The company would send a team to Andhra Pradesh in the next few weeks to study and put forth a proposal before the board for its approval

Our Bureau

Hyderabad, May 7

ENDING years of speculation, the German automobile major Volkswagen has finally decided to locate its complete manufacturing facility in Andhra Pradesh.

The facility to be spread over 350-acres will come up near the Visakhapatnam Steel Plant. The company is likely to invest $1 billion in the project. The facility and the ancillary units are expected to generate 5,000-10,000 jobs.

"Everything will be finalised by a maximum of 45 days," Mr B. Satyanarayana, Andhra Pradesh Minister for Major Industries, who returned from Germany this morning after holding talks with the company, told newspersons.

The company would send a team to Andhra Pradesh in the next few weeks to study and put forth a proposal before the board for its approval.

Agreeing to set up the facility in Visakhapatnam, the company top brass told a high-level team from Andhra Pradesh that the company was not looking at any other location.

The inordinate delay in making an announcement was due to the expansion of the scope of the project from a CKD (complete knock-down, a form of manufacturing vehicles by getting parts from elsewhere and reassembling them) to a full-fledged manufacturing facility.

Other members of the team were Mr D.A. Somayajulu, Advisor to AP Govt on Economic Affairs, and Mr S. Bhattacharya, Commissioner for Industries.

Announcing this at a press conference here on Saturday, Mr Satyanarayana said the German car major invited the team to discuss the issue of arbitration and sanction of SEZ (special economic zone) status for the facility. This was to pave way for signing the memorandum of understanding.

While Volkswagen preferred London to be the place of arbitration, Andhra Pradesh wanted it to be done in India.

"They have agreed to our proposal," Mr Satyanarayana said. With regard to SEZ, the Andhra Pradesh Government told them that it would discuss with the Centre to facilitate a product-specific SEZ.

"But it won't be of much use to them, if they were selling the products in the domestic market as they need to pay the usual taxes," he said.

The expansion of the project scope would give a big boost to the automobile industry in the State as several ancillary units were likely to come up to support the facility.

The ACMA (Automotive Components Manufacturers' Association) will be asked to convene a meeting of local auto ancillaries. The State Government had identified land for the units that might come up.

(This article was published in the Business Line print edition dated May 8, 2005)
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