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Volvo wants to set up unit in India to cut import duty; try us, says Odisha

Wed, 29th Mar 2017 (Source:Business Standard)

With Swedish luxury car maker evaluating possibilities of setting up its assembly plant in India, Odisha has thrown its hat in the ring. The state government has invited Volvo Auto India to explore Odisha as a destination for its assembling facility by dangling an array of incentives the state offers.

"We are given to understand that Volvo Auto India is exploring to set up an assembly unit in India. We invite you to consider setting up the unit in Odisha. The state's existing Industrial Policy Resolution (IPR) provides very competitive incentives for automobile manufacturers. In addition, a new dedicated policy for auto and auto components sector is on the anvil which will ensure unmatched competitive advantage for companies setting up units in the state", Sanjeev Chopra, Odisha industries secretary stated in a letter to Tom Von Bonsdorff, managing director, Volvo Auto India Ltd.

Volvo is looking for an assembly plant in the country as it was losing heavily by forking out steep import duties for its completely built units. India's luxury car market, in volume terms, is estimated at 37,000 units per annum with Volvo accounting for five per cent share.


Odisha offers a very conducive ecosystem for automobile manufacturers. The state has 54 per cent of the country's aluminium smelting facility. An aluminium park is being developed jointly by National Aluminium Company (Nalco) jointly with the state-owned Odisha Industrial Infrastructure Development Corporation (Idco) at Angul wherein Nalco has committed molten aluminium supplies of 0.1 million tonne each year for the downstream units. 

Besides this, Odisha accounts for 21 per cent of the crude steel produced in the country and is the biggest producer of stainless steel. The state offers other inherent advantages like a coastline of 480 km providing a gateway to the ASEAN region, one of the lowest labour wage rates, electricity charges and water supply tariff.

On the policy front, the state has unveiled its latest edition of IPR, committing to develop auto parks. It boasts of a disruptive policy intervention in the form of a dedicated policy for automobiles and auto components manufacturing. The draft of the policy has been prepared by OMEGA Tast, a consultant assisted by the UK-based donor agency Department for International Development (DFID). The state government is giving final touches to this policy that not only compares favourably with competing states like Tamil Nadu, Maharashtra and Gujarat but also goes a step ahead on some counts.

The draft policy envisages a concession of up to 50 per cent on land to be made available to auto component manufacturers. On the power subsidy front, it talks of electricity duty waiver for 10 years. Among the other fiscal incentives delineated in the policy include 100 per cent exemption on entry tax on plant, machinery, raw materials and other inputs. It also talks about reimbursement of value added tax (VAT) paid for a period of 20 years, limited to 200 per cent of fixed capital investment.

The draft policy has proposed a capital grant of up to 25 per cent of fixed capital investment (excluding land cost), subject to a maximum of Rs one crore. Private auto park developers would also be entitled to capital grant of up to 20 per cent of the fixed capital investment (excluding land cost), subject to a limit of Rs two crore, according to the draft policy.

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