When Punjab said no-no to a nano project
Chandigarh, September 23
The Punjab government had found that the project as conceived by Tata Motors Limited then was not going to benefit the state any which way. A note moved by the industries department in October 2006 pointed out that the Tatas wanted to invest Rs 850 crore in the state but expected concessions and investment from the state worth Rs 1200 crore.
The proposal to set up the project in Punjab was moved by the Tatas in 2006. The company wanted land and infrastructure to set up its small car manufacturing plant here. The company officials were shown lands in Nabha, Ludhiana and Ropar. The Birla farmland measuring about 700 acres in Ropar was finalized for the project.
The Tatas calculated the cost of this land as Rs 30 crore. The Punjab government was to develop the land and construct the buildings for the Tatas. The state government was also asked to build the 200 dwelling units of Tata township. As part of the “industry promotion assistance” the Tatas wanted to defer the payment of VAT by thirty years carrying an interest of 0.1 per cent on the pending amounts.
The company also wanted also exemption from excise duty for ten years, a 100 per cent exemption from income tax for five years and 30 per cent exemption from income tax for the next five years.
The company’s investment in Punjab calculated by the state government in the form of plant and machinery cost was Rs 650 crore. Investment in the form of on site vendors was about Rs 200 crore. The direct employment offered by Tata was 1800 persons and employment generated indirectly was about 4700.
According to the Punjab government the total investment of Tatas in the state was going to be about Rs 850 crore and the state’s own expenditure on the project would have been over 1200 crore. The annual turnover of the company was calculated as Rs 2500 Crore at the rate of Rs 1 lakh for 2,50,000 cars per year.
Sources, however, concede that the state lost on the central sales tax that it would have got from the production of the cars in Punjab. “The CST was however reduced from 4 per cent to 2 per cent and in the days to come is going to be abolished,” pointed out a source. Sources pointed out that VAT Punjab would earn even if the car is produced elsewhere in the country and is bought in Punjab.
Terming the Tata proposal as a “negative investment package” the Punjab government rejected the proposal. Sourced add that the Tatas however insisted that the concessions be agreed to. They even showed an offer letter from Uttarakhand (then Uttaranchal) claming that the state had agreed to give all these concessions and Punjab should match the concessions.
Sources add that Punjab however offered two alternatives to the Tatas. Other than the 700 acres of land the state offered to give them a one-time grant of Rs 450 crore. The other offer promised to give the company 500 acres of land in Ladowal (Ludhiana) in addition to the 700 acres. The company was given complete freedom to utilize the land commercially any which way they liked. Sources say the company did not consider these proposals.