According to reports, solar and wind energy companies are waiting for the government to clear subsidies amounting to more than Rs 1,000 crore as they stare at potentially unviable projects which they had launched due to the promise of incentives.
The ministry of new and renewable energy is unable to pay the promised subsidies since it has received just a third of its budgetary allocation of Rs 1,521 crore for 2013-14, officials said, adding that to make matters worse, the allocation for the next fiscal has been reduced by as much as 71% to Rs 441 crore.
India offers generation-based incentives to wind energy projects and small solar projects of 100 kW to 2 mw to help them compete with conventional energy.
“The delay in disbursement of incentives comes at a time when some developers are already facing delays from the state utilities in payments. This is impacting cash flow and the ability of developers to repay loans,” Sumant Sinha, founder, chairman and chief executive of ReNew Power Ventures, told ET.
The government had last disbursed the incentives to wind energy companies in August 2013 for April-September 2012. The total backlog is at least Rs 600 crore, developers said. The amount pending for solar energy companies is about Rs 550 crore, ministry officials said.
“The disbursement of capital subsidies is getting delayed since the market is growing very fast and we don’t have the resources to pay out. But we have been given the confidence that money will be released from the National Clean Energy Fund,” said Tarun Kapoor, secretary in the ministry of new and renewable energy.
India aims to add 30,000 mw of renewable power capacity in the next four years, doubling it from the current capacity. The expansion of wind energy, and more recently solar power capacity in the last few years has been driven primarily by incentives.
“If the government offers incentives, it should either pay or remove it and let the industry survive on its own. Farmers get electricity for free, so why would they want to invest in a solar power pump which is more expensive than a regular pump if there is no subsidy?” asked Dinesh Patidar, chairman and managing director of Shakti Pumps. His firm has recently launched solar water pumps, which get a total subsidy up to 86% of the capital cost.
India launched incentives for renewable energy in the 1990s, accelerating capacity addition, especially in wind energy. Local and international firms and investors thrived on the incentives and upped their investment in the country while individual investors like cricketer Sachin Tendulkar and film actor Aishwarya Rai were attracted to the sector.
In 2007, the government introduced generation-based incentives for wind and solar power in an attempt to weed out non-serious players and increase participation of independent power players. The next big step by the government was introduction in 2010 of the National Solar Mission, a programme to add grid-connected solar power capacity.