Foreign Investment In Nuclear Energy In India

Nations across the globe have announced their net zero targets and other climate action commitments. Each country is pursuing its own pathway to achieve the net zero goal considering the resources...
India Government, Public Sector
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Foreign Investment in Nuclear Energy in India

Nations across the globe have announced their net zero targets and other climate action commitments. Each country is pursuing its own pathway to achieve the net zero goal considering the resources available to it.

In this background, in December 2023, the Government of India announced that it has initiated steps to increase the nuclear power capacity of India from 7,480 MW to 22,480 MW by 2032. The press release also mentioned that construction and commission of ten reactors aggregating 8,000 MW is underway in the states of Gujarat, Rajasthan, Tamil Nadu, Haryana, Karnataka and Madhya Pradesh. In addition, pre-project activities in respect of ten reactors accorded sanction by the Government has been initiated which are scheduled for completion by 2032.

The Government has also accorded in-principle approval to set up a 6 × 1,208 MW nuclear power plant in cooperation with Westinghouse Electric (USA) at Kovvada in the state of Andhra Pradesh.

Current legal framework for private/foreign investment in nuclear energy in India

Under the Atomic Energy Act, 1962, as amended (the "Atomic Energy Act"), only the Government has the power to produce, develop, use and dispose of atomic energy "either by itself or through any authority or corporation established by it or a government company." A "government company" is defined under the Atomic Energy Act as a company in which at least 51% of the share capital is held by the Government.

The Consolidated Foreign Direct Investment Policy dated October 15, 2020 issued by the Department for Promotion of Industry and Internal Trade, Ministry of Corporate and Industry, Government of India (the "FDI Policy") lists "atomic energy" as a sector not open for private sector investments.

The FDI Policy also states that a citizen of, or an entity incorporated in, Pakistan is not permitted to invest in the atomic energy sector in India.

A press release dated September 16, 2020 issued by the Department of Atomic Energy stated as follows: "The present policy (Consolidated FDI Policy of Government) puts atomic energy in the list of prohibited sectors. However, there is no restriction on FDI in the nuclear industry for manufacturing of equipment and providing other supplies for nuclear power plants and related other facilities."

In May 2023, a government panel set up by think-tank Niti Aayog considered the potential role of small modular reactors (SMRs) and related technologies for energy transition as they offer flexible operations. As per the International Atomic Energy Agency, SMRs are nuclear reactors with a power generation capacity ranging from 30 MW to 300 MW.

Key characteristics of SMRs are:

  • they are physically a fraction of the size of a conventional nuclear reactor;
  • they are modular, making it possible for systems and components to be factory assembled and transported as a unit to a location for installation; and
  • they harness nuclear fission to generate heat for electricity production.

The report issued by this panel provided an overview of the licensing framework for SMRs while noting the importance of standards, safety and safeguards. Importantly, the report recognized the importance of private sector participation in SMR development. It noted that conventional nuclear power projects thus far have massive involvement from governments and entities promoted by governments; however, constrained government budgets necessitate the involvement of private capital to catalyze growth in this sector.

Level of screening for foreign investment in the energy sector has increased globally

Globally, the level of screening for foreign investment in the energy sector has increased significantly over the years. This has been further exacerbated by geopolitical fissures that have emerged over the last 24 months.

In the United States, the Committee on Foreign Investment in the United States has competence to regulate two types of foreign investment. First, where a foreign person acquires "control" of a US business, and second, where the investment relates to a business involved with "critical technologies", "critical infrastructure" or sensitive personal data of US citizens. In the energy sector, these rules apply to a wide range of infrastructure but not to supply activities. In addition, investments in energy-related technologies may be deemed a critical technology transaction if the technology qualifies as an "emerging and foundational technology".

The EU FDI screening regulation lists inter-alia critical technologies (which include nuclear technologies) among the factors which member states and the European Commission will consider when assessing whether an investment may affect security or public order.

The national security screening regime in the United Kingdom (UK) imposes mandatory filing obligations for investments in companies that are active in specified sensitive areas. These sectors include civil nuclear, covering nuclear power production and related activities, and energy.

As examples of conditions that may be imposed by the national security screening regimes, in 2016 the UK investigated a proposal by Électricité de France (EDF) to form a joint venture with China General Nuclear Power for the construction and operation of a nuclear plant in England. The UK government ultimately approved the transaction subject to a condition that prior approval of the UK government would be sought for any sale of EDF's stake in the nuclear plant joint venture company. More recently, in August 2023, EDF's acquisition of shares in General Electric's nuclear turbine business in the UK was conditionally cleared. Conditions imposed by the UK government while approving this transaction included arrangements to protect sensitive information, appointment of a government nominated board observer, establishment of a steering committee to provide oversight over compliance with security requirements and maintenance of capacity for Ministry of Defence programs.


To facilitate private/foreign investment in the nuclear energy sector in India, amendments to the Atomic Energy Act and the FDI Policy will need to be considered.

If such amendments are made, it can also reasonably be expected that there will be conditions for FDI in nuclear energy similar to other sectors perceived as sensitive from the perspective of national security. Additionally, the Government's pre-existing rules on investments from countries which share land borders with India will provide an added layer of restriction.

This insight/article is intended only as a general discussion of issues and is not intended for any solicitation of work. It should not be regarded as legal advice and no legal or business decision should be based on its content.

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