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As wind subsidies are slashed, investment falls

According to reports, sustainable energy has been the talk of the town ever since global warming upped the temperature in seminar halls. But do policy wonks walk the talk?

A year after the state peaked in attracting investment in windmills, there has been sharp decline in the flow of funds into the sector. Wind energy producers blame the shift in trend to some of the policy decisions announced by the Centre in recent months.

  K Kasthurirangian, chairman, Indian Wind Power Association, says investment last financial year upped wind power generation by 3,200MW across the country. This year saw a sharp decline in fund flow: capacity has been augmented by just about 207MW.

The main cause for deceleration in investment in wind power is the withdrawal of incentives given to producers, according to Kasthurirangian. The Centre has been giving 80 per cent of accelerated depreciation to the wind power producers. This would mean subsidies that allowed domestic firms to save the costs incurred in the maintenance of windmills through tax savers and enabled them to invest in new windmills. Foreign firms were given a subsidy of 50 paise per unit produced, said Kasthurirangian.

However, the Union government scrapped these incentives from April 1 this year which has acted as dampener for investors. Kasthurirangian argues that energy requirement is likely to grow at 10% every year and new power generation infrastructure needs to be built at the rate of 10% to 14%.

Tamil Nadu used to buy private wind power at Rs3.39 per unit which has now been raised to Rs 3.51, whereas Maharashtra pays Rs5.75 per unit. Producers have been demanding at least Rs 5 per unit, which the state government has not heeded.

Kasthurirangian added that the wind power association is in talks with the ministry of new and renewable energy, the planning commission and the finance committee to facilitate policy changes that would encourage investors and increase power generation.

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