General Motors India has informed the Gujarat government that it intends to expand its manufacturing plant at Halol, where it makes the Opel Astra cars. The company wants to use the expansion to make its small car Corsa.

General Motors India plans to invest about Rs 100 crore in the expansion project. It has submitted a plan to the state government, in which it has sought incentives for its investments and continuance of several exemptions so that it can "remain commercially viable and competitive in the marketplace".

The company says it is entitled to incentives since it has already invested Rs 313 crore in the Opel Astra project and is bringing in more funds for the Corsa project. "The government of Gujarat should allow us incentives on all investments made by GMI between 16 February 1998 and 15 February 2003," the company has said.

GM India wants the Rs 35-crore preferential shares held by the Gujarat Industrial Investment Corporation to be converted into a 16 per cent interest-bearing loan after five years from the date of final disbursal instead of one year as provided by an agreement. The corporation had extended financial assistance to General Motors India by subscribing to the preferential shares. The corporation is to disburse the final instalment of Rs 7 crore in March 2000.

The company has also sought extension of the exemption of electricity duty for five more years. Once the exemption lapses on 21 June 2001, the company will be required to pay Rs 7 crore a year on this account. "As the project has huge accumulated losses and due to fierce competition in the marketplace, it will be difficult for General Motors India to absorb this additional cost", the company has claimed in the representation to the state government.

Meanwhile, the Gujarat government is trying to persuade General Motors to locate its proposed Rs 1,000 crore truck-making facility in the state. A state government delegation is expected to hold talks with General Motors in the US shortly for this purpose.

The state government contends that since the Indian subsidiary of the company has its car-making unit in the state locating the truck-making unit in the state will be a good idea.