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Sops planned for renewable energy

According to reports, the government plans to announce a special package of fiscal incentives in the budget next month to boost the growth of the country’s renewable energy sector with a focus on increasing India’s wind power generation capacity to 60,000 MW by 2022.

Finance minister Arun Jaitley is likely to announce a slew measures in his budget including a 10-year tax holiday for wind power producers, concessions in customs duty and exemption in excise duty for procurement of technology and equipment for projects.

In addition, Jaitley may also increase the fund allocation for the ministry of new and renewable energy to enable it to increase support for green projects and research and development activities.

“Growth of renewable energy has become central to the development agenda of the new government. This has been seen with a series of initiatives announced by the government in this segment. The budget would take the initiatives further so that all the goals are realised,” said a government official privy to the development.

Apart from promoting wind power projects through incentive schemes, the budget may also announce a ‘National Offshore Wind Energy Policy’ extending further fiscal sops in the form of exemption from service tax for services like conducting wind resource assessment, environment impact assessment (EIA), oceanographic study, utilisation of survey vessels and installation of vessels for these projects.

Offshore wind projects are being considered for the first time in India and the government wants to extend all support to these capital-intensive projects that substantially improve the operational efficiency of wind power projects.

The ministry of new and renewable energy has been in the focus of the government with the ministry’s allocation more than doubling to Rs 956 crore in 2014-15 from Rs 438 crore (revised estimate) in the previous financial year. Sources said that this allocation could be doubled again in 2015-16.

The Budget 2013-14 gave a set of incentives for the wind sector. It reinstated generation-based incentive (GBI) that had resulted in the growth of the sector in the past. An incentive of 50 paise is provided for every unit of electricity generated under the GBI scheme. The government, also reinstated accelerated depreciation (AD) for wind sector last year. The AD scheme allowed investors to write down up to 80 per cent of the project cost as depreciation when calculating taxable profits.

The withdrawal of AD and GBI schemes in 2012 had for wind energy projects led to fall in capacity addition with a mere addition of 1,800 MW new capacity in 2012-13 as against 3,000 MW in 2011-12.

With regard to wind projects, the target of the NDA government is to increase the installed capacity to 60,000 MW by 2022 from a level of about 21,000 MW now by envisaging an investment of over Rs 10 lakh crore. The power minister has already indicated that all efforts would be made to add close to 10,000 MW of wind capacity every year for the next few years. It is this regard that offshore wind capacity is being given serious consideration.

“A note for the cabinet has already been moved by renewable energy ministry to approve the national offshore wind policy,” said a government source.

The policy will involve identifying areas where these offshore wind projects could be set up, facilitated by the National Institute of Wind Energy (NIWE). The government also plans to involve the petroleum ministry in the process to prevent an over lap of exploration and production activities with that of offshore wind projects.

“Coal-based thermal power would be optimum for India to meet its base load power requirements in the near medium-term while power generation from renewable sources should be ramped up to meet the peaking power requirement,” said Ratul Puri, chairman, Hindustan Powerprojects (HPPPL), formerly known as Moser Baer Projects.

About 7000 MW of offshore wind capacity has already been installed around the world and around the same capacity is under construction. Worldwide, wind energy is accepted as one of the most developed, cost effective and proven renewable energy technologies to meet increasing electricity demands in a sustainable manner.

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