After losing Volkswagen, Andhra eyes indigenous car project
Nov 21, 2006 - 6:26:20 PM
, Reviewed by: Priya Saxena
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The state government refused to accept the money offered to be paid back by Volkswagen, which had owned up moral responsibility for the illegal dealings by its representative. It was hoping that this would ensure the company would remain committed to Andhra Pradesh.
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By Indo Asian News Service,
[RxPG] Hyderabad, Nov 21 (IANS) With German auto major Volkswagen dropping plans to set up its unit in Visakhapatnam and preferring Pune instead, the Andhra Pradesh government is now eyeing a new car project proposed to be set up by a local firm.
The government has speeded up the process to accord approval to the proposed Rs.12 billion-project by Hyderabad-based MLR Motors and others.
Chief Minister Y.S. Rajasekhara Reddy told a news conference here Monday evening that land for the indigenous project would be allotted soon.
Realising that any legal proceeding against Volkswagen for going back on its commitment can send wrong signals to investors, the Congress government has instead started focusing on the new project.
The chief minister and other officials are playing safe and not divulging details of the project to avoid the hype that surrounded the Volkswagen project for the last four years.
The man behind the proposed project is said to be B.V.R. Subbu, former president of South Korean auto major Hyundai's India operations, while the company will also have Italian auto giant Fiat as technology partner.
According to reliable sources in the industries department, the MLR project will focus on small cars. It is likely to come out with 1,500 cc diesel car priced at Rs.350,000.
Several top auto firms have been outsourcing components from MLR, which also successfully launched cargo and passenger auto rickshaws.
This will be the first car plant in Andhra Pradesh, which in the past tried to woo several projects including Proton, Ford and General Motors.
Faced with criticism over the Volkswagen fiasco, the government is taking solace in the fact that the investment proposed in the indigenous project is equal to the investment planned by Volkswagen.
The German auto giant had proposed to invest Rs.14 billion while the state government had offered incentives of about Rs.25 billion. The government is likely to allot 500 acres of land to the indigenous car project at Tada near Nellore or in Ranga Reddy district near Hyderabad.
The chief minister feels they lost Volkswagen due to lack of vendor base and ancillary units and not due to corruption charges as alleged by the opposition.
The state had been holding talks with Volkswagen for four years and paid Rs.116.7 million for the purported special purpose vehicle Vashishta Wahan towards equity in the joint venture in January last year.
However, it was hit by a corruption scandal in July when it was revealed that the company's India representative, Helmut Schuster, and others floated the front company to cheat the state. Schuster, who was sacked by the company, and others had allegedly siphoned off the money.
The state government refused to accept the money offered to be paid back by Volkswagen, which had owned up moral responsibility for the illegal dealings by its representative. It was hoping that this would ensure the company would remain committed to Andhra Pradesh.
Though the Central Bureau of Investigation (CBI), which is probing the scandal, recovered more than half of the money, the decision by Volkswagen has dealt a blow to the state. The chief minister regretted that a company of Volkswagen's stature went back on its word.
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