Chennai: In an effort to further benefit from tax incentives offered by the government for wind power projects, Chennai Petroleum Corp. Ltd (CPCL) plans to expand its wind power capacity from the existing 17.6MW.
Chennai Petroleum, a subsidiary of state-owned Indian Oil Corp. Ltd, is the first public sector firm in the country to set up wind energy projects.
“We are evaluating the techno-economic feasibility for further investment in wind power,” said K.K. Acharya, CPCL chairman and managing director. He declined to provide more details.
Acharya added that the company planned to use the power generated from its existing wind power facility in a “5.8 million gallon per day seawater desalination plant” that is coming up near Chennai and will be “commissioned by March 2008”.
CPCL’s refinery has the largest capacity of 10.5 million tonne per annum (mtpa) in south India. The company posted a profit of Rs565.27 crore on revenues of Rs29,350 crore in 2006-07.
Drawn by the underlying tax benefits and potential earnings, several oil and gas companies are looking to invest in wind power projects in the country. Other companies with such plans include Hindustan Petroleum Corp. Ltd (HPCL), Bharat Petroleum Corp. Ltd (BPCL) and Oil and Natural Gas Corp. Ltd (ONGC).
Companies setting up wind power projects get tax incentives for up to 10 years and are eligible for depreciation benefits of up to 80% in the very first year of a project’s operation. Analysts say this helps companies diversify into other energy sources and also earns them carbon credits and tax breaks.
“Right from inception, CPCL has been proactive in its approach to environment issues. CPCL’s reasoning for entering the wind power sector is to establish the green credentials of CPCL and reassure stakeholders regarding its belief in the promise of the renewable energy sector,” Acharya added.
Wind power accounts for less than 5% of the 135,000MW installed power generation capacity in the country. Though India has a wind energy potential of 45,000MW, the installed wind power capacity is only 6,280MW. The ministry of non-conventional energy resources hopes to increase this threefold to around 18,000MW by 2012.
“India is among the top three destinations in the world for wind power generation. This is definitely a lucrative sector for the people to invest both for captive and commercial purposes,” said Ravi Mahajan, a partner at audit and consulting firm Ernst & Young.
CPCL is also considering an initial public offering (IPO) to fund its expansion plan, estimated to cost about Rs6,000 crore. “The IPO would be considered at the appropriate time considering the financial performance of CPCL, funds flow, the state of the equity market, etc,” said Acharya.