Reportedly, Karnataka Chief Minister SM Krishna has been persuading Ceat to set up the tyre plant at Dharwad. Meanwhile, the RPG group has also been considering Tamil Nadu as its second choice of states for the proposed project. French giant Michelin has already established its presence in Karnataka. Ceat would be the second major tyre manufacturer to set up base in the state if it were to go ahead with the proposed plant. Karnataka has already provided sops in the form of uninterrupted power and water supply.

In addition, the government is also ready to waive entry tax. Ceat has witnessed a negative sales growth of 11 per cent during the first half of the current fiscal. This was largely due to low OE supply business which has dropped by an alarming 26.5 per cent. Replacement markets have also turned indifferent, especially in the medium and heavy commercial vehicle segments.

Replacement demand which accounts for 75 per cent of the tyre industry's turnover is estimated to have declined by 10 per cent. Says Mr Samuel: "The rethinking on the Dharwad project is related to the overcapacity situation in the domestic market." Even as tyre exports continue to suffer in an environment of dumping, particularly from aggressive emerging export markets, Ceat has added new markets to its export list.

Ceat is looking at exports of Rs 100-120 crore a year, according to Mr Samuel. "We have exports amounting to around Rs 11 crore a month for the last three months." Ceat is looking at the US, Middle East and Latin America as prospective markets. Mr Samuel points out: "We may look for technical tie-ups in truck and light-truck tyres which will come up in a big way in the next 8-10 years." In addition to Bhandup and Ernakulam, Ceat will begin commercial production at Nashik in Maharashtra in December this year. The company has invested Rs 60 crore in this radial tyres plant.