The Hindu Business Line : Allow duty-free import of renewable energy equipment

When developed countries with abundant resources are encouraging the renewable energy sector, particularly wind energy, why is India not actively promoting this sector. This is what Mr Ramesh Kymal, Managing Director, Vestas India, a leading wind turbine manufacturer, has to convey as he makes out a case for the Government to not only promote the renewable energy sector, but also facilitate the local manufacture of all parts of a wind turbine.

The Centre should ensure that the latest technology is available to consumers in India. For this, it needs to remove customs duties on wind turbines, which account for 18-20 per cent of the cost of the machine. Besides customs duties, "some irrational things" like CVD (countervailing duty) has crept in on the blades used in wind electric generators. This adds 4 per cent to the cost of the blades, he says.

"To bring in new technology into the country, they should make renewable energy equipment duty free like it was in the 1990s," says Mr Kymal, who is also the Chairman of the Indian Wind Turbine Manufacturers Association, a representative body of wind turbine manufacturers in the country.

A FILE PHOTO of a wind farm.

He asserts that if the Government were to completely do away with the customs duties and CVD on blades, the turbine manufacturers would definitely pass on the cost reduction to the customers. "It is such a competitive market," he says and adds that with the tariffs paid by State power utilities being what they are, any such cost reduction will only help to make an investment in wind turbines viable.

He advocates the introduction of a production-based incentive, something that has been adopted in the US. The wind industry is not asking for any subsidy. Instead, it would like a production tax credit introduced in India. Those investing in wind turbines now do so either for the depreciation benefits they get or for their own use. Those investing in the sector for tax planning purposes would switch over to another investment avenue if they found it more attractive.

A production tax credit, therefore, would be a tradable tax certificate that would involve paying a fixed amount for each unit of electricity generated. This could be given in lieu of depreciation benefits. The investor, if he cannot use the tax credit, can choose to trade it with somebody else who needs it.

He would also like to see the Government allocate adequate resources in improving the national transmission grid, especially in linking the southern grid with the national grid. The association had commissioned a study on the grid evacuation issues. "We need the Central Government or PowerGrid to complete that connection (linking the southern grid with the national grid)," says he. The evacuation infrastructure within Tamil Nadu, which leads the country in wind turbine installations, is inadequate because of which the wind mills were forced to shut down last year during the peak wind season. This dampened investment climate resulting in some investors putting up windmills in Maharashtra, a State with the most progressive wind energy policy, according to him.

Part of the problem is that even officials in the Planning Commission consider wind energy as something esoteric. Even till recently, they believed that wind turbines had a plant load factor of only 12 per cent, when now with efficient turbines and advanced technology, the plant load factor is close to 30 per cent, says Mr Kymal.

The wind potential in India is estimated at close to 100,000 MW, a figure that Mr Kymal believes could be much higher. Even at that figure and a PLF of 30 per cent, the wind turbines alone could feed 30,000 MW into the grid. "What a fantastic difference it will make at constant prices, no imports, no foreign exchange outflow," he says.

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