The Hindu Business Line : Textile cos cannot set up windmills under TUFS

The Central Government has withdrawn permission hitherto accorded to textile companies availing technology upgradation fund scheme (TUFS) to put up wind energy plants.

The inter-Ministerial steering committee (IMSC) on TUFS, which periodically reviews the functioning of the Centrally supported scheme for the textile industries technology upgradation, has decided to withdraw sanction for windmill projects under the TUFS by holding it as non-TUFS compatible, according to official and textile industry sources.

Confirming the development to Business Line, Textile Ministry officials said that the decision not to accord any more sanction to windmill projects under the TUFS was taken at the IMSC meet held on February 22, 2005 and the bar on sanction on windmill investment under the TUFS would be prospective effective from the date of the IMSC's decision.

The latest decision to suspend sanctions to wind energy projects has been influenced by the views in the Textile and Finance Ministries that wind equipment does not contribute to any technology improvement to the textile industries and windmills don't constitute part of textile machinery, hence they are non-TUFS compatible in terms of specific technology prescription, the sources added.

Though it is not clear as to how many applications are pending before the Textile Ministry/nodal agencies for the TUFS seeking sanctions for the new windmill projects that would be affected by the withdrawal of sanction for the windmill projects under the TUFS, the industry sources said that a sizeable number of aspirants in the textile industry had been waiting in the wings to get Government clearance for new windmill projects.

Windmills, like any other modernisation/expansion project of the textile industry qualified to be treated as TUFS compatible, were all along entitled to five per cent interest subsidy on the capital investment made by the promoters.

The Ministry of Textiles had originally allowed the windmill projects to come up under the TUFS since 2003 in the face of the argument by the industry protagonists, who complained about high power cost that made the domestic textile industry uncompetitive vis-à-vis competitors from other neighbouring countries.

But the other side of the argument one heard in the industry was that many textile mills opted to investing on wind energy projects essentially to save on income-tax on their profits.

The capital investment made on the wind energy plants qualify for 80 per cent depreciation that can be charged on the first year itself.

Even as it is, these investors are simultaneously able to stake a five per cent interest subsidy reimbursement on their borrowings for the wind equipment like any other textile machinery covered under the TUFS.

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