Performance based tax credit mooted

The Indian Wind Energy Association (InWEA) has made a formal submission to the country’s Finance Ministry, requesting a change in the prevalent tax incentive scheme for wind energy to introduce performance-based incentives.

InWEA has suggested that the existing provision of an accelerated depreciation regime be foregone and instead replaced by performance linked tax credit certificates. The difference between the current accelerated depreciation benefit and the normal depreciation could be provided as tradeable tax credit certificates that could be provided at Rs1/kWh ($0.02/kWh) for five years after machine commissioning, subject to a cap of Rs180,000/MW ($3,750/MW) per year. Such a mechanism would also lead to reduction in cost of generation of paise 15-23/kWh (¢ 0.3 – 0.5/kWh). This would maintain neutrality in tax revenue between existing and the proposed tax regimes. Most importantly, it would bring in new wind-energy investors.

Dr Anil Kane, chairman of InWEA, says, “The existing provision of an accelerated depreciation benefit has undoubtedly given a noticeable fillip to the development of the market for different renewable energy technologies. Performance-based incentives will help attract more investors.”