Andhra keen on VW project

Financial irregularities in the company's project not to dampen state's plans, says chief minister.

Andhra Pradesh Chief Minister YS Rajasekhara Reddy today said the alleged financial irregularities regarding Volkswagen's Indian project would not stop his government from trying to get the German carmaker to invest in a production unit in the state.

Reddy was reacting to media reports which said Vasishta Wahan (VW) Private Limited, which was claimed to be incorporated for the purpose of setting up a joint venture project in Andhra Pradesh, is a benami company and not related to Volkswagen.

The state government had issued orders in January this year taking a ¤ 5 million equity in the Volkswagen project, the first installment of which had been deposited into the account of Vasishta Wahan.

"Based on a letter written by the then Volkswagen company's India Project head Helmuth Schuster, the state government deposited Rs 11.7 crore, equivalent to ¤ 2 million, initially in the name of Vasishta Wahan," the chief minister said, adding that neither the Volkswagen management disowned this company nor the government had lost its money.

"Floating a special purpose vehicle to start a new venture is a normal practice and the incorporation of Vasishta Wahan is aimed only at that," he said.

The chief minister also said the government was going to send a team led by the state industry commissioner soon, following a latest invitation received from Volkswagen headquarters on Monday.

He said the company was also in touch with the promoter of Vasishta Wahan Private Limited, in which Volkswagen would have a controlling equity as per Schuster's letter in January, 2005.

Earlier during the day, Major Industries Minister B Satyanarayana, who is in the eye of the storm, showed the letter written by Helmuth Schuster, which said Vasishta Wahan had been incorporated for the purpose of establishing a Volkswagen manufacturing plant at Visakhapatnam. Volkswagen AG will have a minimum stake of 51 per cent in the plant.

He also referred to a letter sent by Detlef Wittig, member of the board of management, Volkswagen, to Reddy on June 22, 2005. Quoting Wittig, he said, "Volkswagen is still strongly interested in entering the Indian market as well as in achieving an attractive package of incentives in Andhra Pradesh, independent of the above mentioned organisational review on our side and the connected delays." Wittig is said to be named as a successor to Helmuth Schuster as India project head.

Satyanarayana said the proposed manufacturing plant by Volkswagen was still on and an outcome was expected in a month or two, in spite of the recent developments in Volkswagen. He also denied having any connections with the promoters of Vasishta Wahan company.