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Chinese truck manufacturer sticks to Maharashtra as others flee

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Chinese commercial vehicle maker Beiqi Foton will stand out from the crowd later in the year, when it goes ahead with its planned Rs 1,700-crore investment in Maharashtra, while other manufacturers are scouting opportunities elsewhere over the value-added tax (VAT) issue.

Beiqi Foton, one of the largest truck and bus makers in China, has planned a mega facility for commercial vehicles in the Chakan auto hub.

 

Though the facility is running substantially behind schedule, Beiqi Foton remains the single largest investing firm in Maharashtra in recent times in the automotive sector.

The scheduled investment by Beiqi Foton comes against the backdrop of firms like Mahindra & Mahindra, Bajaj Auto and Volkswagen, which have operational plants in the state, looking elsewhere for further expansion.

The state has also failed to successfully attract investments recently committed by Honda Motorcycle, Honda Siel, Maruti Suzuki, Hero MotoCorp, Ford India, India Yamaha Motor, Ashok Leyland-Nissan, worth Rs 18,625 crore.

All these investment announcements for expansion and research and development initiatives were made recently.

According to the memorandum of understanding between Beiqi Foton and the state government, signed more than a year ago, the plant should be operational by early 2013. But construction is yet to begin at the site. The plant will have a capacity to produce 100,000 units a year.

R Shankar, executive vice-president, India operations, Beiqi Foton Motor, said, “Our investment plan is intact for India and there is no change whatsoever. We are working with product planning, development, and other activities involved in the set-up as per our plans. We would like to state that we are progressing as per our initial plan in India. We have got the required land allotted at Chakan from MIDC (Maharashtra Industrial Development Corporation).”

The delay could be attributed to the fact that Beiqi Foton’s profit plummeted by 30 per cent last year due to falling sales. The drop was a result of China’s withdrawal of government-backed incentives. The company is looking at bringing its entire range of light, medium and heavy commercial vehicles to India.

Meanwhile, disappointed with the muted response received from the state government, M&M approached the Tamil Nadu government for exploring a Rs 3,000-4,000-crore plant in the state.

Pawan Goenka, president (automotive and farm equipment sectors), M&M, said, “The VAT issue hasn't changed and we are right now in our final decision making (process) on where we will locate our next plant. We are talking to several states and we will decide on it very soon.”

Companies like M&M are disappointed with the amendment to the 52(A) of the Maharashtra VAT Act that has prevented companies from claiming higher input tax credit (ITC). Earlier, the companies would formally sell their entire production to the marketing and sales arm to claim a VAT set-off for sales within Maharashtra.

The marketing arm would then, in effect, bill this to other states across the country. However, under the revised rule, the companies would not be able to claim the VAT set-off on products sold outside the state.