Wind Trouble

Ashish K Mishra
Updated: Apr 3, 2012 05:15:46 PM UTC

Has Pranab-babu taken the wind out of the sails for wind power generation in India?  Starting April 2012, the accelerated deprecation scheme, which for decades has been the mainstay of the wind energy sector in India, will come to an end. Earlier yesterday the Government of India notified that companies can no longer claim the 80 percent depreciation they used to on putting up a wind turbine. According to a circular posted on the Income Tax department’s website, wind mills installed post 31st March 2012 can claim only a standard depreciation rate of 15 percent. Ouch!

This spells bad news for wind turbine manufacturing companies like Suzlon Energy, Gamesa India, RRB and others. That’s because the incentive to invest in wind energy comes down. Accelerated depreciation accounts for almost 40 to 50 percent of the wind market in India. A senior executive at India’s second largest wind turbine manufacturing company said that customers had been calling him frantically to ask what depreciation they would get on their uninstalled capacity.

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It is another matter altogether that the accelerated depreciation regime hasn’t been a great thing for harnessing India’s wind potential. In the past customers have used the scheme solely for tax breaks. “Where non-performing turbines have been put in the ground to get depreciation benefits, that scheme must be abolished but to altogether scrap the scheme without offering substitute lucrative options is not good,” says the official who did not want to be quoted. In the past several companies in the textile sector and even celebrities had invested in wind. The end of accelerated depreciation weeds out those customers from the market.

 

The thoughts and opinions shared here are of the author.

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