Nissan initiates arbitration to recover Rs 5,000 crore from govt

Tamil Nadu govt says efforts on for reconciliation

Japanese carmaker Nissan has sued the Tamil Nadu government in order to recover around Rs 5,000 crore ($770 million) of promised incentives along with interest charges and damages. Nissan Motor had initiated international arbitration proceedings to this effect after months of talks with the state government did not lead to a resolution, Reuters reported.

In a notice sent to Prime Minister Narendra Modi last year, Nissan sought payment of incentives from the Tamil Nadu government as part of a 2008 agreement to set up a manufacturing plant in the state. A state government official said efforts for reconciliation were on.

The agreement between Nissan and the the Tamil Nadu government was for the refund of the incentives over 21 years, but the firm wanted the amount sooner, an official said. Nissan did not respond to queries. 

Nissan with its French partner Renault invested around Rs 6,100 crore in a plant and R&D facilities near Chennai. According to a deal, the Tamil Nadu government would provide an investment promotion subsidy and refund the gross value-added tax (VAT) and central sales tax (CST).

The state government was yet to pay Rs 1,901 crore as the subsidy and Rs 822 crore in input VAT, Reuters said.

The company has invoked provisions of the Comprehensive Economic Partnership Agreement (CEPA) India has signed with Japan, seeking  remedy in the International Arbitration Centre in Singapore, according to a state government official.

"They want all the accruals in a very short period. Nissan's entire investment is around Rs 5,000 crore and around Rs 1,600 crore is already paid by the government. The company has put up a bill of Rs 1,700 crore and a schedule of repayment. They have said that if this is not paid, it will charge interest,” the official said. 

The amount after verification by the commercial tax department is Rs 1,700 crore and there is no dispute in terms of what is to be paid, said the official. The point of conflict is that the company wants an accelerated refund.

Nissan is the ninth biggest player in the Indian car market while its partner Renault is placed seventh. Nissan’s market share is less than 2 per cent while Renault has a little over 3 per cent share in the 3 million car market. 

Both companies have seen double-digit declines in sales during the April-October period of this financial year. Nissan, which sells more cars in the export market, has also seen its exports shrink by 40 per cent in the first seven months of 2017-18.