India - Wind energy producers seek performance based incentives

The Indian Wind Energy Association (InWEA) has made a formal submission to the Finance Ministry, requesting a change in the prevalent tax incentive scheme for the wind energy sector in the country. InWEA has sought the introduction of a performance-based incentive system. The new system is expected to accelerate growth of the wind energy sector in India. InWEA has suggested that the existing provision of an accelerated depreciation regime be reduced to a normal depreciation regime, and the indirect fiscal benefits provided as tax foregone be linked to performance. To enable a smoother implementation of a change in the tax structure, InWEA proposes the introduction of tax credit certificates (TCCs), moving away from the current system of accelerated depreciation. The proposed TCCs would expand investor base and reduce the cost of wind electricity to utilities.

With the Kyoto Protocol aimed at reducing greenhouse gas (GHG) emissions across the globe coming into force effective from February 16, 2005, the need to look at the wind energy sector assumes greater significance than ever before. Wind energy's lack of greenhouse gas emissions makes it one of the most promising technologies for solving the long-term problem of climate change. Reducing GHG and contributing to sustainable development, wind energy has been identified as one of the energy sources that can achieve the dual objective of the Clean Development Mechanism (CDM) under the Kyoto protocol. According to Dr Anil Kane, Chairman, InWEA, “While the existing provision of an accelerated depreciation benefit has undoubtedly given a noticeable fillip to the development of the market for different renewable energy technologies, the time has now come to take the wind energy sector to a higher level of performance. Performance-based incentives will help attract more investors as well as make electricity available to consumers at a lower cost”.

In order to keep pace with the rest of the world, to maintain its leadership position in renewable energies and to move towards greater energy security, India needs to have an enabling framework in place. There is a need to review the existing framework for the promotion of the renewable energy sector in India in order to ensure that it reaches a self-sustaining stage of growth within the earliest possible time.

India is already the fifth largest producer of wind energy in the world and has one of the largest renewable energy programmes across the globe. With an installed capacity of over 2,800 MW of wind energy as of September 30, 2004, wind energy accounts for about three per cent of the overall generation capacity in the power sector. India now has indigenous wind-energy equipment manufacturing capacity in excess of 1000 MW per annum. There has been a manifold increase in capacity installed from about 30 MW in 1990 to nearly 3000 MW at the end of 2004.