Cash-strapped State doles out sops to Telco8217;s Indica

MUMBAI, Jan 14: In an apparent move to help Telco, the cash-strapped State government has announced major sales tax concessions to big au...

MUMBAI, Jan 14: In an apparent move to help Telco, the cash-strapped State government has announced major sales tax concessions to big automobile projects with investments of over Rs 1,500 crore. The immediate beneficiary of this move will be the Indica model of Telco, bookings for which will start soon. Telco has, however, made no announcement whether it would pass on the sales tax benefits roughly around Rs 30,000 per car to the costumers or not.

In a policy tailor-made to benefit only the Tatas, the State Government, which is facing huge fiscal deficit, has decided that sales tax incentives would be available for a period of two years to such projects, subject to a monetary ceiling of 10 per cent of the gross fixed investment made in such projects, by amending the Package scheme of incentives, 19938242; for the automobile sector.

Telco8217;s Indica project is the only such project which can claim this incentive now. While announcing the sop, a government press statement, however, did not mention the name of the Tatas.

The State Government has made the package applicable in A8217; category areas of Mumbai and Pune metropolitan regions for mega projects in the automobile sector after defining mega automobile project in these areas as one having investment in gross fixed capital in excess of Rs 1,500 crore.

This means the cost of an Indica car which is worth around Rs 3 lakh for the diesel model will come down by around Rs 30,000. If the company passes on this benefit to customers, the ongoing car war is likely to intensify in the coming months.

Telco had on December 30 announced ex-showroom price of Indica8217;s standard petrol version at Rs 2.59 lakh in Delhi and Rs 2.63 lakh in Mumbai. Maruti and Fiat had subsequently reduced the prices of their models. If Fiat has to claim for a similar incentive, it will need to invest another Rs 900 crore as it has invested only Rs 600 crore so far.

It is learnt that the State Finance Ministry had earlier strongly opposed such an incentive to the Tatas on the grounds that the project was not a case of greenfield investment which needed to be wooed. The Indica project of Telco at Pimpri in Pune metropolitan region was embarked upon with a capital outlay of Rs 1,700 crore.

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The government move to salvage Telco comes at a time when hunderds of small scale industries SSI are closing down in the State due to high power tariff, sales tax, octroi and other indirect taxes. 8220;Why should the government restrict the sops only to Telco. We should also get such sops,8221; said the owner of a small engineering unit.

The government has also modified industrial location policy for the metropolitan regions by deciding to allow new mega projects in auto sector subject to clearance from the Maharashtra Pollution Control Board. The State Government had earlier defined mega project in B8217;, C8217; and D8217; category areas of the State as one having investment in gross fixed assets in excess of Rs 750 crore in Vidarbha and Marathwada regions and in excess of Rs 1,000 crore in the rest of Maharashtra but excluding the A8217; category areas.

The Tatas had sought sales tax incentive about two years back stating that Indica was the first indigenously designed and developed car. The government has also allowed expansion projects of existing automobile plants in the two metropolitan projects with 8220;due regard to environmental considerations8221;.

The Telco stock recorded historic volumes of 1.33 crore shares on the National Stock Exchange NSE, while on the Bombay Stock Exchange BSE the volumes clocked a new high of 94.74 lakh shares. Similarly, the stock rose by 8 per cent to be locked in the upper band of the circuit filter at Rs 224.30 on the BSE following the tax concessions.