Skoda, however, demanded that this concession should be given to it eventhough it may invest Rs 250 crore in the initial phase. The state governmentrejected this demand and Skoda has since then climbed down from its earlierposition.

The company will now sign an MoU with the Maharashtra government on January13 and hold a ground breaking ceremony at Shendre near Aurangabad on January14 from where Octavia car, priced around Rs 9 lakh, will rollout by June.

Skoda Auto which will implement this project through a 100 per centsubsidiary, Skoda Auto India had though indicated a long term investmentplan of Rs 1,000 crore, had made a strong plea for a fall back position for"unforeseen and unavoidable circumstances." The company had stated that itsdemand was in line with the FIPB application and the memorandum ofunderstanding with DGFT assuring to bring in an equity of $56 million intoIndia.

However, Maharashtra chief minister Vilasrao Deshmukh who had shot downSkoda's demand at the cabinet sub-committee meeting held on December 29,1999 today reiterated that it would be improper to accord concession of megaproject if the investment were not commensurate with the state government'slaid down policy. Deshmukh is believed to have explained that the stategovernment would consider Skoda's demand for fall back position if thecompany's investment falls below the mega project limit in an unforeseeneventuality (and in fact effectively even below Rs 500 crore).

State government sources told The Financial Express that the project wouldbe entitled to benefits under the Package Scheme of Incentives, 1993 whichhas incidentally come to an end on December 31, 1999 following theintroduction of uniform floor rate of sales tax and phase-wisediscontinuation of various incentive schemes all over the country.

The company would be exempted from the purchase and additional tax, salestax paid or payable to its vendors on its purchases of raw materialsincluding the sales tax paid or payable on such raw materials on any earliertransactions. Sales tax, additional sales tax and turnover tax payable onsale of its finished products will be exempted while octroi/entry taxpayable will be refunded.

The company which has been given a 100 hectares of land at the rate of Rs 50per sq mt will also be exempted from stamp duties on documentation formortgage of assets to financial institutions for raising loans and foracquisition of land.

It would also be entitled to avail sales tax incentives by way of deferralin respect of the sales tax liability.

The government has agreed that the interest rate to be charged for theexcess drawal would be computed at the PLR of the State Bank of India forthe respective years of such excess drawal.