Honda to sign Rajasthan deal tomorrow

Honda Siel Cars India (HSCI) will sign a memorandum of understanding (MoU) with the Rajasthan government for setting up a Rs 1,000-crore car manufacturing project in Jaipur on Thursday.

The project is slated to come up in 450 acres in the Khuskhera industrial area in Alwar.

HSCI proposes to manufacture around 50,000 cars per annum initially, and expects to increase it to 100,000 per annum. Once started, the project is expected to offer employment to over 5,000 persons.

"The state government is in the process of acquiring over 750 acres for the project as well as for ancillary units, which would come up along with the car project," a senior state government official said.

The car project would come on 350 acres and the remaining 100 acres would be for research and development centre," he said.

The official said the project was to be completed in two years, adding that the company at a later stage planned to up its investment to Rs 2,000 crore. The state government also decided to reduce central sales tax (CST) from the applicable 4 per cent to half per cent for the Honda project.

HSCI was incorporated in December 1995 as a joint venture between the Japanese auto major and Siel Ltd, a Siddharth Shriram Group company. The Rajasthan plant will be the company's second project in India. It started operations in the country by setting up a plant at Greater Noida in Uttar Pradesh in 1997 with an investment of Rs. 450 crore.

The green-field project is spread across 150 acres. The initial installed capacity of the plant was 30,000 cars per annum, which was recently increased to 50,000 cars on a two-shift basis.

The expansion process involved an investment of Rs 150 crores. The enhanced production facility of Honda Siel Cars India accommodates the Honda Civic, which was launched in India in July.

The company plans to further raise its capacity to 100,000 units per annum by the end of 2007 and 150,000 units per annum by 2010. HSCI currently produces the Honda City, Civic and Accord models in India and the CRV is sold as a full import from Japan.

According to sources in the company, the Rajasthan plant will produce Honda's small car.

Honda Siel chose Rajasthan for its second plant because it is near its biggest markets in the north and east of India.

Together they account for 45 per cent of its total sales. Honda Siel Cars India (HSCI) registered an all-time high sales of 61,327 units in the financial year 2006-07.