The Indian power sector offers enormous investment opportunities:
Foreign Investment:
100 per cent FDI is allowed in all segments of power sector including trading.
No discrimination between domestic or foreign investors
Fiscal incentives:
Zero customs duty on import of capital goods for Mega Power Projects
Income tax holiday for generating plants for 10 years

Investment Opportunities and Potential
According to Central Electricity Authority's sixteenth electric power survey, peak demand is expected to increase by a staggering 77 percent to 157,107 MW by 2012. Similarly, the energy requirement is also expected to increase by around 275 percent to 976,000 MU by 2012. It is estimated that a capacity addition of over 100,000 MW units by 2012 to bridge the supply deficit and keep up with the increasing demand. The total investment required in capacity creation, along with necessary investments in transmission and distribution segments is estimated at US$ 200 billion.This quantum of investment calls forth public-private partnerships in the sector.

• Hydro Projects

• Sixty eight percent, i.e., 101,454 MW of potential capacity is still not developed.
• Seventy-seven schemes with a cumulative total of 33,000 MW have been identified.
• Captive Power
• At present, CPP accounts only for fifteen percent, i.e., 22,100 MW of total combined capacity. Government plans to bring further 5000 MW into mainstream.
• "Open Access" and "Group Captive" allowed under recent policy initiatives.
• Ultra Mega Power Projects
• Seven projects with an individual capacity of 4000 MW, requiring an investment of approximately US$ 3.26 billion (INR 15,000 crore) each have been identified.
• Nuclear Power
• In the post indo-US agreement period, there is scope for private -public partnership in this sector.
• National Grid Program
• The program envisages addition of over 60,000 ckm of transmission network in a phased manner by 2012 with an estimated investment of about US$ 15.18 billion. Of this about US$ 4.33 billion is ought to be mobilized through private participation.
• Distribution: with respect to distribution, the following opportunities exist
• Rural Electrification
• Privatization of Discoms
• Participation under Franchise Model
• Trading
• "Power Pools" system has been established to facilitate trading opportunities for licenses.
• Renewables
• Existing untapped wind energy potential of 45,000 MW
• Untapped Bio-power potential of 52,000 MW.
• Untapped Cogeneration- bagasse based potential of 5000 MW.

Policy Incentives

• 100 percent foreign equity participation is allowed under the automatic approval route in all segments of the industry (except atomic energy).
• The electricity act 2003 allows trading in power and provides for further deregulation.
• A renewable license period of 30 years has been set.
• Return on equity up to 16 percent is assured at 68.5 percent PLF for thermal power plants. Similar incentives are provided for hydroelectric power projects.
• Import duty at the concessional rate of 20 percent has been set for import of equipment.
• The government allows a 5-year tax holiday for power generating projects with an additional five years in which a deduction of 30 percent taxable profits is allowed.

Source: Ministries websites