 "Maharashtra CM Devendra Fadnavis (left) with Terry Gou, founder and chairman, Foxconn")
The Bharatiya Janata Party-led government in Maharashtra has offered a slew of sops to Foxconn, which is set to invest $5 billion in the state. The state government has offered to help Foxconn, Taiwan's leading electronic contract manufacturer, seek loans at preferred interest rates from financial institutions, with a payment moratorium of 10 years. It will also assist the company in securing favourable working capital financing, with preferential interest rates for 10 years.
The government will provide a subsidy on the entire fixed capital investment, without any limit on the amount, as well as an additional 20 per cent capital subsidy over and above central government subsidies.
According to the memorandum of understanding (MoU) signed between Foxconn and the Maharashtra Industrial Development Corporation (MIDC) in August, the company will get 100 per cent exemption from stamp duty during the investment period, cash subsidy of 50 per cent (or up to $10 million a year) on the research and development costs incurred and exemption from local body taxes such as property tax, land tax, entry tax to all Foxconn companies.
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Business Standard has reviewed a copy of the MoU.
The project, code-named MF101 by Foxconn, will be spread across 1,500 acres at Talegaon or Khopoli.
By June next year, MIDC will offer a land parcel on a 95-year lease, with a renewal clause at the end of the tenure, in accordance with norms.
The project will also be allowed flexibility on sub-leasing to third parties.
On condition of anonymity, an MIDC official told Business Standard, "All concessions are being proposed in line with the state's industrial and mega project policies.
According to the MoU, Foxconn will set up one or several hi-tech industrial parks for mobile phones, computers, monitors, televisions, network devices, electronic components, automotive electronics, precision tooling, LED lights and smart-city development. Foxconn will establish a training centre for human resources, too."
The state government has agreed to pitch the MF101 project as a smart city project to the Centre. It also seeks to partner Foxconn in various other smart city projects. Foxconn's manufacturing facilities are likely to be located at Hinjawadi (100-300 acres), Chakan (300 acres), Ranjangaon (300 acres), Aurangabad (300 acres) and Supa (300 acres).
Foxconn will gradually introduce key components manufacturing for either thin-film transistor liquid crystal display or semiconductors, in line with the latest policy for the sector and the tariff protection stipulated by the Centre. On its part, the state government says as fair competition is critical for Foxconn to localise key components manufacturing, only a particular number of anchors will be allowed in the state. The preferential benefit offered to the first mega project in electronics systems design and manufacturing won't be offered to other manufacturers for three subsequent years.
More, the government has promised 100 per cent VAT exemption on local purchase, 100 per cent retention from VAT payable on local sales and 100 per cent retention on CST payable on cross-state sales. The company will be given subsidy on electricity rates, which are expected to be Rs 2 a unit. In addition, it will be exempted from payment of energy duty and water charges and duties for 15 years.
SOPS GALORE
- 100% subsidy on fixed capital investment, without any limit on amount
- 20% capital subsidy over and above central government subsidies
- 100% exemption on stamp duty during the investment period
- Cash subsidy of 50% (up to $10 million a year) on R&D costs
- 100% exemption from local body taxes such as property tax, land tax and entry tax
- 100% VAT exemption on local purchases
- 100% retention from VAT payable on local sales
- 100% retention on CST payable on cross-state sales
- Electricity at Rs 2 a unit
- Exemption from payment of energy duty, water charges/duties for 15 years
