Wind power industry seeks restoration of accelerated depreciation benefit

Representatives of the wind power industry, during an interactive meeting with minister of power, coal and renewable energy Piyush Goyal on Tuesday, sought restoration of the benefit of accelerated depreciation (AD) to the industry to revitalise the sector.

Accelerated depreciation, an incentive also available to many other sectors, has been the main driving force and the real incentive for development of wind sector in the country. However, the benefit was withdrawn from 1 April 2012, which resulted in sharp drop in wind power addition in last two years.

They pointed out that the provision of accelerated depreciation benefit is not a loss to the government, rather it is a deferment of income tax. In addition, the government loses other taxes (MAT, service tax, central sales tax etc) in a situation of no investment because of absence of AD.

They also sought increased funding for Generation Based Incentive (GBI) as the pending claims of GBI have risen to Rs300 crore.

Lack of adequate transmission and evacuation facilities by state government is another major issue facing wind power units. It was pointed out that there was a loss of around 2.1 billion units in Tamilnadu alone during windy season (May-August) last year on account of putting the wind turbines off-grid.

In order to increase the corpus under National Clean Energy Fund (NCEF), it was suggested that the cess on coal may be increased from Rs50 to Rs100 per tonne.

Representatives of wind energy companies suggested formulation of a long term sustainable regulatory framework, so that bigger projects could be planned. Besides, they suggested enforcement of Renewable Purchase Obligation (RPO) in order to create market for REC mechanism.

Since developers of the wind sector have not yet reached a stage to go for competitive bidding, it was suggested that the route of Feed-in-tariff (FIT) should continue. Signing of PPA is uncertain in some states, they pointed out.

The industry representatives proposed the setting up of a Payment Guarantee Fund for ensuring timely payment of electricity generated from wind projects.

It was also suggested that the RBI categorise renewable energy as priority sector for lending by banks.

The minister said the issue of restoration of AD benefit has been taken up by MNRE with the ministry of finance.

Regarding provision of additional funding for GBI and other wind activities, the minister promised to take it up with ministry of finance. However, he said, much will depend on the availability of funds. He asked the MNRE officials to prepare the action points on the basis of the days discussions.

Goyal, meanwhile, asked IREDA to simplify the procedure for GBI releases and make it more transparent.

The ministry, Goel said, will organise a global investors meet of all renewables in November 2014, for which he suggested the setting up of a committee comprising stakeholders in renewable energy sector.

The minister also proposed to interact with the stakeholders of the renewable energy sector on a quarterly basis.

With a cumulative capacity of over 21,200 MW set up so far, wind energy is by far the largest renewable energy option producing clean energy in India. The government has targeted addition of 15,000 MW capacity in the 12th Plan.

The government has been promoting commercial wind power projects since 1993-94 through a host of fiscal incentives, which included accelerated depreciation.

The main driving force and the real incentive for development of wind sector has been the provision for Accelerated Depreciation, an incentive also available to many other sectors. This provision has enabled large profit making companies, small investors and captive users to participate in the sector.

The AD benefit was withdrawn with effect from 1 April 2012. This has resulted in sharp drop in wind power addition in last two years. Since then the country added only 1700 MW of generating capacity in 2012-13 and 2079 MW capacity in 2013-14, compared to 3097 MW in 2011-12 when AD was available. This apart, due to high penetration of wind into grid, many infrastructural and regulatory issues have started affecting the sector.

Representatives from four wind associations, ie, Indian Wind Turbine Manufacturers Association (IWTMA), Wind Independent Power Producers Association (WIPPA), Indian Wind Energy Association (InWEA) and Indian Wind Power Association (IWPA) participated in the discussions. Officials from MNRE, IREDA and C-WET were also present at the discussions.