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Karnataka takes wind out of renewables

According to reports, the wind farms of Karnataka that loom in the interior could well be on Mars. As for the rest, they remain on someone’s drawing board…Of the 609 allocated projects, only 37 projects have taken off. The others remain in limbo. The state’s unfriendly laws, makes it difficult to bring in the big bucks that are needed.

The only reason an entrepreneur invests in wind energy projects today is for the income-tax subsidies. Therefore, the idea that wind energy will even begin to help the State tide over a power-deficit is still far fetched. But many private players find it lucrative to set up wind farms. They pull in smaller investors who get to enjoy tax benefits as the income-tax laws allow 80 per cent of the cost of the windmill to be set off against taxable income, said Sridhar Prabhu, an expert on wind energy.

“The green energy tag also offers more benefits under Section 80 (i)(a) – where income from power generation gets a tax holiday for 10 years, if the investor is himself the operator,” adds Prabhu. Karnataka, with its potential to generate 11,500 MW from wind energy has found it hard to find genuine entrepreneurs to take up the allocated projects. Reason? The State policy is very discouraging to generation companies as they are expected to supply power at a generic tariff of Rs 3.75 per unit, which is rarely revised. In contrast, the distribution companies (Escoms) get a tariff revision every year. The policy also bars third party sales, which could have helped investors break even through differential pricing of power supplied to a third party, point out experts.

“The capital costs are huge. Installation cost to harnesss just one MW of power is about Rs 7 crore. Strangely, the investor has to bear the cost of setting up transmission lines and substation too (to link up to the State grid). He also pays network augmentation charges of Rs 5 lakh/ MW to the government. The investor faces Right of Way problems while setting up transmission lines as it traverses both private and forest lands,” explains Prabhu. Another reason why wind energy projects are not viable is because good quality sites Grade A and B, have been taken up prior to 2008 – in Gadag and Chitradurga. Ironically, no exhaustive mapping of potential sites, wind data, project feasibility study with respect to installation cost and policy framework tariff have been carried out.

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