Tax incentives for Wind Farms in India

The Hindustan Times reports of the tax breaks for companies and individuals for investing in green energy, especially Wind Farms.

WORRIED ABOUT your taxes? Take a look at one way how companies and high net worth individuals are reducing theirs – by buying windmills. The income-tax laws allow 80 per cent of the cost of the windmill to be set off against taxable income.

Private sector wind energy players have woken up to this opportunity and are offering investments in wind farms that they set up. In a shared wind farm, other companies can own anything from a single wind turbine to the entire farm. The electricity generated is sold to the state electricity board where the wind farm is situated. If an owner of a windmill wants to use the power he can draw it back from the board at a different point.

[…]

Mehta says the electricity being generated will begin to bring in revenues from the second year. If the owner can show itself as a power sector operator, it can gain more benefits under Section 80 (i)(a), under which income from power generation can get a tax holiday for 10 years. Now other companies like Enercon India and Vestas RRB have followed Suzlon with their own wind farms. In fact, wind energy is not the only form of green energy that enjoys that benefit, but this has become commercially viable. This benefit is also allowed for, among others, investments in biogas and solar energy too. Sun farms any one?

The interesting thing is that wind farms are commercially viable now, atleast in India and hence, the investments in them. However, the article was written from the angle of “ways to pay less tax, legally” style. The bigger picture is whether the tax break is driving an investment in wind farms.

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16 thoughts on “Tax incentives for Wind Farms in India

  1. The Tax Incentive under the Income Tax Act benefit the manufacturer only as capex prices are adjusted by them in such a way that under the present interest regime a wind mill owner will get the same IRR as it was getting two or three years back, when the prices of wind farms were atleat 20% lower than now.
    Add the preferential tariff, banking and wheeling charges, Development cost of evacuation borne by the Utility as compared to price of a thermal power plant @ Rs. 1.20 or less per kWh,the cost of this uncertain green power/energy capacity having a PLF of 25% or less is prohibitively high.

  2. Wind energy is not economically viable without substantial subsidies, including tax breaks. That might be tolerable if we were all benefiting from such use of our money. But we aren’t.

  3. it is not only the tax break that is pushing wind business in India. carbon credits have become a major incentive.
    regardinng genration from caol based plants, the tariff ma be low but they don’t reflect they hidden cost(environmental, wastage etc.), a comparison of levelized tariff from both the sources will show that power from wind is cheaper.

  4. One still has to ask what we get from wind “farms”. They don’t appear to reduce the use of other fuels, so what is there purpose?

  5. With the current boom in the Indian economy, power requirements are ever-increasing. The demand has to be met by some power source – fossil-fuel based plants, nuclear plants, imports, or environment-friendly options.

    Promoting wind farms will reduce dependency on power import and prevent further pollution.

  6. Though it is true that presently the wind power business is driven by tax incentives, from promotion of any new technology this is the practice all over the world. To compete with conventional fuel sources, one need to take into account the subsidies which are provided to conventional power sources also, we are furgetting that Conventional power do have some subsidies in direct indirect form which are susbstantial. These subsidies along with the externalities of conventional power if factored into cost of generation ( in real sense) the wind power is mcuh competative TODAY also…
    As per GOI reports, Coal (WHICH IS producing 65% power in India) will be available for about 35 year Only from now…in that case shifting our power generation to renewables will not be possible within 2/3 years..IMPORTED COAL is NOT A ADVISABLE OPTION in view of secutity point. ONE MUST UNDERSTAND TO BUILD UP ANY ALTERNATIVE POWER SOURCE IT TAKES DECADES TO COME THAT SOURCE to MAINSTREAM…IT CAN NOT BE BUILD OVERNIGHT…. HENCE PROMOTING WIND/RENEWABLE POWER WITH ALL POSSIBLE WAYS AND MEANS IS JUSTIFIED TODAY!

  7. This whole idea of Wind Mill farming is really very interesting and i would like to get into this business as i have a farm land which really idea for this kind of farming. i really need guidness in starting this farming.

    • Hi Ajit…ds is vallabh Kapadi from Global Power Developers in Mumbai. We undertake micro and mega wind turbine projects all over India and abroad. We do have the necessary skills and experience to undertake mega projects for the kind of farming that you planning to get into. Please feel free to contact at 9821321361/vallabhkapadi@gmail.com

      • Dear Mr Vallabh,

        Thanks for replying on my inquiry, please let me know what is the kind of capital required and how much land is required to start a micro project.

  8. Hi…ds is vallabh Kapadi from Global Power Developers in Mumbai. We undertake micro and mega wind turbine projects all over India and abroad. We do have the necessary skills and experience to undertake mega projects. Kindly email me at the email address as I have got some calculations done, about the investment and payback period, specially for those who are interested in setting up windfarm. You can understand it perfectly. Please feel free to contact at 9821321361/vallabhkapadi@gmail.com/9920421119.

  9. For a environmentally concerned person – wanting to ‘do’ something and yet gain somewhat from it – how would private use small wind turbines compare with these large wind mill farms. Is there govt subsidy / tax incentive for such small turbines too? Or is it just the large power players(with their lobbyists) who only stand to gain from govt policies ?

    • Si, the private use of the small wind turbines is basically for the electrification purposes only. It can be used to electrify an individual bungalow, farmhouse etc. As far as the subsidy is concerned honestly speaking even if there is any its too difficult to get a subsidy as thats when red-tapism come into picture. And there is an amount of 60Cr being sanctioned by Ministry of New n Renewable Energy. However, the subsidy is on first come first serve basis and if the sanctioned amt has been exhausted no further subsidy available. As far as the tax incentive is concerned yes there is 80% depreciation of the small wind turbines as well.Rgds vallabh/09821321361/vallabhkapadi@gmail.com

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