Tax benefit scheme restored for wind energy sector

In a move that will bring cheer to the wind energy sector, the Centre has reinstated the 80 per cent accelerated depreciation (AD) scheme for the sector through the Finance Bill.

AD is a tax benefit scheme that can be availed by anyone setting up or investing in a wind energy farm. Eighty per cent of the project cost is paid back if it is commissioned before September 30 of the financial year or 40 per cent of the cost if commissioned before March 31.

With the restoration of AD, the sector now has the two beneficial schemes. The other scheme is generation-based incentive (GBI) of 50 paise a unit of wind power produced, introduced in the 2011 Union Budget.

There was some confusion about the accelerated depreciation scheme this year, as the Budget speech in English did not mention it, while the Hindi version did.

“We would see a capacity addition of about 1,000 Mw of wind power during the current financial year, taking the cumulative amount to 3,000 Mw,” said a member of Indian Wind Turbine Manufacturers Association, adding the tax benefit would make sense by the next financial year.

Of the current capacity of 21,100 Mw of wind power, the installation under AD is 14,400 Mw. About 6,700 Mw was built under the GBI scheme.

“We will see massive scale-up of wind power, which suffered in the past two years due to confusion over incentive schemes,” said the Indian Wind Turbine Manufacturers Association member quoted above.

Till April 2012, the sector enjoyed two fiscal benefits — AD and GBI. AD had been in force for the industry since 2003 till 2012, when it was withdrawn.

GBI, announced in 2011 was discontinued in 2012, only to be reintroduced in 2013 in the Union Budget.

During the interim period of about a year, the sector was without any financial assistance, leading to a 50 per cent fall in capacity addition in 2012-13 to 1,700 Mw, compared with the previous year.