Standard Post with Image

Govt to End Wind Farm Tax Break in FY13

  • The government will discontinue a tax break for wind farms starting in April, the beginning of the financial year, potentially stalling growth in a $3 billion market dominated by turbine-supplier Suzlon Energy Ltd.Accelerated depreciation will go away in April, Dilip Nigam, director of wind policy at the ministry of new and renewable energy, said in an interview in Mumbai on Tuesday.General Electric Co., Siemens AG, and Spain’s Gamesa Corporacion Tecnologica SA are expanding wind-turbine manufacturing capacity in India in a bid to take market share from Suzlon, the country’s biggest wind-turbine maker. New installations next year may fall 15%, or a decline of $540 million in investment, if the tax break ends, Bloomberg New Energy Finance forecast in July.

  • Accelerated depreciation allows companies to write off investments at a faster rate, helping reduce tax liabilities. Suzlon shares rose 3.1% to Rs. 23.2, the highest in more than a month, as of 2:39 pm in Mumbai. The benchmark Sensitive Index climbed 1.8%.The government has said it will end the incentive either on 31 March or with the introduction of a new taxation framework whichever comes first, Nigam said. In either case, it will end in April unless the government takes a special decision to surpass the previous decision.Demand could dip for about two years before growth resumes as the industry adjusts to changes in state incentives, Nigam said.

Generation-Based Incentive

  • Renewable energy minister Farooq Abdullah said on 17 February the accounting method has encouraged companies to erect wind projects as a way of cutting taxes rather than generating power. The ministry favours extending an alternate subsidy called generation-based incentive that rewards wind power producers for the amount of electricity produced, Nigam said.The government may continue the generation based subsidy, which pays wind farms Rs. 500 ($9.8) for every megawatt-hour fed to the grid, next financial year, Nigam said.Suzlon supplies about half of all new wind installations in India, according to the Indian Wind Turbine Manufacturers’ Association.

Source