The Hindu Business Line : Ashok Leyland-Nissan LCV project at ‘zero cost’

Chennai, Sept. 8 The VAT refund for 21 years for two different projects of Ashok Leyland practically means that the entire $500 million (Rs 2,200 crore) investments in the Leyland-Nissan LCV project will be given back to the investors. In a way, the project is being put up at zero cost.

Ashok Leyland is involved in two different projects — one, the joint venture with Nissan to produce light commercial vehicles and another on its own to produce medium duty commercial vehicles.

(Incidentally, it was revealed by Ashok Leyland on Monday that the MDV project is coming up at Vallam village, a suburb of Chennai, not far from the emerging industrial area of Oragadam.)

Project packaging

The combined investments of the two projects will exceed the Rs 4,000-crore threshold for being eligible for concessions under Tamil Nadu Government’s package for ‘ultra mega integrated automobile projects’. The essential component of the package is the VAT refund for 21 years.

Sources in Ashok Leyland told Business Line that the VAT refund means that the entire project cost of the LCV venture will be paid back. As regards the MDV project, Ashok Leyland will get back between 60 per cent and 70 per cent of the investments.

The Government Order relating to the package for ‘ultra mega integrated automobile projects’ of February 26, 2007, says the concessions are available to an entity that puts up a project “either on its own or in consortium/joint venture mode in the same location…..”

In the case of Ashok Leyland, however, it appears that two separate projects — or, one “on its own and a joint venture” have been combined to secure the benefits.

Asked about this, the Managing Director of Ashok Leyland, Mr R. Seshasayee noted that the Government was right to give the concessions to “one entity in different legal formats”.

He said that the Government was better off if smaller parcels of lands are sought in multiple locations rather than a large chunk of land in one location, which would be difficult to obtain.

The LCV project is coming up at Pillaipakkam, near Sriperumbudur, about 40 km from Chennai and would need about 380 acres of land.