Nissan Seeks Payments From India for Unmet Tax-Break Promise
(Bloomberg) -- Nissan Motor Co. is seeking compensation from India, saying the government failed to keep its end of the bargain on promised tax breaks after wooing the Japanese automaker to set up a factory in the South Asian country.
The Yokohama-based carmaker has started international arbitration against the Indian government, a Nissan spokesman said Friday. The company wants $770 million in payments and damages, Reuters reported Friday, citing a person familiar with the matter. Nissan sent a legal notice to Prime Minister Narendra Modi last year after making repeated requests, the report said.
“We are committed to working with the government of India toward a resolution,” Nissan said in an email, declining to elaborate. A spokesman at the commerce ministry in New Delhi didn’t immediately respond to a message seeking comment.
Nissan’s move flies in the face of Modi, who has sought to improve India’s image among foreign investors by making it easy to start ventures and resolve bankruptcies. He is counting on reforms to lure overseas capital and create jobs under his flagship “Make in India” program. While a World Bank index in October showed the country moved up 30 notches in business-friendly rankings, companies such as Vodafone Group Plc. and NTT Docomo Inc. have previously run into disputes over taxes and investment rules.
Vodafone, facing a demand for more than $2 billion in taxes from the Indian government even after the nation’s Supreme Court ruled in the mobile-phone company’s favor, has taken the matter to international arbitration. The Newbury, England-based company has maintained it doesn’t owe the government the levy. India’s foreign investment rules prevented Docomo from getting $1.2 billion from Tata Sons Ltd. as compensation awarded by an arbitration court in London, before the two parties agreed to settle in February this year.
Nissan signed a preliminary agreement with the southern Indian state of Tamil Nadu in 2008 and invested about 45 billion rupees in a factory on the outskirts of Chennai, starting operations two years later. It spent 16 billion rupees more in subsequent years to add power train and tool manufacturing.
The plant, also shared by affiliate Renault SA, caters to both domestic and international markets has exported more than 600,000 units to 106 countries since 2010, according to the company. It has a capacity to produce 480,000 units per year.
The models that roll out of the plant include the Micra hatchback, Terrano mini-SUV, the Sunny small sedan and Datsun.
Nissan is proud to play a role in the Make in India effort and has created over 40,000 jobs in India, directly and indirectly, and contributed to the economic growth of Tamil Nadu with about a billion dollars in investment, it said in its email statement.
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