India fails to bring back key incentive

INDIA: The Indian government has not reinstated the generation-based Incentive (GBI) as some in the industry had hoped.

Addressing delegates on the first day of the Wind Power 2012 conference in the south-eastern city of Chennai, energy minister Farooq Abdullah spoke of the need for the industry to stand on its own feet and reassured delegates that he would work hard to help them.

However, he did not announce the reinstatement of the GBI, contrary to rumours circulating before the speech. The incentive, which pays INR 0.5/kWh ($0.009/kWh), was withdrawn in April.

The Ministry of New and Renewable Energy recommended that the GBI should continue, but final approval from the cabinet has been expected since October.

Many investors appear to have shunned the GBI over concerns that their wind projects would not produce sufficient kilowatts hours to turn a profit.

Proponents, however, hail the incentive as an improvement on earlier tax incentives rewarding owners of wind farms whether or not they produce much power. They argue that reviving the GBI will cultivate a mature wind sector not reliant on subsidies.

India has installed only 850MW so far this year, and some fear that it will not reach even 2GW by the end of the year, mainly due to the discontinuation of the GBI and a separate tax incentive known as accelerated depreciation (AD).

In 2011, when both AD and the GBI were in operation, more than 3GW of wind was installed.