Maruti's Gujarat plant delay would require state govt approval

Maruti notified earlier today that it may postpone its plans of opening a 3rd plant in Gujarat

With India's largest passenger carmaker Maruti Suzuki indicating that the company is unlikely to commission the Gujarat plant by fiscal 2015-16, the company, however, would have to take approvals from the Gujarat government to postpone the commissioning, informed sources in the Gujarat government. This was required as there were Value-Added-Tax (VAT) related concessions granted to the company, which is linked to the commissioning of production. 

 

On Tuesday, Maruti Suzuki India chairman R C Bhargava said, "It is unlikely that we would be able to commission the Gujarat plant even by the end of FY16."

 

Maruti Suzuki had signed a state support agreement (SSA) with the state government in June 2012 with regard to purchase of land and setting up of a manufacturing plant here in Gujarat. "According to the SSA, the target commissioning of the plant was by 2015-16," said a senior official in the know. SSAs have guidelines related to payment installments, and dates of commissioning etc. 

 

In case a company was to miss a deadline related to installment payment or commencement of work on the project, it has to technically inform the concerned departments and take permission for the same. 

 

The official further informed, "Maruti was granted certain VAT related concessions, which are obviously related to the start of production, and hence the company has to inform and take requisite approval from concerned departments in case of any delay or postponement of the project." 

 

He added at the same time that there would be no issues related to the project, and that this was a technical formality to be adhered to and that everyone understands the current slowdown in the automotive market. 

 

When asked about the issue, Bhargava, said, "Such technicalities would be handled by the company officials." 

 

Maruti was offered land at Hansalpur at the rate of Rs 670 per square meter (or roughly Rs 27 lakh per acre). The 700 acre plot at Hansalpur hence cost the company around Rs 189 crore. The company, on its part, bought land directly from farmers at the nearby village of Vithlapur, for setting up a second manufacturing plant. 

 

"Maruti is making payments for the land in annual installments with a certain interest component," the government official informed.