Indian power industry has a long way to go. India’s fast-paced economic growth and its rapid rate of industrialisation and urbanisation have fuelled an increased demand for energy.
India has made remarkable progress in the power sector during the eleventh plan. The sector ranked sixth among the leading sectors of the Indian economy and has attracted US$ 4.6 billion in foreign direct investment since 2000. There are three major pillars of the sector – generation, transmission, and distribution. Generation is further divided into central sector (Public Sector Undertakings), state sector, and private sector, which constitutes total installed capacity of 31.21 per cent, 47.49 per cent and 21.17 per cent respectively.
Investment in Power Sector
With the population increasing at a rapid pace and a wide gap between demand and supply, the Indian energy sector offers strong opportunity to industry participants. After China and the US, India has been ranked as the third best investment destination in renewable energy sector.
The power sector in India requires an investment of up to US$ 400 billion in a span of five years to end on March 2017, according to P. Uma Shankar, Secretary, Ministry of Power, India.
The organised trading business in energy sector is set to be opened up for NRI invest in India. This attracts foreign funds to invest in the Indian power industry. 26 per cent FDI will be allowed at par with the level of commodity exchanges in the sector.
Investment Opportunities and Future Prospects
If India continues to grow at the current rate, the Indian economy would emerge as the second largest in the world, next only to China, by the year 2050. It is therefore expected that, the demand for energy would also rise substantially in the future.
US companies investing in India’s green energy market will have good prospects and it will be a win-win situation for both the countries.
The generation capacity of the country stands at over 180 MW (as in August, 2011) with a dominant share of the state sector. The private sector, which currently contributes around 22 per cent of the generation capacity, is expected to increase its share to 52 per cent by 2017.
Government Initiatives
Indian Government has proposed various proposals in the budget 2012 to stimulate investments in power sector in India, which provides a massive opportunity to the American companies.
In order to attract NRI invest in India, FDI up to 100 per cent is permitted under automatic route for projects of electricity generation (except atomic energy), transmission, distribution and power trading.
The Government of India is working on the plan to generate 470 gigawatts (GW) of nuclear energy by 2050, announced in 2009. Thus, it opens the door for huge opportunities in the sector.
The Government has planned to set up four solar thermal power projects through the solar energy corporation of India.
Being one of the fastest growing economies and the second largest populated country, India represents an attractive investment destination for the power industry.
Investment Opportunities in India 
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