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M&M's Rs 1800-cr project facing delay due to land acquisition

Last updated on: December 26, 2012 08:15 IST

M&M's Rs 1800-cr project facing delay due to land acquisition

T E Narasimhan in Chennai

utomobile major Mahindra & Mahindra has said that the company's proposed Rs 1,800-crore (Rs 18 billion) testing facility near Chennai is getting delayed since the state government is yet to allot land. The company said that the delay is impacting its investments.

Meanwhile, the question is whether Tamil Nadu, which was one of the frontrunners for Mahindra's Rs 4,000-crore (Rs 40 billion) investment plan, is losing the grip because of this delay.

Mahindra & Mahindra, Automotive and Farm Equipment sector President Pawan Goenka said that the company was supposed to get the land at Cheyyar by this time, but it has not happened. There are some procedural delays.

"They (government) have not said "no", so we are hopeful that the Government will give us the land fast," said Goenka.

Asked whether the delay is impacting the company's investments, he said, "it is, since it is important for the company to have a complete testing facility".

To tide over the situation, at present the company is doing the testing on a small scale at Mahindra World City, 40 kms away from Chennai. "But this will not help the company in the long run. We need to be able to do it on a big scale", said Goenka.

It may be noted that when the company signed a MoU with the Tamil Nadu government in early 2011, it said that the testing facility will be ready in 12 months. The company has asked for 400 acres of land and the first phase of land acquisition is around 150 acres to set up the testing facility.

On the remaining land, the company will set up an auto plant, although there is no specific time-frame for that now. Declining to elaborate on the products to be manufactured from the Cheyyar facility, Goenka said it would be a single-line plant, manufacturing one product, since it is not a large enough plant to use multi products. The Rs 1,800 crore committed will be for seven years starting from 2011.

When asked whether the delay in this project will take away Tamil Nadu from Mahindra & Mahindra's radar for the Rs 4,000 crore investment plant, Goenka said, "we are in the final decision mode. Earlier we were looking many states, now we have shortlisted two states. One among the two will share the investment with Maharastra".

He refused to comment on whether Tamil Nadu is one of the states.

Anand Mahindra, vice-chairman and managing director, Mahindra & Mahindra, met with Tamil Nadu Chief Minister J Jayalalithaa in June 2012 to explore opportunities for setting up a manufacturing plant in the state.

Goenka, who accompanied Mahindra that time said, "we are looking to set up our next plant. We have come here to talk to the Chief Minister and officers on our desire to set up the new plant in Tamil Nadu and looking for land and whatever incentive package the government has. This is the first meeting on that. It is a very early evaluation of possibilities in Chennai."

"Like we have done in Chakan, this will be probably the largest single investment in the automotive industry," he said. But that time too he made it clear that other states will also be considered for this investment.

The question which remains unanswered is, whether the delay in handing over land in Cheyyar would lead Tamil Nadu out from the race for the Rs 4,000-crore investment programme.