Saturday, 16 July 2011

Hard to do Business in Maharastra : Bajaj

The Bajaj Group said it may review its investments in Maharashtra. “We are likely to review our investments in Maharashtra as we are finding it tough to do business here. It is a mess here,” said a peeved Rajiv Bajaj, managing director, Bajaj Auto. Rahul Bajaj, chairman of Bajaj Auto, and son Rajiv are upset with the Maharashtra government for denying them their due and failure of the state government to make promised refunds.
Bajaj Auto is the third company to have protested against functioning of the state government in recent times. Earlier, Mahindra and Mahindra and Volkswagen India had bitterly complained against the Maharashtra government, which failed to honour its commitments. Bajaj Auto could have posted much better numbers than it had in the first quarter for the financial year had it not been for refusal of the Maharashtra government to give sales tax refund to the company.

Bajaj is miffed with the Maharashtra government for failing to make sales tax refunds for the last 15 months. “The state government owes us R1,100 crore and we have not got a penny. We have tried everything,” Rajiv Bajaj said in Pune. If this is what happens to us in one of the best-administered states, then there was little to be said about the country. The company said it was a legitimate demand for a refund which was being stonewalled by the Maharashtra government. Bajaj said the company had lost R100 crore in interest and R30 crore in other income because of this.
Rajiv Bajaj said the group was able to manage because of the resources it had but if there are smaller companies that have limited working capital, this kind of an attitudue would have destroyed their business and brought them to a grinding halt.
Such erratic functioning, reversal of policies and failure to meet its commitments would lead to flight of capital from Maharashtra , the Bajaj MD warned. His company is going to use up all its capacity in Chakan and Aurangabad soon and could be looking at expanding but if this attitude continued, it would look at states such as Gujarat to invest which many other automakers had already done, he said. The Bajaj managing director said the company had a great experience while opening a Probiking showroom in Gujarat and was surprised with the treatment it got though it was just a show room while in Mahrashtra, where the company has been running manufacturing operations for the last 50 years, the group was being treated badly.
Bajaj also said there were also massive labour problems in Chakan, which the Mahrashtra government had sold as a great investment destination. Our vendors and logistics providers located in Chakan area are declining to do business because of labour problems, Bajaj said. Bajaj has 50 vendors in Chakan.
According to Kevin D'Sa, president, finance, 90% of Bajaj’s input comes from vendors across Maharashtra and the company pays 12.5% VAT, which is to be adjusted against the sales tax on the output. This worked out to R220 crore per quarter and till 2009-10 year-end there was nothing outstanding but the Maharashtra governement abruptly stopped payment last fiscal and there has been no payment for 15 months. “We were recently asked to pay a bank guarantee of R200 crore to start the process which we did but there is no refund in sight,” D'Sa said.
Bajaj Auto is upset that it has been doing business, following all laws and stayed away from controversies. Yet the group had to suffer.


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