Negative Impact of Accelerated Depreciation on the Indian Economy

For argument sake or as an illustration, if we assume that 1 MW solar will generate 1.6 Mkwh and rs. 1.2/kwh is rebate for AD taken by the investor = 16 x 1.2 = Rs. 19.2 lakhs/year

[Now, Adani and Tata Power have been negotiating the firm Contract PPA to get more, like wise biomass people who based their PPA on LCOE, but, are asking more money from Government, hence, Solar PV developers may also follow the same route after few years, wherein this rebate of AD given will not have any meaning!!]

Total rebate given = 19.2/year x 25 years = Rs. 480 lakhs = Rs. 4.8 Crore (that too year wise depreciated / devaluated rupee value, which has no meaning !)

But, the tax saved is = 80% of investment = 0.8 x 10 cr = 8 Crore, upfront, right in the first year, which is great value, which government would have used as Equity to develop many more MWs.

Is this POLICY of providing 80% Accelerated Depreciation correct by any standards and why Finance Secretaries or policy makers can't take note and issue corrective measure for INDIA FIRST Culture??

MNRE, in its Draft policy has proposed 20 to 40% Viability Gap Funding, which will further worsen the LOSS to the government !!

If Mahagenco (with 50% subsidy) goes ahead with the proposed business model, then, how and why State and hence Central government has to take the burden due to such errant policies??
We must put an end to the Scrupulous Project Development, which avails the Capital Subsidy (or Viability Gap Funding) and the Accelerated Depreciation and then the Promoters Sell the Project to a prospective buyer, who in turn approaches the Government for the Tariff hike in the 25 years tenure (please note the Politics dynamics or change of administrative set up will hamper the sustainability), thus, the nation is a great loser

Policies and the enabling tax advantages to few promoters (who claimed Capital Subsidy without creating good quality asset or with NON functional biomass power plants) have made a big dent on Indian Economy without any good results esp in Renewable energy sector.

Government or its administration through such policy (without checks or being accountable) transferred the Public Property to the Private Companies in the Form of Renewable Energy Generation through Capital Subsidy (or Viability Gap Funding) coupled with Accelerated Depreciation along with Low cost Debt fund to these Corporate companies (like EXIM etc) / Project Developers - entrepreneurs, which are not paid back as few of these projects are not functioning and still no action taken to recover the Capital Subsidy paid or Tax recovery which was availed through Accelerated Depreciation (AD).

If Government would have established all these projects from the Tax collections (which are doled out as free through AD), it would have needed only a fraction i.e only Rs. 51,504 Crores, which could have been managed from the taxes of Rs.137,344 Crores while retaining the land and property in Government's name and could have generated lot of employment.

But, by giving an opportunity to Private sector, many have failed to deliver and no Action to recover the Capital Subsidy or the Debt (due to Tribunals etc…. Please be informed that Indian Parliament had to pass an act in Dec 2012 to recover debt (through wrong business cases of Project Promoters, approved by many banks which were certified by National and International Advisors or Consultants) which is around a whopping 40 Billion USD!!)

Total estimated Renewable energy project capacity = 12% of total installed 220GW = 26000 MW
Cost/ MW Investment Equity Debt Cap Sub AD
Source MW installed Total 30% 70% Rs(Cr) 80%adj
Biomass 6 4,500 27,000 8,100 18,900 6,750 21,600

Wind 7 20,160 131,040 39,312 91,728 104,832

Solar PV 10 1,300 13,000 3,900 9,100 VGF? 10,400
(Ground)

Solar PV 16 40 640 192 448 60 512
(Roof top)
(rs 160 to 240/wp)

Sub Total: 26,000 171,680 51,504 120,176 6,810 137,344

Obeservations:
1). Through this policy, it is a Systemic transfer of Public Property to Private Companies, despite failure of many Biomass power projects and Wind mills with a great loss of Tax collection
2). Lot of Debt is not recovered from Defunct projects, esp from Biomass power projects. Why not ask for repayment of Availed Subsides and Tax savings made
3). Why not solar PV projects be developed in every taluka with local entrepreneurs by collecting the Taxes from Corporate cos and arrange Equity to these Entrepreneurs!!
4). Let Government or Lenders have stake holding in these small, new generation entrepreneurs till they pay debt and equity by abolishing Capital Subsidy (and Viability Gap Funding) and Accelerated Depreciaiton.
5). International good quality investors can not avail AD, hence, there are players from Potato Chips, Jewellary, Brewery, Cinema stars or such industry to save taxes on profit earned through Accelerated Dep hence, a great loss to the national exchequre through this policy and hence the budget deficit…… CAG needs to take note…
6). Instead of Capital subsidy (or Viability Gap Funding), Accelerated Depreciaiton, we recommend the Interest subsidy only against assured power generation shall be paid for 10 to 12 year to reduce the tariff to the common man and also eliminate the EXIM bank influence to promote their country products and services, instead the interest subsidy will create the much needed LEVEL PLAYING FIELD to boost the Local GDP
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CAG only suggests the lacuna, advantages or disadvantages or misuse of POLICY or the basic wrong intent of POLICY MAKING, but, the action to be taken lies with Parliament and its executive, but, unfortunately, the Policies are made by these POLICY MAKERS i.e Law Makers i.e Parliamentarians with Indian Administration Service support.

How can the Policy Makers (be it ruling party or opposition party who certify / approve these Policy through standing committee, political majority in Parliament) punish their own Most Favoured Policy Makers / Colleagues or same party members ??

We have seen the drama of Rejection of Indictment of many Politicians and Administrative officers of many state government by LOK AYUKTAS (reference is made on Mining, CWG Cases etc), but, the State Cabinet or the ruling parties have rejected the Report of LOK AYUKTAS and CAG due to powers snatched while making such Constitution, which is against Judiciary or Natural Justice to the Common Man despite having Institutions in the our Democratic Country (which have been made to collapse through such rejections etc and a mockery of Democracy is prevailing in INDIA).

Why not the Supreme Court be made responsible to take action against the ERRANTS based on CAG report without waiting to get sanction to prosecute the IMMUNED policy makers or decision makers ? Is it not the high time to scrap the IMMUNITY Clause provided to the constitutionally privileged (Constitutional Amendment is necessary or an Ordinance can be promulgated), which is against Democratic Principle of EQUALITY and everybody must be same / Equal as for as Law / Judiciary is concerned.