Investment and Credit Rating Agency (ICRA) has said the discontinuation of accelerated depreciation (AD) benefit will hit the wind energy sector as addition to the capacity will be discouraged in the near term. The government has discontinued the tax benefit available in the form of accelerated depreciation (AD) for wind energy projects, from 1 April 2012.
While this is in line with the earlier provisions ]announced in December 2009 for the generation-based incentive (GBI)framework by the ministry of new and renewable energy (MNRE), there were expectations of further extension of this benefit at least till 31 March 2013, given the delays in the implementation of the proposed direct tax code (DTC). While the AD benefit has ended, there is still lack of clarity over the continuation and amount of GBI benefit applicable (for capacities commissioned after 31 March 2012).
ICRA estimates that the overall domestic wind-based capacity addition during FY 2012 increased to about 3,000 MW (against 2,350 MW in the previous FY), driven mainly by growing demand from the independent power producer (IPP) segment. While the share of consumers availing themselves of the AD benefit (mainly retail consumers, financial investors or captive consumers)declined gradually to 40-45 per cent in FY2012 from the earlier 70-75 percent, the same still remains sizeable.
In ICRA's opinion, discontinuation of the AD benefit is likely to result in a decline in capacity addition by 800-1,000 MW in the near term, which in turn, would keep capacity addition for FY2013 lower than that achieved in FY2012. With the expected fall in demand for wind based capacity, wind turbine manufacturers may also face some pricing pressure in the domestic market.
Notwithstanding this, the long-term demand drivers for wind energy remain intact. In the long run, wind-based capacity addition would continue to be driven by the IPP segment, given the progress in the implementation of the renewable energy certificate (REC) framework, besides other factors. These factors include the preference of many IPPs for the REC route, the renewable purchase obligation (RPO) norms being put in place in most States, and the increasing cost-competitiveness of wind energy versus conventional sources.
While this is in line with the earlier provisions ]announced in December 2009 for the generation-based incentive (GBI)framework by the ministry of new and renewable energy (MNRE), there were expectations of further extension of this benefit at least till 31 March 2013, given the delays in the implementation of the proposed direct tax code (DTC). While the AD benefit has ended, there is still lack of clarity over the continuation and amount of GBI benefit applicable (for capacities commissioned after 31 March 2012).
ICRA estimates that the overall domestic wind-based capacity addition during FY 2012 increased to about 3,000 MW (against 2,350 MW in the previous FY), driven mainly by growing demand from the independent power producer (IPP) segment. While the share of consumers availing themselves of the AD benefit (mainly retail consumers, financial investors or captive consumers)declined gradually to 40-45 per cent in FY2012 from the earlier 70-75 percent, the same still remains sizeable.
In ICRA's opinion, discontinuation of the AD benefit is likely to result in a decline in capacity addition by 800-1,000 MW in the near term, which in turn, would keep capacity addition for FY2013 lower than that achieved in FY2012. With the expected fall in demand for wind based capacity, wind turbine manufacturers may also face some pricing pressure in the domestic market.
Notwithstanding this, the long-term demand drivers for wind energy remain intact. In the long run, wind-based capacity addition would continue to be driven by the IPP segment, given the progress in the implementation of the renewable energy certificate (REC) framework, besides other factors. These factors include the preference of many IPPs for the REC route, the renewable purchase obligation (RPO) norms being put in place in most States, and the increasing cost-competitiveness of wind energy versus conventional sources.
No comments:
Post a Comment