Karnataka gives tax sops to Honda bike plant

Bangalore : The Karnataka government Friday granted a slew of tax incentives to Honda Motorcycles & Scooters India Ltd (HMSI) for setting up its first plant in southern India at Narasapur in Kolar district.

“The government has decided to convert 40 percent of the value added tax (VAT) to be levied on HMSI into an interest free loan for 10 years, reimburse 95 percent of the central sales tax (CST) for five years and exempt stamp duty and registration fee on 96 acres of land allotted to it in the Narasapur industrial estate,” Law Minister Suresh Kumar told reporters after a cabinet meeting here.

As a wholly-owned subsidiary of the Japanese auto major Honda Motor Corporation, HMSI is setting up a two-wheeler plant with an upfront investment of Rs.1,300 crore (Rs.13 billion) with an installed capacity of 1.8 million units per annum.

“The cabinet has decided to extend these incentives to the company as a quid pro quo to provide 85 percent jobs to the local people in all departments. The company has agreed to our condition,” Suresh Kumar said.

The company in its proposal has indicated that it would provide direct jobs to 3,200 people and indirect jobs to 15,000 people in its third plant in the country.

HMSI’s two plants are located at Manesar in Haryana with a capacity of 1.6 million units and Tapukara in Rajasthan with 1.2 million units per annum.

The company has set a sales target of 2.1 million bikes for this fiscal (2011-12) as against 1.6 million units sold in last fiscal (2010-11).

The new plant is set to reduce the waiting period for Honda vehicles in the southern states to 30 days from six months currently.

Honda’s range of two-wheelers include three automatic scooters (Activa, Dio & Aviator) and six motorcycles (CB Twister, CBF Stunner, CB Shine, CB Unicorn, CB Unicorn Dazzler and CBR 250R).