Wind sector happy, others not thrilled with new Indian budget

In his FY2014 budget speech yesterday India’s finance minister, P Chidambaram, announced two measures to address the dramatic slowdown in the development of new wind power generating capacity.

From the beginning of April the country will reinstate the generation-based incentives for wind energy — to the tune of 50 paise (1 US cent) per kWh – that were scrapped in last year’s budget. The central government is allocating 8 billion rupees (USD147 million) to the Ministry of New and Renewable Energy in FY2014 to support the subsidy.

Chidambaram also unveiled a new scheme to provide renewable energy generators with low-cost loans through the National Clean Energy Fund for the next five years. The fund, which was set up in 2011, has been criticized for being used more to meet the budgetary shortfall of various ministries than to promote energy-related research and projects.

Industry projections are that India will have added 1.5-GW of new wind capacity in FY2013, which is well below the 2.5-GW target set at the beginning of the year and only half the 3-GW installed in FY2012. Ashish Sethia, country manager for Bloomberg New Energy Finance (BNEF) in India, estimates that reinstatement of the generation-based incentive will help add at least an extra 400-MW of new wind capacity in the coming 12 months.

The Indian Wind Turbine Manufacturers Association, led by its chairman, Ramesh Kymal, who also heads Gamesa’s Indian subsidiary, has been very active in lobbying for new government support for the industry.

The new low-cost loan scheme can be seen as a replacement for the accelerated depreciation benefit that the industry used to enjoy, which allowed project developers to write off 80 percent of the project value in the first year as depreciation, and thus reduce their tax burden.

“Unlike coal or gas power plants, a majority of the cost for renewable energy projects is in the form of initial capital expenditure. Projects that will be able to access low-cost debt can see a significant boost in their equity returns,” BNEF’s Sethia said in comments to Bloomberg.

India plans to add 3-GW of capacity from wind, small hydro, biomass, industrial waste-to-energy and solar power plants in the year to March 2014, according to budget documents.

While the wind sector in particular and the renewable energy companies in general will be happy, India’s broader environmental community is less enthralled, despite Chidambaram saying sustainable development is a “Mool Mantar” (literally root verse) while presenting his budget.

Kishor Rithe, a member of India’s National Board for Wildlife pointed out that the Ministry of Environments and Forests got just 24.3 billion rupees (USD 445 million), or 0.001 percent of the total budget, while other ministries were given large budget increments.

“The budget statement ‘Development must be economically and ecologically sustainable and democratically legitimate’ sounds good but there is no scheme to conserve 618 protected areas in the country which contribute to regulate climate for sustainable development,” Rithe told The Times of India. “I've hardly seen any budget presented so far by any finance minister showing concerns through arithmetics about 'sustainable development' although they use these words in the budget speech.”

Rithe says India is targeting to achieve sustainable rural development through agriculture-based development, but this totally depends on protecting forests.

Echoing his sentiments, Prafulla Bhamburkar, manager of the Wildlife Trust of India, said: “Focus is on infrastructure, roads and highways, mining and power projects which will put tremendous pressure on forests and wildlife corridors. Shockingly, there is no allocation to address adverse impacts of these projects or mitigation measures.”