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Incentives for wind power producers to be simplified

According to reports, ahead of the Union Budget next week, the ministry of new and renewable energy has taken up the issue of accelerated depreciation (AD) benefit with the ministry of finance.

The issue of providing additional funding for generation-based incentive (GBI) and wind activities would also be taken up with the finance ministry, power and coal minister Piyush Goyal said on Tuesday.

Goyal held an interactive meeting with all the stakeholders in the wind sector here. The representatives from four wind associations — Indian Wind Turbine Manufacturers Association (IWTMA), Wind Independent Power Producers Association (WIPPA), Indian Wind Energy Association (InWEA) and Indian Wind Power Association (IWPA) — were called for discussions. The officers from MNRE, IREDA and C-WET were also present.

In order to increase the corpus under National Clean Energy Fund (NCEF), the issue of higher cess on coal also came up for discussion. It was proposed the cess be increased from Rs 50 to Rs 100 a tonne. It was suggested there should be a long-term sustainable regulatory framework so that bigger projects could be planned.

Goyal asked IREDA to simplify the procedures for GBI releases and make them more transparent. The minister said a Global Investors’ Meet of all renewables would be organised in November, 2014 for which he suggested to have a committee comprising of stakeholders in the renewable energy sector.

The minister also mentioned he would like to interact with the stakeholders on a quarterly basis. Detailed discussions on various issues in the sector were held and suggestions for remedial solutions were invited.

According to the industry, AD benefit is not a loss to government rather it is a deferment of income tax. In addition, the government loses other taxes (MAT, service tax, central sales tax, etc.) in a situation of no investment because of the absence of AD. The industry cited this as the reason for restoration of AD benefit. It was requested that the government should increase funding for GBI, as there are pending claims of GBI of the order of Rs 300 crore.

Augmentation of transmission and evacuation facilities by state governments is another major issue, which needs to be improved. There was a loss of around 2.1 billion units in Tami Nadu alone during windy season (May-August) last year on account of putting the wind turbines off-grid, the associations informed the minister.

Requirement of enforcement of renewable purchase obligation (RPO) was emphasised by the industry. This will create the market for REC mechanism. It was mentioned by the developers that the wind sector has not yet reached to a stage to go for competitive bidding and, therefore, the route of feed-in-tariff (FIT) should continue.

Timely payment of electricity generated from wind projects is another necessity. A payment guarantee fund was proposed. Signing of PPA is uncertain in some states. It was also suggested that renewables should be categorised under the “priority sector” by RBI. Wind energy is the largest renewable energy option producing clean energy in India. A cumulative capacity of over 21,200 Mw has been set up so far. A target of 15,000 Mw has been kept for the 12th Plan. The main driving force and the real incentive for development of wind sector has been the provision for AD, an incentive also available to many other sectors.

This provision has enabled large profit-making companies, small investors and captive users to participate in the sector. The AD benefit was withdrawn from April 1, 2012. This has resulted in sharp drop in wind power addition in the last two years. A capacity of only 1,700 Mw in 2012-13 and 2,079 Mw in 2013-14 was installed as compared to 3,097 Mw in 2011-12 when AD was also available.

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