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Cabinet clears ‘generation-based incentive’ for wind power projects

According to reports, the Centre has formally approved the ‘generation-based incentive’ scheme for wind power projects — a promise that was made by Finance Minister P. Chidambaram in his Budget speech of 2013-14. The scheme was approved by the Union Cabinet of Ministers which met on August 1, sources in the know told Business Line.

It is learnt that the Government of India will provide an incentive of 50 paise per kWhr of electricity generated by wind projects registered under the scheme. The incentive will, however, stop once the payout reaches Rs 1 crore per MW of capacity.

The incentive of Rs 1 crore can be drawn in not fewer than four years and not more than 10.

In his Budget speech, the Finance Minister had said that he would provide Rs 800 crore towards the scheme.

It is understood that the scheme will take effect retrospectively. This means that projects set up last year too will be eligible to register themselves under the scheme. It is, however, not clear at the moment whether or not they would get ‘arrears’ for last year’s generation.

On the issue of ‘accelerated depreciation’, it is learnt that no decision has been taken. This is a fiscal sop that allows profit-making companies to put up windmills and write down 80 per cent of the cost of the windmill as ‘depreciation’ expenditure and, hence, reduce income-tax. A Committee of Secretaries, comprising the Secretaries of the Ministries of New and Renewable Energy, Power and Finance, are considering the issue.

Industry analysts look at even this as a positive, because until recently it looked as though ‘AD’ would not be allowed, given that the Ministry of Finance was opposed to it. But now there is hope.

Formal approval of the GBI scheme, even if well-flagged in the Budget speech, should bring cheer to the wind industry, which has been facing a plethora of problems. In Tamil Nadu, the windiest State, there is the issue of lack of sufficient transmission infrastructure to take the electricity to consumers. In most States, acquiring land and securing ‘right of way’ for taking turbines, blades and towers, are big issues.

Electricity distribution utilities in some States such as Gujarat and Rajasthan are not signing power purchase agreements. According to the Wind Independent Power Producers’ Association, there are 470 MW worth of commission-ready wind turbines that are idle because of the delay in signing the PPAs.

On top of all this, the recent order of the Central Electricity Regulatory Commission mandating wind power producers to provide a forecast of their generation the following day on a quarter-hourly basis or face penalties has cast a pall of gloom on the industry. The order has been challenged in the Courts.

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