Indian Wind Power Association: India wind farm spending to stall on tax-break cut

"Investment could come to a standstill," said Arvind Prasad, managing director of developer Ushdev Power and head of the Indian Wind Power Association in the western Indian state of Maharashtra.

Wind farms built from April 1 are only able to claim so-called accelerated depreciation at 15 per cent of the cost of equipment, down from 80 percent, according to a circular on the website of the Indian tax authority. Demand for wind turbines this fiscal year may drop by almost 400 megawatts, or about $540 million of orders, as a result.

The tax break drove 70 per cent of installations last year, according to the Ministry of New and Renewable Energy. Suzlon, Gamesa and Denmark’s Vestas Wind Systems A/S are the biggest publicly traded turbine suppliers to the market, the Indian Wind Turbine Manufacturers Association says.

Accelerated depreciation accounting allows developers to write off investments faster. "The policy change takes away one of the key pillars of India’s success," Suzlon said yesterday in an e-mailed reply to questions. "India needs power for growth, and this step unfortunately pushes the country in the wrong direction."

Accelerated depreciation has encouraged companies to erect most of India’s 16,179 megawatts of wind capacity to cut their tax rather than generate power, renewable energy Minister Farooq Abdullah said.

The ministry has applied for cabinet approval to extend an alternative incentive introduced in 2009 and which expired on March 31 that rewards farms for the power they generate.

India plans to add 2,400 megawatts of wind farm capacity in the year ended March 31, according to the renewable energy ministry.