Govt to take action against Volkswagen

BY V L SRINIVASAN

Published on Sept 23, 2006

Hyderabad: Peeved at the German-based Volkswagen AG’s decision to pull out of its proposed car project in the State, the State Government made it clear that all actions of Helmut Schuster, former head of VW India Project, be they related to fiscal or otherwise, were binding on the company.

This was communicated to the automobile major after its Head of Volkswagen India-Project Peter Wolters and special envoy of the Board of Management (International Affairs) Frank Elbe wrote a letter to Principal Secretary (Industries) D Lakshmi Parthasarathi on Aug 21 expressing their inability to set up the unit as Andhra Pradesh lacked auto ancillary network and was far off from its other production units in the country.

‘‘Volkswagen has been obliged to observe certain additional specific criteria namely the local presence of a meaningful automobile supplies for the purpose of optimising synergies and the geographic proximity to production units of VW already existing in India. After diligent and careful examination, we regret to inform that the Volkswagen will not set up its production facility in Andhra Pradesh,’’ Wolters and Elbe said in the letter.

Though Elbe offered to return the two million Euros, which was released last year by the State Government to Vasishta Wahan Private Limited, an Indian company nominated by Volkswagen to implement the car project in the country, the company has now sought exemption and hinted at returning only one million Euros to Andhra Pradesh.

Dismissing their contention, Lakshmi Parthasarathi expressed surprise as they took four long years to discover that the state did not have auto ancillary network.

Replying to their letter last week, she said: ‘‘We are not at all convinced about the reasons you have stated for not setting up the facility as at no point of time in the last four years, have you stated this as the only criteria for the selection of the location. If so, there was never a reason for you to step into AP, as it was everybody’s knowledge that the State does not have a large auto ancillary network.’’

‘‘This is least expected of a company of the standing of Volkswagen. You must be aware of the consequences of the breach of promise, particularly in the light of time and money that the Government of Andhra Pradesh had spent on this project,’’ she said.

According to highly-placed sources, the State Government would go to ‘‘any extent’’ to claim damages as the company, after taking the offer letter from Andhra Pradesh Government, went to other states seeking better incentives.