HYDERABAD: The wait seems to be finally over. Volkswagen, the German auto major, will be inking a memorandum of understanding with the Andhra Pradesh Government next month.

Draft memo ready

Highly placed sources in the Government told The Hindu on Wednesday that the draft MoU was ready and a team of Volkswagen company officials from Germany would arrive here next month to complete the formalities. Volkswagen is planning to set up a plant at a cost of Rs. 5,400 crores to manufacture cars and light commercial vehicles (LCVs) in the port city of Visakhapatnam, which it wants to develop into a regional hub for its activities. Controversy marred the Volkswagen deal last year when the Government transferred an amount of Rs. 11.67 crores as an advance payment to Vashistha Wahan (VW), which styled itself as a special purpose vehicle, at the instance of then Indian representative of the company, Helmuth Schuster.

However, it turned out that this money was not transferred to Volkswagen and the Rajasekhara Reddy Government handed over the case to the Central Bureau of Investigation (CBI) for a thorough inquiry into the whole transaction, particularly the role of Mr. Schuster and his companions. Amid accusations by the Telugu Desam Party and other political parties, Chief Minister Y. S. Rajasekhara Reddy stripped Botsa Satyanarayana of the Major Industries portfolio and shifted him to Marketing.

The Volkswagen later offered back the Rs.11.67 crores "owning up moral responsibility" for the irregularities, but the Government refused to accept it insisting that the company go ahead with the proposal of establishing the unit at Visakhapatnam. The absence of a MoU was considered as one of the causes leading to the scandal.

Groundwork

Sources explained that much groundwork had to be done before the MoU was signed. The application of Volkswagen had to be processed by the Finance, Law, Planning and Industries Departments before finally reaching the Chief Minister's desk. From there it would go to the Cabinet for approval. The MoU is signed at this juncture stipulating the share and equity arrangements.

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