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Volkswagen moves to Nasik

German carmaker Volkswagen AG has decided to shift its proposed car facility to Nasik from the earlier proposed site near Vishakapatnam.

india Updated: May 03, 2006 02:35 IST

In a significant move, German carmaker Volkswagen AG has decided to shift its proposed car facility to Nasik, in Maharastra, from the earlier proposed site near Vishakapatnam, in Andhra Pradesh.

Highly placed sources divulged that top Volkswagen officials met Union Government officials and conveyed their decision to relocate their car facility that will come up with an investment of Rs5400 crore.

Volkswagen officials called upon the top brass, including Commerce and Industry Minister Kamal Nath at Hannover during the recent visit of Prime Minister Dr Manmohan Singh and expressed their desire to move their car-making facility to Nasik, in Maharastra. While Volkswagen officials are tightlipped on the move, Industry Ministry officials have confirmed the development.

The reason offered was that the Mumbai – Nasik – Pune industrial triangle will be the right place for an automobile manufacturer, as against Vizag that has no or very little connectivity. On the contrary, Nasik is well connected to both Mumbai and Pune through the expressway.

Volkswagen, billed as the largest European automobile producer, has over a dozen top passenger car brands including Skoda, Lamborghini, Bentley, Seat and Passat in its stable.

Apart from manufacturing internationally renowned cars, the company proposes to set up an auto components unit in Nasik, sources said.

The decision to shift the proposed automobile manufacturing plant to Nasik assumes significance owing to the controversy involving its officials that cheated the Andhra Pradesh Government.

Volkswagen’s former chief in India Helmuth Schuster is being probed by CBI along with its Delhi representative Ashok Jain for allegedly misleading the Andhra Pradesh Government to put in 2 million euros in a Delhi-based company Vasishta Vahan against the equity in the proposed joint venture with it.

After the controversy broke out, the Volkswagen team that flew in to Hyderabad in February this year offered to make up with Andhra Pradesh Government and offered to compensate for the fraudulent transactions undertaken by its official. Reportedly Volkswagen officials carried a cheque for Rs 11.6 crore (equivalent to two million euros).

But, Chief Minister Rajasekhar Reddy preferred to await the completion of CBI investigation rather than reach a compromise deal with Volkswagen. State Industry Minister Botcha Satyanarayana was relieved from the industry portfolio for not being careful enough while making payments to Varishta Vahan without ascertaining whether it was a subsidiary of Volkswagen.

In this backdrop, the Volkswagen’s decision to shift out may be opposed by Andhra Pradesh Government that has reportedly acted on the advice of the officials deputed by German carmaker.

However, an industry ministry source pointed out that Volkswagen’s decision to relocate its facility to Nasik has nothing to do with the controversy surrounding payments made by Andhra Government worth Rs 11.6 crore. “A solution acceptable to both Volkswagen and Andhra Government will be found to settle the issue. We are keen that Volkswagen should invest in India and not elsewhere,” said a top official source privy to the company’s decision.