Mumbai: Government will offer Rs380 crore ($81 million) in incentives to wind power projects that feed into the national grid, the government said on Thursday, a move analysts believe will attract large companies.
The country ranked fourth in the world after Germany, Spain and the United States in grid-connected wind projects, with 9,587 megawatt (MW) of capacity in November 2008 that fed over 54 billion units of electricity to the grid, official data showed.
Wind power projects will be given Rs0.5 for each unit of power fed into the grid with a ceiling of Rs0.62 crore per MW for a minimum 4 years and maximum 10 years, the ministry of new and renewable energy said in a statement on its website.
The subsidy will be for projects of up to 4,000 MW until 2012, it said.
This looks better than an existing tax benefit scheme because it provides direct cash benefits to the developers, Bhargav Buddhadev, analyst at Noble group, said.
“It will now attract genuine utility size players to enter into wind farm development,” he said.
Most of the wind projects are in small private hands, but large companies such as Tata Power Co have plans to diversify into the energy source. Wind turbine maker Suzlon could also expect more orders, analysts said.
Buddhadev also said the incentive would increase the internal rate of return by at least 3-4% for a project.
Government currently allows wind power firms accelerated depreciation and the ministry said projects can either continue to claim this benefit or avail the new subsidy, not both.
The country has been facing large outages due to shortfall in power production. Last month, power minister Sushilkumar Shinde had said India was likely to add only 78% of its targeted 14.5 gigawatts power capacity in 2009/10.