NEW DELHI: Hero Honda’s plan to expand its plant at Haridwar in Uttarakhand has hit a roadblock with the state development agency threatening to cancel the allotment of 94.5 acres of land due to non-payment of arrears.
State Infrastructure and Industrial Development Corporation of Uttarakhand Ltd (Sidcul) has threatened to cancel the land allotment if the world’s largest two-wheeler maker by volumes fails to pay Rs 50 crore by September 15.
The company said Sidcul demand is much higher than its own estimates but hoped it can settle the issue through negotiations .
The 18-month-old Haridwar unit accounts for one-third of the 3.5 lakh twowheelers Hero Honda produces every month across its three plants in India. It plans to ramp up the production here to 6,000 bikes per day to extract higher profits from this tax-free zone.
The land under dispute is key for any capacity expansion. Hero Honda and its component suppliers were allotted 265 acres of land at the Haridwar industrial estate in 2006 for Rs 1,000 per square metre. The company set up its plant on 119.75 acres for which it paid the full amount of around Rs 49 crore to Sidcul. It also paid an earnest money for the remaining 145.26 acres at Rs 2 lakh per acre.Its ancillaries, which were allotted 50.7 acres, also paid the full amount. The dispute is over the remaining 94.5 acres.
While Sidcul has demanded that the company pay for the entire land plus a penalty on late payment, Hero Honda claims it is liable to pay only for 54 acres on which its new plant will come up, or about Rs 22 crore. “As per our estimates, the industrial area, leaving roads etc, is much less than the Sidcul estimates,” a company spokesman said.
According to a state government order in 2006, there was no need to pay for land left for roads and infrastructure facilities , he said. “However, we are still willing to negotiate and settle to pay something for the disputed land with Sidcul on a mutually agreeable acreage of land,” the spokesman said.
Sidcul officials said the agency, which allotted the land in 2007, has already adjusted some land for infrastructure development and will not
entertain any plea for further adjustment.
“By depositing earnest money for the entire land, they acknowledged their ownership on the entire stretch and are liable to pay for the whole allotment,” said a senior official at Sidcul head office in Dehradun. The agency will not extend the new deadline set after the company failed to meet the earlier deadline of August 31, added the official requesting anonymity.
The Haridwar plant set up with an investment of Rs 1,900 crore (including ancillaries) helped Hero Honda to improve its profit margins as it came with a slew of tax incentives including zero excise duty for first 10 years, 100% income tax exemption for first five years and 30% exception for the next five years.
The company improved its operating margins to 18.12% in the quarter ended June from 13.64% a year earlier as it increased production of top selling bikes Splendor and the Passion at Haridwar. The company reported a 83% jump in net profit at Rs 500 crore in the quarter.
State Infrastructure and Industrial Development Corporation of Uttarakhand Ltd (Sidcul) has threatened to cancel the land allotment if the world’s largest two-wheeler maker by volumes fails to pay Rs 50 crore by September 15.
The company said Sidcul demand is much higher than its own estimates but hoped it can settle the issue through negotiations .
The 18-month-old Haridwar unit accounts for one-third of the 3.5 lakh twowheelers Hero Honda produces every month across its three plants in India. It plans to ramp up the production here to 6,000 bikes per day to extract higher profits from this tax-free zone.
The land under dispute is key for any capacity expansion. Hero Honda and its component suppliers were allotted 265 acres of land at the Haridwar industrial estate in 2006 for Rs 1,000 per square metre. The company set up its plant on 119.75 acres for which it paid the full amount of around Rs 49 crore to Sidcul. It also paid an earnest money for the remaining 145.26 acres at Rs 2 lakh per acre.Its ancillaries, which were allotted 50.7 acres, also paid the full amount. The dispute is over the remaining 94.5 acres.
While Sidcul has demanded that the company pay for the entire land plus a penalty on late payment, Hero Honda claims it is liable to pay only for 54 acres on which its new plant will come up, or about Rs 22 crore. “As per our estimates, the industrial area, leaving roads etc, is much less than the Sidcul estimates,” a company spokesman said.
According to a state government order in 2006, there was no need to pay for land left for roads and infrastructure facilities , he said. “However, we are still willing to negotiate and settle to pay something for the disputed land with Sidcul on a mutually agreeable acreage of land,” the spokesman said.
Sidcul officials said the agency, which allotted the land in 2007, has already adjusted some land for infrastructure development and will not
entertain any plea for further adjustment.
“By depositing earnest money for the entire land, they acknowledged their ownership on the entire stretch and are liable to pay for the whole allotment,” said a senior official at Sidcul head office in Dehradun. The agency will not extend the new deadline set after the company failed to meet the earlier deadline of August 31, added the official requesting anonymity.
The Haridwar plant set up with an investment of Rs 1,900 crore (including ancillaries) helped Hero Honda to improve its profit margins as it came with a slew of tax incentives including zero excise duty for first 10 years, 100% income tax exemption for first five years and 30% exception for the next five years.
The company improved its operating margins to 18.12% in the quarter ended June from 13.64% a year earlier as it increased production of top selling bikes Splendor and the Passion at Haridwar. The company reported a 83% jump in net profit at Rs 500 crore in the quarter.
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