To pitch for restoration of Accelerated Depreciation, ‘Generation-Based Incentive’ benefits

The Minister for New and Renewable Energy, Dr Farooq Abdullah, is scheduled to meet representatives of the wind power industry on August 1.

This comes in the backdrop of wind power capacity addition being estimated to work out to half of what it was last year.

Much is not well with the Indian wind industry today.

‘Accelerated Depreciation’ is gone, ‘Generation-Based Incentive’ is gone and the industry is preparing to make a strong pitch for restoration of these benefits.

Describing the situation on the ground as “pathetic”, Mr Ramesh Kymal, President, Indian Wind Turbine Manufacturers and Chairman and Managing Director, Gamesa India, says that unless urgent steps are taken, wind power capacity addition in the current year may not exceed 1,500 MW.

That would be half of what it was last year — at a time when China is doubling its capacity year after year. To put this further in perspective, the installed wind power capacity in India is a little over 17,000 MW. In China it was 62,000 MW in 2011.

The removal of Accelerated Depreciation and Generation-based Incentive benefits are only a part of the problem. The other part is, well, Tamil Nadu.

Tamil Nadu, the windiest state in the country and credited with having spawned and nurtured the wind power industry, until recently played the role of the sheet anchor to the industry. So much so, the industry had come to look up to Tamil Nadu as the rain maker.

But now, things have got inverted. The environment in the State has turned negative. Too many things have happened in the recent past against the industry and further clouds are looming overhead. First, the state utility, Tangedco, has not been paying the wind power producers their dues—in some cases, for as long as over a year. This has affected the investor sentiment.

In the first quarter of the current year, Tamil Nadu added 80 MW of wind power, while in the same period last year, it did 180 MW.

Inadequate infrastructure

Second, not only is there inadequate evacuation infrastructure, but also even where it is there, the grid is not being made available to wind power producers — despite their having paid ‘transmission charges’ and ‘infrastructure development charges’.

Higher transmission charges

Third, the state electricity regulatory commission recently hiked the transmission charges for ‘open access’ consumers. The increase was huge. For instance, for short term open access, the charges went up from Rs 28.96 per MWh to Rs 270.11. This is not good for the wind developers who take the ‘group captive’ route, for the income they would get from the ‘renewable energy certificates’ will only be enough to pay the transmission charges.

And now, Tangedco wants to remove the ‘banking facility’, which enables a wind power producer to ‘bank’ the power produced—put into the grid today, and draw it another day within a specified period.

Further, the tariffs fixed years ago expired on March 31, 2011, and the state’s regulator is yet to come up with revised (higher) tariff. This is expected to happen soon, but there are uncertainties about the quantum, and an apprehension that it may not be enough, given that the Commission is bound to take into consideration the paying capacity of the state utility, Tangedco, which is very poor.

Tamil Nadu does not allow any power produced within the state to be sold to consumers outside the State, invoking powers given under the Electricity Act, which are to be used under emergency conditions.

There is a pervasive negative perception about the industry, with Tangedco alleging cartelisation and holding the ‘banking facility’ responsible for its own bad financial condition.

If this is the situation in Tamil Nadu, things are not much better elsewhere. In Rajasthan, there are payment delays. In Karnataka and Maharashtra, developers are beset by land-related issues.

Tough times for wind companies

Against this backdrop, the wind industry is hoping that Government of India would bring back at least the Generation-based Incentive. When the scheme was in vogue, it paid 50 paise a unit to green power, but the payout was capped at Rs 62.5 lakh a MW a year. The scheme was to last either until it covered 4,000 MW of capacity or till March 31, 2012, whichever came earlier. The deadline came first, although only less than 2,000 MW have been covered under the scheme.

The wind industry’s plea is that the Generation-based Incentive scheme could be kept alive until 4,000 MW of capacity comes under it.

This being the state of the industry, companies like Gamesa, Suzlon, Enercon, Regen Powertech and Vestas will find the going tough this year.

On August 1, the wind industry may convince Dr Abdullah that they have a case. But the point whether the Minister will be able to get the Ministry of Finance loosen purse strings or not, is moot.

mramesh@thehindu.co.in

(This article was published on July 25, 2012)
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