Ritesh: AD for wind is a misdirected benefit as the power cannot be scheduled nor used for almost half the year.
It is champagne time for the wind industry and thanks to the Finance Minister. The restoration of the long-awaited ‘accelerated depreciation’ is just a formality away.
The government will move an amendment to the Finance Bill to bring back the tax-saving benefit and the measure will come into force as soon as the Bill is passed by the Parliament, i.e., before July 31.
Profit-making companies will now have an option of putting up wind power turbines and write-down 80 per cent of the cost of the machines — about Rs 6.5 crore a MW – as depreciation for the purpose of calculating taxable profits.
Wind industry experts say this move will have an impact of creating 1,000 MW of wind power capacity in a year; in the current financial year (2014-15), about half of it could be expected to come.
1,000 MW of capacity would mean investments of about Rs 7,000 crore. “We expect direct employment of 20,000 and indirect employment of 10,000 people during the manufacturing and project execution phase and 2,000 people on long term basis for operations and maintenance for 1,000 MW,” says Madhusudhan Khemka, Chairman of the Indian Wind Turbine Manufacturers’ Association.
The ‘accelerated depreciation’, introduced in the early 1990s, was what gave a leg-up to the industry in its infancy. (The wind energy companies (independent power producers), who got into the business for producing and selling electricity came in only in the recent years.)
Many medium and large enterprises in the windiest state of the country, Tamil Nadu, took to putting up windmills to save on taxes. The accelerated depreciation was therefore chiefly responsible for the bulk of the 22,000-odd MW of wind capacity the country has today.
Earlier, those who did not avail themselves of accelerated depreciation could use another incentive that gave 50 paise for every unit of electricity generated, subject to a cap. Both this ‘generation based incentive’ and accelerated depreciation were withdrawn on March 31, 2012.
Wind installations fell to 1,700 MW in 2012-13 from 3,168 MW in 2011-12, thanks to the killing of the incentives. In the following year the generation based incentive was brought back, and this helped fresh installations to climb to 2,160 MW in 2013-14. The industry continued to lobby for restoration of the accelerated depreciation, an effort that is now coming to fruition.