Green and profitable

Rewards beyond energy security are attracting smaller players to the sector.

The non-conventional energy sector has opened up a whole new set of opportunities for small and medium enterprises (SME). Many are using renewable energy sources to meet their power needs, and generate profits from the energy business.

Tax sops announced by the central and state governments, combined with the easy availability of funds from financial institutions, a proactive tariff policy, opportunities in trading carbon credits and the possibility of setting up a power plant with low capital outlay are the reasons SMEs are flocking to this sector.

Recently, the Maharashtra State Electricity Distribution Company contracted to buy power from Nitco Tiles' Dhule wind farm at Rs 3.50 per unit with the assurance of a 15 paisa increase in per unit tariff every year for the next five years. It is selling power to the company at Rs 3 per unit at their plant site.

Maharashtra's minister for non-conventional energy, Vinay Kore, said, "The basic advantage this sector provides for SMEs is that you can commission a plant with a low capital outlay, unlike traditional plants which need big capital outlay. Per mega watt cost for setting up a renewable energy unit may be high, but with a traditional thermal or hydro plant, one can't think of setting up a 1or 2 mw plant."

India has a potential of generating more than 71,000 Mw of electricity from renewable energy sources. Of this, only 7,100 mw has been tapped, with large opportunities for new players in this sector.

KPMG's Manish Mohnot said, "The Government of India's policy on renewable energy is encouraging, as it makes it mandatory for distribution utilities to buy a percentage of their requirement from renewable sources." Besides, tax sops such as no taxes on income from this sector, accelerated depreciation and tax holidays make this sector extremely attractive for SMEs, he said.

The biggest benefit for the investors in the sector will be from the carbon credits they will be generating along with the electricity, Mohnot added.