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India Ministry Said to Seek Extension of Wind Farm Tax Break

India’s renewable energy ministry is seeking to extend a tax break for wind farms in the world’s third-largest market for turbines, said two government officials with direct knowledge of the matter.

The Ministry of New and Renewable Energy has applied for approval from Prime Minister Manmohan Singh’s Cabinet to extend the incentive known as accelerated depreciation, which is set to expire on March 31, said the officials, declining to be identified because the information is private.

The tax break may benefit Suzlon Energy Ltd., India’s largest wind-turbine maker, as the company is more dependent than other suppliers on customers who claim accelerated depreciation, an accounting method that allows them to write off investments at a faster rate, according to Bloomberg New Energy Finance. If the incentive lapses, demand for turbines in India could slump by 15 percent in the financial year starting April, according to the London-based researcher.

“The continuation of the accelerated depreciation policy will allow the sector to be more globally competitive” because it encourages investment in wind projects especially from smaller businesses, Suzlon Chairman Tulsi Tanti said in comments e-mailed to Bloomberg News last week before India revealed its budget proposal, which failed to clarify speculation that the incentive would be discontinued.

Alternative Subsidy

The government introduced an alternative subsidy called generation-based incentive in 2009 that rewards farms based on the amount of power they generate. That’s also due to expire on March 31 and the ministry has applied for an extension with the Cabinet, the officials said.

About 90 percent of wind projects built before 2009 claimed accelerated depreciation, and the incentive still drives about 25 percent of yearly installations, according to Mumbai-based Ambit Capital Pvt.

India installed some $3 billion of turbines from manufacturers including Vestas Wind Systems A/S, General Electric Co. and Gamesa Corp. Tecnologica SA last year, according to the Indian Wind Turbine Manufacturers’ Association. The two biggest suppliers, Suzlon and Enercon India Ltd., along with Leitner Shriram Manufacturing Ltd. are the most dependent on accelerated-depreciation customers, according to New Energy Finance.

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