Soft loan to Tata Motors consistent with govt policy: HC

Gujarat High Court on Thursday dismissed a public interest litigation (PIL) challenging the soft loan by the state government to Tata Motors Ltd (TML) for its Nano car plant in Sanand.

A division bench of Chief Justice Bhaskar Bhattacharya and J B Pardiwala held that decision of Gujarat government to give soft loan to TML in proportion to the value added tax (VAT) paid against production of Nano cars, was not violative of any government rules.

It was consistent with the government resolution of January 2009 issued with regard to incentive to TML.

The bench also observed that soft loan to TML was not favouring any one industrial house.

The PIL was filed by one Himnashu Patel, where he had challenged the soft loan to TML against the payment of VAT. He had alleged that loan against VAT was not consistent with state policy. The PIL was filed last last year.

Gujarat government had in 2009 decided to provide fiscal incentives to TML in the form of a loan at 0.1 per cent simple interest per annum for amounts equal to the gross VAT and Central Sales Tax (CST) payable to state government on the sale of the Nano car and its parts and components from the date of commencement of the sale of the Nano car.

As per the government decision, this loan would be repayable in monthly installments starting from the 21 st year of the commencement of first sale of Nano car.

The government had submitted in the High Court that Tata Motors has paid Rs 382 crores as VAT against which state government had disbursed loan of Rs 273.45 crore. It has further said that Gujarat government has not disbursed loan in proportion to VAT paid.

Around 1,100 acres of land in Sanand was given to Tata Nano at Rs 900 per square meter.

Going by that, the net cost of land works out to be Rs 400.6 crore. The company has been granted an option to pay the price in seven or eight equal installments at 8 per cent compound interest.