The Ministry of New and Renewable Energy (MNRE) introduced the GBI in December, aiming to broaden the investor base and facilitate the entry of large independent power producers and foreign direct investors to the wind power sector.
The GBI will be provided to wind electricity producers at $0.01 per unit of electricity fed into the grid for a period of four to ten years, with a cap of $140,000 per megawatt. The MNRE is investing $81 million into the project.
Another incentive available to the wind industry - accelerated depreciation of capital investment against tax - will continue until 2012. Companies can either claim GBI or the accelerated depreciation, but not both.
Rajendra Kharul, senior fellow of the World Institute of Sustainable Energy says: "GBI is not taking off because the support is not lucrative to the investor looking for at least INR 1 ($0.02) incentive per unit of electricity fed into the grid."
MNRE director of wind energy Dilip Nigam says the amount is justified, though admitting the "scheme is ambitious". He acknowledges that response to the scheme is not as good as expected. However, he says that the 300MW of projects that have registered with the Indian Renewable Energy Development Agency for the GBI is "not bad at all, as it is the first time".
"Besides, last year we did not expect much as the world was going through a recession and profit-making companies were in depreciation," explains Nigam.
The Indian wind industry is at a crossroads, Kharul says, adding: "On one side, the depreciation is being taken away and, on the other, the incentive is not enough."
The wind industry is annoyed that the solar sector receives subsidies of $0.25 per kilowatt hour. It argues that it is better established and so should receive more.
MNRE expects 600MW to be registered under the GBI by the end of the financial year in March 2011. This year its target will be to reach a total of 2GW of new wind capacity throughout India. Last financial year 1.5GW was added. "We are hoping more investors and foreign direct investments, which we expect, will come in," says Nigam.
However, the industry feels the government subsidies are not enough and the Indian Wind Turbine Manufacturers Association is said to have approached the Crisil rating agency about the viability of the $0.01 per unit incentive since institutional investors are not willing to look at this amount.
The GBI cannot be claimed until a project is built and it may well be up to a year after that before any money is paid out.
"Nobody has seen the colour of the money, since no amounts have been claimed as yet," says an industry sympathiser who asked not to be named.
The ministry is adamant that the GBI does not need to be reformed just yet. "When GBI was being introduced, it was in discussion with the stakeholders in the wind industry," says Nigam. "The decision was made after approvals by the Cabinet. We cannot change it in such a short time. It will take at least six months to re-evaluate it."
The MNRE has also said that the GBI would be re-evaluated in 2012. It pledged to consider upscaling the GBI if the response exceeded expectations.