Stuck in a wind hole

The Budget for 2016-17 has turned out to be negative for the wind industry and this has deepened the feeling of being ‘left behind’ among the players. For some time now, the industry has been complaining that ‘solar’ is walking away with all the attention and the tried-and-tested ‘wind’, which is still the mainstay of India’s renewable energy, has been pushed to the background.

The Budget has not only hiked excise duty on certain components for making blades — ironically, in the name of ‘incentivising domestic value addition’ — but the Finance Mhas also spoken of halving the tax-saving ‘accelerated depreciation’ benefit from April 1, 2017. Coming after the imposition of ‘minimum price’ on imported steel plates, the excise duty hike and the impending slashing of accelerated depreciation sop have come as big negatives to the industry.

Against this backdrop, the question being asked within wind industry circles is, ‘is achieving the 60 GW target possible?’ The government wants the country to raise the installed wind power from 25 GW to 60 GW by 2022, which calls for adding 35 GW in seven years, or 5 GW a year.

The current year is likely to see fresh installations of 3 GW; next year might be a little higher because the sun-setting of incentives would crowd-in investments in that year. The fate of the industry from 2017-18 is shrouded in a haze.

Given today’s regime, say industry experts, it is impossible to get to 5 GW a year. Nevertheless, all it takes to remedy the situation is a few policy tweaks. Basically, the industry pleads for unshackling. Let us free, we will find a market for ourselves, says the industry.

Today, the shackles come in the form of some charges (which, incidentally, the ‘solar’ industry is exempt from) and regulations. One is the transmission utility charges. While the recently-announced New Tariff Policy exempts wind players from paying transmission charges when they use the national grid, wind companies still have to pay the ‘state transmission utility’ charges. This adds to the cost and makes it unviable for inter-state sales of power. Besides, in some States such as Tamil Nadu, energy companies are barred from selling power outside the State. Thus, if a wind power company sets up a plant in a nice, windy site in Tamil Nadu and finds a paying customer in Karnataka, sorry, it can’t sell. The market is restricted to each State. Besides, even within the State wind companies are not exempt from paying the ‘cross subsidy charges’, when they sell directly to customers, by-passing the state electricity distribution company (discom). As such, they are forced to enter into power purchase agreements with the state-owned, financially weak discoms.

If a free, open market is one major demand of the industry, the other is making land acquisition easier and bringing down attendant transaction costs. In this, the new State of Telangana has brought in a few measures in its wind policy, which the industry hopes will set a precedent. If you buy land in Telangana for the purpose of putting up a wind farm, the land is deemed to be non-agricultural. If you buy land from private parties, there are no registration charges. Nor would land ceiling rules apply.

The industry also seeks some help for manufacture, mainly interest subsidy. Chintan Shah, Vice-Chairman, Indian Wind Turbine Manufacturers’ Association (IWTMA) wants the government to follow the example of Brazil, where manufacturers are given an interest subsidy if the domestic value addition is above 70 per cent. The Brazil example is a good way of encouraging Make in India, says Shah. Such a measure, he says, is also compatible with WTO rules.

For ramping up wind power activity in the country, it would be imperative to open up new States. There is huge, untapped potential in some States; once it was assumed to be zero, says Jami Hossain, a wind energy expert and one of the author’s of last year’s Report on India’s Wind Power Potential. According to the study, Chhattisgarh, Odisha, Kerala and Uttar Pradesh together have at least 19,000 MW of potential, reckoned at less dense placement of the windmills and only on fallow lands and wastelands.

The way to get governments of these States to invite wind projects is to enforce the mandatory ‘renewable purchase obligation (RPO)’, says D V Giri, Secretary General of IWTMA. Under the extant RPO rules, State discoms (and other ‘obligated entities’) are required to ensure that a certain (prescribed) percentage of their electricity consumption or sales comes from renewable sources such as wind and solar.