Policy for All Round Development of Renewable Energy

Fiscal incentives are being offered to increase the viability of RE projects; the main incentive is 60% accelerated depreciation. Other incentives include a tax holiday, lower customs duty, sales tax, and excise tax exemption for RE projects. The Indian Renewable Energy Development Agency is the main financing institution for renewable energy projects. It offers financing of the renewable projects with lower interest rates, which vary with the technology, depending on its commercial viability. Though interest rates are falling in India, they are not in the renewables sector for various reasons, but mainly due to perceived high risk. The interest rates vary from 11 (for biomass cogeneration) to 14.5% (for wind). The Clean Development Mechanism of the Kyoto Protocol has started offering additional stream of revenue making renewable energy projects more attractive.

Policy measures aim at overall development and promotion of RE technologies and applications. Policy initiatives encourage private as well as foreign direct investment including provision of fiscal and financial incentives for a wide range of RE programs.

Foreign investors can enter into a joint venture with an Indian partner for financial and/or technical collaboration and setting up of RE-based power generation projects. Proposals up to 100% foreign equity participation in a joint venture are automatically approved under the RE policy. The Government of India also encourages foreign investors to set up RE-based power generation projects on BOO (Build, Operate, Own) basis. Various Chambers of Commerce and industry associations in India provide guidance to the investors in finding appropriate partners, and foreign investors can set up a liaison office in India

MNES is promoting medium-, small-, mini- and micro enterprises for manufacturing and servicing of various types of RE systems and devices, and industrial clearances are not required for setting-up of an RE industry. CEA permits power generation projects up to IR 1,000 million (~ U.S. $ 22.7 million). Other promotional incentives include: A 5-year tax holiday for RE power generation projects, Private sector companies allowed to set up enterprises to operate as licensee or generating companies, and Customs duty concession offered to RE spares and equipment, including those for machinery required for renovation and modernization of power plants. Excise duty on a number of capital goods and instruments in the RE sector has been reduced or exempted.

A number of states in India have announced policy packages including wheeling, banking, third-party sale, and buyback, and a few of them are providing concessions or exemption in state sales tax and octroi. These rates vary from state to state for different technologies and devices, and in periodicity. So far, 14 states have announced policies for purchase, wheeling and banking of electrical energy generated from various RE sources.

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