Maharashtra's new policy on incentives is turning out to be a boon for Gujarat. Gujarat has lined up nearly Rs 18,000 cr investment in a month's time, with Maruti Suzuki, Ford and Peugeot preferring Gujarat over Maharashtra, ever since the latter amended the Maharashtra value-added tax (MVAT).
According to industry insiders, these companies had first initiated discussions with Maharashtra as the infrastructural advantage of the Pune industrial belt was an incentive for them.
Pune, home to a host of major automobile companies such as Tata Motors, Mahindra & Mahindra, General Motors, Volkswagen, Fiat and Mercedes Benz, and almost hundreds of component manufacturers, is already an established auto hub.
However, Maharashtra's decision to defer tax refund for sourcing and sales within the state and limit VAT setoff to the sale of vehicles sold within the state, which dampened the spirit of prospective investors such as Maruti Suzuki and Ford.
Gujarat, on the other hand, offered sops such as hassle-free land acquisition among others.
Ford and Peugeot signed MoUs with the Gujarat government in the last fortnight to invest Rs 4,000 crore each to set up car and engine manufacturing plants. Maruti Suzuki is also likely to sign deal with the state soon.
Pawan Goenka, president, auto sector, M&M, had warned the Maharashtra state government in August that the change in industrial policy would affect future investments. The withdrawal of tax sops reduced M&M's profit margin last quarter by 0.6-0.7%, he said.