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Web Exclusive | April 2012

IWTMA - On removal of Accelerated Depreciation

Ramesh Kymal, CMD, Gamesa India, and Chairman - Indian Wind Turbine Manufacturer's Association regarding accelerated depreciation.

The notification of the Income Tax Department, Ministry of Finance, Government of India withdrawing Accelerated Depreciation (AD) with effect from 1 April 2012 is considered a major setback. The industry considers it, incorrect timing of withdrawal and could have coincided with introduction of Direct Tax Code (DTC).

Wind power generation has been growing at a rapid speed in the country and this fiscal year witnessed a milestone installation of 3,000 MW. It is a major contributor to achieve the goal of 15 per cent share on renewable power by 2020 set under the National Action Plan on Climate Change (NAPCC). Unlike other sectors, private investment is driving the growth of this sector.  AD which in itself is a tax deferral and not a subsidy. This has been the key driver to the growth of this industry from inception.

It is all the more evident that with the economy slow down, increase in interest rates, escalation in all input costs, AD was the major motivating factor in investment decision.  The industry had a made a joint representation to the Ministry of New and Renewable Energy (MNRE) and we are sure, they were sympathetic and positive to protect it.

Withdrawal of this benefit will see a major drop in installation and inability to maintain the growth rate which will send a wrong message nationally and internationally.

The withdrawal of AD has also come at a time when continuity of Generation Based Incentives (GBIs) remains a question mark. Urgent intervention is required on continuity of GBI in the 12th Plan period as requested by the industry in the discussions of the 12th draft plan.

On a broader note, it is rather ironical that high efficiency coal and oil fired boilers continued to get AD and it has been denied to a source of power generation which is clean, no fuel cost and a significant source to arrest global warming and climate change.

We appeal to the Central government to reconsider the decision to build confidence in the minds of the investors when the industry along with MNRE has set in the 12th Plan a reference target of 3,000 MW per annum going up to an aspirational target of 5,000 MW per annum.

In conclusion, wind power is mainly in the rural areas and major supporter to rural economy and rural employment.
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