Tata Motors’ exit may cost the state dear

  • Anupam Srivastava, Hindustan Times, Lucknow
  • Updated: Jan 20, 2015 11:44 IST

The dream of UP to attract big investment may get a jolt after the indication of Tata Motors to shift base to Rudrapur soon. The medium and small scale units are worried about the impact of this step in the days to come.

“In UP, the sluggishness in taking decisions may cost the industries dear as existing giants like Tata Motors, which contribute Rs. 500 crore per year to the state exchequer, may shift base to Rudrapur in Uttarakhand,” said MSME owner Deepak Suri.

Tata Motors was accorded incentive for expansion under the Industrial Investment Policy (IIP-06) in 2006 during the last Samajwadi Party regime. They made huge investments (to the tune of Rs. 11,000 crore). But then the SP government was voted out and the subsequent regime sidelined these incentives. When SP regained power, Tata Motors demanded restoration of benefits promised in 2006. The Akhilesh government assured full support and a group of ministers (GoM) was constituted to consider the demand. The report is still pending with the state cabinet.

Tata management had almost decided to shift most of their production to Rudrapur last year but stayed back in Lucknow because the then UPA government offered a 4% cut in excise duty to the automobile sector to boost the declining industry. But this did not stop them from toning down production in Lucknow. The plant, which has the capacity to produce more than 500 vehicles per day, is manufacturing only around 320.

But now that the Modi government has rolled back this timebound facility, for Tata Motors, once again the cost of vehicles manufactured in Rudrapur is much lower than those produced in Lucknow. In Rudrapur, the company is enjoying a plethora of tax subsidies and the manufactured vehicles cost around Rs. 1.5 lakh lower than those manufactured in the Lucknow plant.

Hence it is imperative that the UP government fulfils its assurances to retain Tata Motors. Its exit would be a big blow to attracting investors to the state, feel industrialists. The MSME sector would also be hit, as it will face lock-up in the absence of Tata Motors, said divisional chairman, Lucknow Chapter of Indian Industries Association (IIA) Prashant Bhatia.

IIA member Deepak Suri said, “The future of around 40 medium and small industries is at stake.” He said IIA had studied the impact of shifting of Tata plant on the local MSME industry and found there would be an estimated loss of commercial tax of over Rs. 500 crore to UP government, besides loss of employment to about 60,000 people.

An official of Tata Motors said on condition of anonymity, “Future course of action depends on the state leadership’s response.”

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