would be qualitative in nature. This would make
understanding the concept of “Financing Solar Power Projects in India Investment Through
FDI and FII” even better

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 8. Data Analysis & Findings

9.1 Findings and suggestions:

Current Trends &Issues:
Prime Minister Narendra Modi has visited a dozen big FDI source countries since taking
office in May last year, and India earned $19.78 billion (Rs 1.3 lakh crore) in FDI in 2014-15.
This is more than half of the $34.93 billion in FDI the nation earned in the fiscal year, up
27% from the previous year. According to data from the Department of Industrial Policy and
Planning, FDI expanded faster after the introduction of the Make in India program in
September 2014, with inflows jumping 48 percent between October 2014 and April 2015
compared to the year before.
Tarun Das, an ex-mentor of the Confederation of Indian Industries (CII), spoke about the
“Modi government and latest FDI developments and issues” – “Modi has successfully
combined international policy with economic and business policies. As other BRICS
economies experience a downturn, India is emerging as the apple of everyone's eye. As a
result, the Prime Minister has decided to meet individual CEOs of multinational business
giants, signaling a significant shift in the country's attitude to international investors. When
domestic deposits are limited and Indian banks have large nonperforming assets (NPAs), FDI
is critical to the economy's growth.
Among the countries Modi visited, Japan has pledged to spend $35 billion over the next five
years, while South Korea has pledged to invest $10 billion. China has pledged $20 billion
over the next five years, while France has pledged $2.26 billion dollars. The United Arab
Emirates has pledged to contribute funds to India's $75 billion development programme.
Prior to Modi's expected visit in November, the UK announced an investment scheme, and
Germany made announcements related to the Make in India project during Chancellor Angela
Merkel's visit to New Delhi in the first week of October.
“Some concerns have been raised about the Modi government's success in terms of reform
rate and ease of doing business,” a foreign diplomat in Delhi said. However, a government
official from Japan, one of the countries Modi visited and from which he received a large
investment pledge, said there was no need to be upset after Modi became Prime Minister.

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Previously, during the last two terms of the UPA government, the Ministry of Home Affairs
had eventually approved the plan to allow foreign direct investment in railways. The plan was
supposed to be considered by the Cabinet Committee on Economic Affairs (CCEA). Foreign
buyers could only invest in railway building and repair, not in activities. Mr. Manmohan
Singh, India's then-Prime Minister, had pursued expanded Japanese investment in the region.
The two countries were also discussing the potential of concrete collaboration in fields such
as computer engineering, research and development, and electricity efficient and energy
saving technology.

From 2000-2001 to 2014-2015, India's FDI and GDP were assessed.

9.2 Statics:
 In 2018, approximately 73.4 GW of renewable energy capability was added (till
October).
 The addition of wind power capacity in 2016-17 was the highest ever at 5.5 GW,
exceeding the mark by 38%. A total of 841 MW of power was installed between April
and November 2018, bringing the total capacity to 34.9 GW.
 India ranks fourth in the world in terms of installed wind power capability, behind
China, the United States, and Germany.
 The addition of solar power capacity in 2017-18 was 9.4 GW, the highest to date. A
total of 2.6 GW of capability was added between April and November 2018, bringing
the total capacity to 24.3 GW.
 As of October 2018, the country had installed over 196,000 solar pumps and 1.7
million solar home lights.
 Biomass electricity comprises biomass burning, biomass gasification, and bagasse co-
generation installations. To date, 9.5 GW of cumulative potential has been reached,
with a target of 10 GW of bio-power by 2022.
 The National Biogas and Manure Management Programme establishes Family Type
Biogas Plants, which are mostly for rural and semi-urban households (NBMMP). The
Ministry of New and Renewable Energy set an annual physical goal of 65,180 biogas
plants for 2017-18 in March 2018. By November 2017, about 5 million biogas plants
had been constructed under the NBMMP.
 Solar projects with a capacity of 22.8 GW have been tendered, with 13.8 GW under
construction as of November 2018.

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  Between April 2014 and October 2018, small hydropower plants added 0.7 GW of
capability to the grid-connected renewable energy mix.

9.3 Sector policy:

 Amendments to the Ministry of Power's Tariff Policy 2016 to encourage clean
energy:
 Solar Renewable Power Obligation (RPO) to be increased to 8% by March 2022
 After a certain date, the Renewable Generation Obligation (RGO) will be
implemented for new coal/lignite-based thermal plants.
 Providing sustainable solar energy by bundling renewable energy with thermal energy
from the government's unallocated limit. This allowed distribution companies to
generate grid-connected solar power at lower costs.
 Solar and wind resources will not be subject to interstate transmission costs or
damages.
 In the Indian Exclusive Economic Zone, there is an offshore wind energy program for
the production of offshore wind energy.
 The Ministry of Power released a notification in June 2018 detailing the RPO's long-
term growth trajectory for solar and non-solar capacity. Solar and non-solar clean
energy projections, except hydro, are 17.5 percent, 19 percent, and 21 percent,
respectively, for 2019-20, 2020-21, and 2021-22.
 Solar parks and ultra-mega solar power parks are being built.
 The Green Energy Corridor Project is assisting in the creation of a power transmission
network.
 Solar panels on the roof are also used with bank-provided home loans.
 Repowering the next generation of wind power projects for maximum wind resource
use.
 Supporting research and advancement on different facets of clean energies, with
industry involvement.
 Off-grid and decentralized solar energy projects and devices are eligible for financial
incentives to satisfy energy demands for cooking, illumination, and efficient uses.

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9.4 Financial support:
 The Ministry of New and Renewable Energy has announced that borrowers would be
eligible to get bank loans up to $2.3 million for solar power generators, biomass
power generators, wind power projects, and micro-hydel plants.
 Loans are also available for renewable energy-based public services such as street
lighting and electrification in rural villages.
 The loan is capped at $15,384 per borrower for individual households.

9.5 Investment opportunities:

 The $5.8 billion Green Energy Corridor was developed to ensure the evacuation of
renewable energy from generation points to load centers by constructing transmission
networks.
 A total of 40,000 MW of solar parks and ultra-mega solar power projects have been
approved under the Scheme for Development of Solar Parks and Ultra-Mega Solar
Power Projects. This will necessitate the construction of at least 50 solar parks, each
with a capacity of more than 500 MW. The Scheme is expected to receive $1.2 billion
in funding from the federal government.
 The Smart City Project's upcoming 100 smart cities have a lot of potential to be
driven by green energies.
 Until 2022, hydro schemes are excluded from open bidding.
 Small hydro project development has been designated as a "priority" by the National
Mission on Small Hydro. Watermills and micro-hydro schemes will be upgraded
under the same scheme.
 Electric vehicle battery packs.

9.6 Foreign investors:

Name of some foreign investors and their origin country

 Enercon (Germany)
 Vestas (Denmark)
 Applied Materials (US)
 Asian Development Bank
 Enel (Italy)
 Gamesa (Spain)

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  Orix (Japan)
 Nordex (Germany)
 Mudajaya (Malaysia)

9.7 Key achievements:

 During the 2017-18 fiscal year, the country produced more than 100 billion kWH of
electricity from all renewable energy sources.
 Renewable energy's total installed capacity has grown from 35.5 GW in March 2014
to 73.4 GW in October 2018.
 Solar parks with a total capacity of 21,144 MW have been authorized in 21 states.
 A Geographic Information System (GIS) called Wind Atlas 2015 was unveiled.
 Under emission regulations, the renewable energy industry has been reclassified as a
"white group" sector.
 India is the world's fourth-largest installed wind power capacity, fifth-largest installed
solar power capacity, and fifth-largest installed clean energy capacity.

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 9. Recommendation & Conclusion

FDI would support India in a variety of ways, including increased expertise, ability,
technology, exports, jobs, and management. MNCs, on the other hand, may trigger a forex
outflow from India. Foreign firms would be fierce competitors for Indian firms. As a result,
while allowing various sectors such as multi-brand retailing, the government of India should
exercise caution. FDI in retail will subject domestic retail traders to unfair competition,
resulting in job losses. In this regard, a neutral and impartial viewpoint is required; foreign
investments in a portfolio may be removed at any time. As a result, the government of India
should emphasize attracting more equity investments. Furthermore, regulatory policies
should be favorable, and policymakers should prevent risks in order to raise FDI in India and,
as a result, GDP, trade, and foreign reserves. Due to their own merits, such as local market,
low price, tight customer ties, credit facilities, familiarity with customers, and customized
services, Indian retailers can compete with international retailers and succeed in the
competition.

Over the study duration, FDI inflows into India have seen a positive pattern. FDI inflows
include a 63 percent share of direct equity investment and a 37 percent share of institutional
investment in gross inflows. FDI rose as a result of the government of India's implementation
of a more liberal foreign policy and a number of steps. Mauritius and Singapore were found
to have received 48 percent of total FDI inflows. When looking at FDI inflows from a
sectoral viewpoint, it is discovered that the service sector attracts the most FDI in equity
inflows, led by the manufacturing sector.

Also, after the latest global recession, FDI inflows continued to rise. In the coming years, FDI
is expected to increase. It was hypothesized that FDI inflows will display an optimistic
growth pattern. This theory must be agreed based on the above data interpretation and debate.
The findings of the correlation study revealed that there is a very high correlation between
FDI inflows and other associated economic indicators, as predicted. FDI in multi-brand
retailing has had a mixed effect on India's retail sector.

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