AHMEDABAD, June 3: Even as the government is fighting shy of admitting the ruling party's connection with the swadeshi brigade of VHP-Bajrang Dal which has been out to smash everything American, at least one US multinational, General Motors, continues to thrive on government largesse through its Indian joint venture with the Birlas, General Motors India Ltd (GMIL).And despite receiving special treatment from Gujarat government in the form of subsidies running into several crores of rupees to the exclusion of all others in its category, the Halol-based GMIL is unlikely to retain the ``Prestigious Unit Status'' granted to it under the industrial policy of 1990-95.
The reason being its inability to complete the promised investment of Rs 300 crore-plus in the stipulated time frame of two years from commencement of commercial production. Officially, it started commercial production in April 1996. Against this backdrop, the scheme for special incentives to Prestigious Units which was to expire on August 15, 1995 was amended and thrice extended in two years thereafter.
And what are the incentives? Any unit investing Rs 100 crore or more but less than Rs 300 crore in certain areas is entitled to sales tax exemption up to 25 per cent of the eligible investment for 14 years. If the investment is in excess of Rs 300 crore, then the exemption limit is a steep 90 per cent of the eligible investment. But the investment must be completed within two years of beginning commercial production. GMIL is yet to cross this investment limit but has already crossed the sales tax exemption limit in less than three years.
Apart from not completing and yet availing the exemption facility, GMIL is enjoying the unique privilege of selling 35 lakh preference shares worth Rs 35 crore to the government-owned Gujarat Industrial Investment Corporation (GIIC) without yielding any right to dividend or voting rights. According to sources, GIIC has been purchasing seven lakh such shares from GMIL annually since 1996.
At the end of five years, these shares will be converted into a loan of Rs 35 crore repayable over next five years. But by that time, GMIL will have saved an equal amount in the form of unpayable dividend. In effect, it will have nothing to pay from its own pocket while repaying this `loan'.Sources at GIIC refused comment but said necessary details about this investment were given in the balance sheet.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
