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Gush of funds greets wind projects

business Updated: May 30, 2011 02:38 IST
Himani Chandna Gurtoo
Himani Chandna Gurtoo
Hindustan Times
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A gush of investment activity has been breezing across India’s wind energy economy in recent months as private equity funds and asset financing companies seek to exploit opportunities in the sector coming through a mix of tax breaks, policy incentives and ecological benefits, experts said.

Investments worth $586 million (Rs 2,637 crore) have already flowed into wind farms in India during January to March this year.

This is more than half of $934 million (Rs 4,203 crore) investment attracted by the wind energy sector in 2010, a report by consulting firm KPMG said. “With wind, there has been a lot of tax-driven development which just begs to be consolidated,” said Cyrille Arnould, head of the Renewable Energy Fund, European Investment Bank.

With 12,809 mega watts of installed capacity, India is one of the leading nations for wind power backed by strong state governments’ feeding tariff policies. More than two-thirds of India’s power from renewable energy comes from wind farms peppered across the country’s southern and western states.

Experts tracking the sector said investor-friendly fiscal policies are making renewable energy sector a hotspot for global financiers.

The government provides renewable power projects a preferential tax rate of 15% compared with the standard rate of 30% for other industries. The government also offers capital and interest subsidies, concessional excise and customs duties on such projects to attract private investment.

By 2015, every state in India will need to source at least 10% of its energy from clean sources, mostly from wind.
The Central Electricity Regulatory Commission (CERC) has asked state counterparts to notify Renewable Energy Certificate (REC) regulations. The Pew Charitable Trusts, a US-based not-for-profit organisation, said in a recent report that India can attract private investments worth $169 bn (Rs 7,60,00 cr) in the next 10 years in clean energy, mostly wind.

International banks have shown interest in financing wind energy plants. For instance, in March, a consortium of HSBC and Sumitomo Mitsui Banking Corp has underwritten a loan $110 million (R495 crore) for a 92 MW wind farm in Gujarat.

“The Indian market is offering a greater accommodation to international investment. This impresses the global industry,” said DK Jain, director (technology), NTPC, India’s largest power generation company that is also investing in wind energy.