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Denial of incentives ‘will kill’ wind power industry 

Credit:  R. Yegya Narayanan | Business Line | www.thehindubusinessline.com ~~

Coimbatore, Jan 25:

Installation of new wind power generation units in the country has fallen dramatically this year due to non-extension of tax and fiscal incentives. Denial of incentives will choke the growth of the industry, according to a senior executive of the Indian Wind Turbine Manufacturers Association.

He also expressed the fear that the mounting dues from the Tamil Nadu Generation and Distribution Corporation Ltd (Tangedco) to the wind power producers would lead to flight of investment from the State in this sector.

Speaking to Business Line here on Thursday, D.V. Giri, Secretary-General, IWTMA, Chennai, said that as at the end of December 2012, the installed capacity of wind power generation was 18,120 MW in India. The wind power generation potential of the country was earlier estimated at 49,000 MW when the turbine blade size and the tower size were smaller.

With taller towers and bigger turbines coming into use, the potential has been revised to 1,09,000 MW. But while a satellite study by a foreign agency has shown the potential to be 400,000 MW, according to conservative estimates it should at least be 2,50,000 MW. The country, ranked fifth in the world among wind power producers, is set to dislodge Spain to grab the fourth place in the current year.

Giri said with the technological advances made in recent years, the plant load factor of wind power units had increased from 15-16 per cent to 50-60 per cent during the peak wind season. The turbine capacity now ranges from 250 kw to 2.1 MW. The manufacturing capacity of the industry has also gone up to 9,500 MW of wind turbines.

He said during 2011-12, the country registered the largest installation in a single year of 3,196 MW of wind power. The rush to install was because the Accelerated Depreciation (a tax deferral for profit making companies to hedge tax) and Generation Based Incentive (GBI) of 50 paise per MW were both to end by then.

He said 2012-13 witnessed a precipitous fall in the installation of fresh wind power generation capacity since we “neither have a policy of Accelerated Depreciation or of Generation Based Incentive’. During April-September 2012-13 FY, the new capacity added was a mere 844 MW compared to 1,400 MW in the same period in the previous fiscal. By December end this touched 1,020 MW and even if an additional 600-700 MW capacity was installed during January-March 2013, the total addition for the year would be 1,700-1,800 MW that was about 40 per cent less than last year.

Giri said the industry was not asking tax incentive exclusively for itself nor was this limited to India alone. When the government could give Accelerated Depreciation to coal-fired boilers that were polluting he wondered why it was being denied to a non-polluting power generating activity. The investment on equipment for the wind power generation capacity installed so far would be about Rs 12,000 crore and even if the duty paid on the raw materials was taken into view it would be substantial compared to the tax deferral.

He pointed out that before the GBI was offered, the investment in wind power generation was made by those interested in the Accelerated Depreciation (AD) as a tax incentive or for captive use of power. But now the profile of customers has changed from individuals or companies to Independent Power Producers (IPPs) keen to put up wind farms of 50 MW to 100 MW who want to have a 17-18 per cent post-tax return.

Giri feared that if the Government failed to extend the tax and fiscal incentives, it would “kill the industry” and the capacity addition would come down to 1,000 MW a year.

With regard to the outstanding power dues to the wind power producers in Tamil Nadu by Tangedco, he said it could be in the region of about Rs 3,000 crore as of now. It had assured to clear the dues for the October 2011-March 2012 period by the end of this month. But as this was a lean season for wind power, the amount would just be around Rs 300 crore out of Rs 3,000 crore it owed. He said this was also affecting fresh investment in wind power generation in the State.

He said Tangedco’s purchase price for wind power was the lowest among the States in the South. While Andhra Pradesh paid Rs 4.70/unit, Kerala paid Rs 4.77 per unit and Karnataka paid Rs 3.70. But in Tamil Nadu, the price paid was only Rs 3.51 per unit. Also, Tangedco charged Rs 1.37 per unit of power under various heads if there was captive use or group captive sale of power, all of which worked as a disincentive for investment in wind power generation in the state.

Source:  R. Yegya Narayanan | Business Line | www.thehindubusinessline.com

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

The copyright of this article resides with the author or publisher indicated. As part of its noncommercial educational effort to present the environmental, social, scientific, and economic issues of large-scale wind power development to a global audience seeking such information, National Wind Watch endeavors to observe “fair use” as provided for in section 107 of U.S. Copyright Law and similar “fair dealing” provisions of the copyright laws of other nations. Send requests to excerpt, general inquiries, and comments via e-mail.

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