The finance ministry on Tuesday exempted components used in wind power generators such as towers, rotors and blades from excise duty, in a bid to improve the ease of doing business in the non-conventional energy sector and to reduce litigation arising from claims of tax exemptions. Industry executives said the move would improve the finances of wind energy companies.

According to a circular from the Central Board of Excise and Customs (CBEC), the excise duty exemption is applicable  to parts such as “tower, nacelle, rotor, blades, wind turbine controller etc of wind-operated electricity generators.”

The move comes after industry players approached the government. Companies have been paying excise duty on the various parts that go into making a wind energy station without any method of availing a credit or set-off on the same because supply of electricity to the state electricity authorities does not attract excise duty or service tax. Thus, the duty paid on parts was a cost to these companies. “This situation has now been rectified and it will go a long way in driving more investments in companies engaged in generating energy from renewable sources,” said M S Mani, senior director, Deloitte in India.

The government is focusing on renewable energy, considered as clean energy, to meet the country’s growing power demand. The target has been set at 175 GW of renewable power generation, including 100 GW solar energy, 60 GW wind energy and 10 GW from bio-mass.