Parliament has passed the new Electricity Act, 2003 which consolidates and replaces a number of earlier legislations in respect of electricity. This Act will compel the State Electricity Boards to purchase certain percentages of power, as may be determined from time to time, produced by renewable sources and is expected to boost generation of electricity from renewable sources of energy like wind.

India is the only country in the world with a ministry - the Ministry of Non-Conventional Energy Sources (MNES), established exclusively to regulate the development of renewable energies for national development.

The all India installed capacity of electricity power generation is 1,23,462 MW as of 2005. According to the Central Electric Authority (CEA), in fiscal year 2005, the energy shortage in India was approximately 7.3 per cent and the peak deficit was at 11.7 per cent.

The Kyoto Protocol reached in 1997 in Kyoto, Japan, extends the commitments of the United Nations Framework Convention on Climate Change and sets world targets for reducing Carbon Dioxide (CO2) emissions to counteract global warming.

India, being a signatory to the Kyoto Protocol is taking measures to substitute CO2 emitting sources with non-polluting green power.

Trading carbon credits is a new mechanism enabling firms/companies that fail to meet emission standards set by the Kyoto Protocol, to buy credits from other firms/companies that meet their targets.

There is a great opportunity awaiting India in carbon credit trading which is estimated to go up to $100 billion by 2010. In the new regime, India could emerge as one of the largest beneficiaries accounting for 25 per cent of the total world carbon trade.

Some Indian companies individually commissioned 0.8MW wind power turbine in Karnataka signing an Emission Reduction Purchase Agreement with the UK buyer for a period of 12 years. The agreement includes selling of 18,000 carbon credits, each credit representing 1 tonne of CO2 saved from being released into the atmosphere. This has decisively marked the arrival of carbon trading in India, opening a fresh stream of dollar earning opportunities.

The Government also offers various incentives to non-conventional power players setting up renewable energy which include:

  • Income Tax exemption on power income for 10 consecutive assessment years;
  • Exemption/Reduction in Excise duty for renewable energy sector;

  • Exemption from Central Sales Tax for renewable energy sector; and

  • Customs duty concessions on the import of material, components and equipment used in renewable energy projects.

MNES has been working closely with various state governments, as a result of which States with wind power potential have introduced policies pertaining to the purchase of power, wheeling and banking in order to provide a framework for investment in wind power.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.