Volkswagen puts on hold Rs 2,000 crore investment in Maharashtra

German auto major Volkswagen AG on Thursday said it has put on hold the proposed Rs 2,000 crore investment plan in India as the VAT refund issue with the Maharashtra government remains unresolved. 

"The normal investments required for usual operations of the company is going on but the big plans for the future have been put on hold at the moment," Volkswagen Group Chief Representative India John Chacko told PTI. 

He was responding to a query on whether the ongoing issue with the Maharashtra government over the change in policy regarding VAT refund has impacted the group's expansion plans, including the Rs 2,000 crore investment announced in January. Earlier, to woo investors, the state government used to refund VAT paid on all vehicles sold by companies, which have factories in the state. 

It was, however, modified last year and the state government said it would refund VAT only on vehicles sold within the state. Stating that the group wants the state government to keep its commitments, Chacko said: "We are talking to the state government to sort out the issue. We want to work in a stable conducive environment and would like to get what was committed to us." 

Asked what would be the group's next step if the state government sticks to its stand, he said: "We will cross the bridge when it comes." In January this year, VW had said it will invest a minimum of Rs 2,000 crore on its Indian operations by 2013 to ramp up capacity, launch new models and strengthen research activities. 

The group, comprising Volkswagen, Audi and Skoda has two manufacturing facilities at Chakan and Aurangabad in Maharashtra. VW had announced an investment of 580 million euros (about Rs 3,600 crore) in 2008 for setting up the plant at Chakan. The group had stated that it planned to increase the capacity of the Chakan plant to 1.3 lakh units annually from 1.1 lakh cars this year.