PROPOSAL FOR ESTABLISHING A WIND ENERGY BUSINESS IN INDIA BY A CHINESE NATIONAL OR ENTITY.

A. INTRODUCTION:

 Establishing a wind energy business in India, particularly by a foreign investor from China, involves several regulatory and compliance steps. The renewable energy sector in India is rapidly growing, and wind power has become a key focus area due to its environmental and economic benefits. However, investments from Chinese nationals or entities are subject to specific regulatory scrutiny concerns. This note outlines the essential steps and necessary government approvals required for a Chinese national or entity to establish a windmill business in India.

B. GOVERNMENT APPROVAL FOR INVESTMENT FROM CHINA:

Since the investor is a Chinese company looking to be a promoter in an Indian company, the investment will fall under the government route and require approval from the Department for Promotion of Industry and Internal Trade (DPIIT) and the Ministry of Home Affairs.

Equity Holding Restrictions

There is no fixed upper limit on the shareholding of a Chinese company under FEMA. However, the approval process will consider factors like:

• Sectoral Cap: Certain sectors (like telecom, defense, and financial services) have caps on FDI.
• Security Concerns: Investments from China are subject to security clearance, and higher equity stakes (e.g., more than 75%) may invite more scrutiny.
• Control and Management: If the Chinese entity is holding a majority stake (more than 50%), the government will closely examine whether the Indian company remains Indian-controlled or effectively becomes a Chinese-controlled entity.

C. SECTOR-SPECIFIC IMPLICATIONS (RENEWABLE ENERGY COMPONENT MANUFACTURING):

• The renewable energy sector itself allows 100% FDI under the automatic route.
• However, since the proposed investment involves a Chinese entity, the Press Note 3 (2020) restrictions apply, meaning prior approval is required.

D. KEY REGULATORY CONSIDERATIONS FOR CHINESE INVESTMENT IN WIND ENERGY:

1. FDI Policy & Approval Requirement

• Renewable Energy (including Wind): 100% FDI is allowed under the automatic route.
• However, since the investor is from China, prior approval from the Government of India is mandatory under the FEMA (Non-Debt Instruments) Rules, 2019.

2. Equity Holding Limit

• No fixed cap on foreign ownership, meaning a Chinese company can hold more than 75% equity in an Indian wind energy company.
• However, a higher stake increases regulatory scrutiny, particularly in sensitive infrastructure sectors like power and renewable energy.

3.Security & Supply Chain Concerns

• Since wind energy is part of India’s critical infrastructure, the government will evaluate potential risks related to Chinese control over key technology, data security, and operational influence.
• Companies like Suzlon and other Indian wind energy firms rely on government tenders, and the government may restrict Chinese involvement in strategic projects.

4.Possible Conditions for Approval

• Investment via a joint venture (JV) with an Indian partner may improve approval chances.
• Technology transfer and local manufacturing commitments could be favorable.
• No involvement in sensitive projects like those near defense installations or strategic zones.

E. THE FOLLOWING DEPARTMENTS AND REGULATORS ARE INVOLVED:

1. Department for Promotion of Industry and Internal Trade (DPIIT)

• Primary authority for reviewing FDI proposals under Press Note 3 (2020).
• DPIIT coordinates with relevant ministries before granting approval.

2. Ministry of Home Affairs (MHA) – Security Clearance

• Since the investment is from a country sharing a land border with India (China), the MHA conducts a security clearance to assess risks related to national security and critical infrastructure.

3. Ministry of New & Renewable Energy (MNRE)

• Since the investment is in the wind energy sector, MNRE’s opinion is sought, especially if the Chinese entity will supply technology, components, or operate wind farms.
• MNRE may impose conditions to ensure compliance with “Atmanirbhar Bharat” (self-reliance) policies.

4. Reserve Bank of India (RBI) – FEMA Compliance

• RBI oversees the investment under FEMA (Foreign Exchange Management Act) (Non-Debt Instruments) Rules, 2019.
• If approved by DPIIT, the investment must be reported to RBI.

F. SCOPE OF CONSULTANCY SERVICES:

     A. Regulatory and Compliance Advisory

1. Conducting an initial feasibility study on regulatory requirements and investment structuring.
2. Advising on FDI policy, FEMA (Non-Debt Instruments) Rules, 2019, and Press Note 3 (2020) implications.
3. Identifying sectoral restrictions and security concerns related to Chinese investments in renewable energy.

      B. FDI Approval Process

1. Preparing and filing the Foreign Direct Investment (FDI) application with the Department for Promotion of Industry and Internal Trade (DPIIT).
2. Coordinating with the Ministry of Home Affairs (MHA) for security clearance.
3. Assisting in responses to queries from DPIIT, RBI, MHA, and MNRE (Ministry of New & Renewable Energy).
4. Ensuring compliance with RBI’s reporting requirements under FEMA.

      C. Entity Incorporation & Legal Structuring

1. Advising on the most suitable business structure (Private Limited Company, Joint Venture, Wholly Owned Subsidiary, etc.).
2. Drafting and reviewing the Memorandum of Association (MoA), Articles of Association (AoA), and Shareholder Agreements (SHA).
3. Assisting in obtaining Director Identification Number (DIN) and Digital Signature Certificate (DSC) for the proposed directors.
4. Filing for company incorporation with the Registrar of Companies (RoC).

      D. Documentation and Legal Agreements

1. Preparing required documentation, including:
2. Investment agreements, joint venture agreements, shareholder agreements.
3. Undertakings, affidavits, declarations for regulatory submissions.
4. Security clearance documents as required by MHA.
5. Assisting in drafting contracts with Indian partners (if applicable).

     E. Compliance with Renewable Energy Policies

1. Reviewing sector-specific approvals from the Ministry of New & Renewable Energy (MNRE).
2. Advising on government incentives, tax benefits, and renewable energy policies.
3. Ensuring compliance with Atmanirbhar Bharat (self-reliance) policies if applicable.

     F. Post-Investment Compliance

1. Filing post-investment reporting and compliance documents with RBI and RoC.
2. Assisting with periodic regulatory filings and renewals. Advising on taxation, repatriation of profits, and compliance with transfer pricing norms.

     G. PLACE OF RENDERING SERVICES:

The place of rendering services generally shall be our office situated at Office No. 106, Sr No. 55, Sukhaniwas, Mangalwar Peth, Pune – 411011

Yours truly,

SD/-

CS IP PRAMODKUMAR R. LADDA

Company Secretary & Insolvency Professional