Three textile manufacturers based in Karur, Tamil Nadu, have put up a 10 MW solar plant in the State, and have vowed to do more “if Tamil Nadu comes up with a favourable solar policy”.

The three companies – Aravind-A-Traders, Asian Fabricx and Karur Sree Rama Traders – seem to have put their faith in the ‘REC mechanism’ for making their project viable. Since they have chosen to sell the solar power to the state utility, Tangedco, at a non-premium tariff (of Rs 3.11 a kWhr), they will get ‘renewable energy certificates’ that can be traded in the market. ‘Obligated entities’ – typically, large consumers of electricity or electricity distribution companies – who do not buy solar power or generate it themselves, could meet their legal green-power obligation by purchasing the certificates in the market.

But the issue with this mechanism is that most of the obligated entities simply shrug away their responsibilities and the respective state electricity regulatory commissions, who are supposed to enforce the law, have chosen not to penalise them.

Against this backdrop, it is not clear as to how these three Karur companies will make the project viable. Asked about this, Thangavel Balachandran of Aravind-A Traders said that the three companies put up the project on the hope that the REC market would revive.

The 10 MW is owned severally by the three companies. The biggest chunk – 6 MW – is owned by Asian Fabricx while Aravind-A Traders owns 3 MW. All the three companies will get the tax-saving ‘accelerated depreciation’ benefit, which allows them to write-down 80 per cent of the cost of the project as expenditure for the purpose of calculating taxable income.

Shapoorji Pallonji group company Sterling & Wilson, which is today India’s leading constructor of solar power projects, has built the 10 MW for the Karur textile companies. The plant, built with solar panels from Astra Energy and Yingli of China, is expected to produce 16 million units of electricity in a year.

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