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Government may continue breathing incentives into wind energy sector

According to reports, the Ministry of New and Renewable Energy is seeking extension of existing incentives for the wind energy sector in the upcoming Union Budget. This would ensure growth momentum in the coming years after the sector added record 10,500 megawatt in the 11th five year plan, government and industry officials said.

The sector is expected to add another 15,000 mw in the next five years. In the past, wind energy has thrived even as other sectors missed targets. It was helped by generation-based incentives to independent power producers and accelerated depreciation available to captive users – both of which expire in March.

“We were earlier of the opinion that ‘accelerated depreciation’ may be discontinued and ‘generation-based incentive’ could be continued to encourage more independent power producers. But the industry feels that rolling back any of these incentives right now would hurt capacity addition,” a senior official from the ministry of renewable energy said.

Ramesh Kymal, CMD of the Indian subsidiary of Spain’s Gamesa, said, “Accelerated depreciation has been the driver for the wind industry for the past 15 years. If it is rolled back, India’s capacity addition would fall to less than 1,000 mw every year from 3,000 mw.”

According to industry experts, in the past few years, almost 70% of the new wind capacity has been added by entities under the ‘accelerated depreciation’ route. Under this, investors, mostly setting up capacity for captive use, can take advantage of up to 80% of the project cost if the project is commissioned before September 30 of the financial year, or 40% if the project is commissioned before March 31 of the financial year.

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