From rxpgnews.com
Andhra Pradesh's Volkswagen dream shattered
By Indo Asian News Service,
Nov 19, 2006 - 10:48:21 PM
Hyderabad, Nov 19 (IANS) Andhra Pradesh's dream to bag the prestigious Volkswagen project has been shattered with the German auto major deciding to set up the car manufacturing unit near Pune.
The decision of the auto giant came as a big blow to the southern state as it had been trying to bag the project for four years and had even refused to accept Rs.115 million offered to be paid by the company as compensation for the money deposited by the government for the joint venture but siphoned off by the firm's former representative in India.
Chief Minister Y.S. Rajasekhara Reddy Sunday tried to play down the Volkswagen's decision saying the state could get some other project.
'Well. We were getting signals for last two months (about Volkswagen shifting to Pune). If not Volkswagen some other company will come. Let us see,' he said when newsmen sought his reaction to the latest development.
The chief minister in September this year had stated that the company would have to stick to its plans in Andhra Pradesh and government officials had dropped hints that they could sue Volkswagen if it goes to any other state.
The Volkswagen had earlier agreed to set up the Rs.54 billion ($1.2 billion) plant to manufacture cars and light commercial vehicles (LCVs) in the coastal city of Visakhapatnam but backed off in view of the controversies.
The opposition parties blamed the government for the fiasco. The main opposition Telugu Desam Party, whose government had launched the effort to get the project, said government's faulty policies and corruption resulted in the state losing an opportunity to attract the huge investment.
BJP demanded a through probe into the entire issue while left parties pulled up the government for its failure to bag the deal.
The state government had paid Euro two million to Vashishta Vahan, a purported special purpose vehicle floated by Volkswagen's India representative Helmut Schuster and others for a joint venture.
The MoU was signed and the money was paid in January 2005 but a scandal surfaced in July last year when Volkswagen sacked Schuster for the alleged illegal dealings.
Corruption charges rocked the state government forcing the chief minister to order a probe by the Central Bureau of Investigation (CBI) and transfer industry minister B. Satyanrayana to another department.
However, Volkswagen owned up moral responsibility for the wrongdoings of Schuster and promised to abide by its commitment to set up a plant in Visakhapatnam.
In September last year, the state government refused to accept Rs.115.74 million ($2.6 million) which Volkswagen offered to pay back.
Volkswagen's representative and former German ambassador Frank Elbe had come here to handover the cheque but the chief minister politely refused to accept the same saying the government was more interested in the project.
The CBI, during its probe, arrested Ashok Jain, one of the promoters of Vashishta Wahan. Another director Jagdish Alagar Raja is still at large.
The federal agency recovered Rs.50 million which Raja had given as loan to one V.G. Joseph in Bangalore. Raja had also given Rs.20 million to his sister-in-law Gayatri.
It was in 2002 that the then government of Chandrababu Naidu began talks with Volkswagen for the project. In January last year Schuster conveyed in writing that the company had decided to set up a plant and that Volkswagen would have a minimum of 51 percent stake.
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