India today reintroduced a subsidy for wind farms and announced low-cost loans for clean energy generators in its budget for the year starting April 1.

The South Asian nation will reinstate generation-based incentives for wind energy, Finance Minister Palaniappan Chidambaram said in his budget speech to Parliament. The government will allocate 8 billion rupees ($147 million) to the renewable energy ministry for the subsidy, he said.

The withdrawal of the incentive contributed to a 50 percent drop in capacity additions this fiscal year, said Ramesh Kymal, chairman at the India unit of Gamesa Corp. Tecnologica SA (GAM),Europe’s second-biggest wind-turbine maker. The benefit expired in March last year. Annual installations in the world’s third- biggest wind market more than doubled from 2009 to 2011 helped by the subsidy.

Reinstatement of the generation-based incentive will help add at least 400 megawatts of wind capacity in India in the year ending March 2014, said Ashish Sethia, country manager for Bloomberg New Energy Finance in India.

The Indian government will also provide companies that generate renewable energy with low-cost loans for the next five years from the National Clean Energy Fund, Chidambaram said.

“Unlike coal or gas power plants, a majority of the cost for renewable energy projects is in the form of initial capital expenditure,” BNEF’s Sethia said. “Projects that will be able to access low-cost debt can see a significant boost in their equity returns.”

India plans to add 3,000 megawatts of capacity from wind, small hydro, biomass, industrial waste-to-energy and solar power plants in the year to March 2014, according to budget documents.

Copyright 2013 Bloomberg

Lead image: Wind turbines via Shutterstock