According to reports, spending on new wind farms in India, the world’s third-largest market for turbine producers such as Suzlon Energy Ltd. (SUEL) and Gamesa Corp. Tecnologica SA (GAM), may stall as the country cut a tax break this month, industry officials said.
“Investment could come to a standstill,” said Arvind Prasad, managing director of developer Ushdev Power Holdings and head of the Indian Wind Power Association in Maharashtra state.
Farms built from April 1 are only able to claim so-called accelerated depreciation at 15 percent of the cost of equipment, down from 80 percent, according to a circular on the website of the Indian tax authority. Demand for wind turbines this fiscal year may drop by almost 400 megawatts, or about $540 million of orders, as a result, Bloomberg New Energy Finance said in July.
The tax break drove 70 percent of installations last year, according to the Ministry of New and Renewable Energy. Suzlon, Gamesa and Denmark’s Vestas Wind Systems A/S (VWS) are the biggest publicly traded turbine suppliers to the market, the Indian Wind Turbine Manufacturers Association says. Accelerated depreciation accounting allows developers to write off investments faster.
“The policy change takes away one of the key pillars of India’s success,” Suzlon said today in an e-mailed reply to questions. “India needs power for growth, and this step unfortunately pushes the country in the wrong direction.”
Accelerated depreciation has encouraged companies to erect most of India’s 16,179 megawatts of wind capacity to cut their tax rather than generate power, Renewable Energy Minister Farooq Abdullah said. The ministry has applied for Cabinet approval to extend an alternative incentive introduced in 2009 and which expired March 31 that rewards farms for the power they generate..