The company is insisting upon the fallback provision assuming that it may not be possible for it to invest Rs 750 crore or more in seven years required under the "mega project" category.

The company has also said that it will repay in one stroke the amount of incentives availed by it in excess of the entitlement under the Package Scheme of Incentives, 1993. It has, however, made it clear the payment will be without any interest.

The state planning department, while opposing the 200 per cent fallback provision, had warned that the government will incur a revenue loss of around Rs 2,250 crore in 18 years (this was based on an annual Octavia production of 60,000 units).

Additionally, the state directorate of industries has said that Skoda's request does not fit in any of the government's schemes. "Based upon the time frame and investment made, the project could be classified either very large or pioneer. Whatever excess investment has been made beyond the time frame would qualify for expansion benefits," it added.

Deshmukh confirmed the deferment, and said the sub-committee has sought a clarification from Skoda Auto on how its demand for the fallback provision of 200 per cent sales tax incentives can be met when its project fails to be a "mega project" one.

According to the company, it will initially make an investment of Rs 225 crore to produce 45,000 Octavias in five years from the launch of production. The company wants to hold a ground breaking ceremony at Shendre near Aurangabad in January second week, and roll out the first Octavia model from June next year.

Sources said the Chief Minister may use his discretion to reduce the sales tax incentives to about 175 per cent, if the company reconsiders its investment plan of Rs 225 crore for the next three years. In this case, the company will have to increase the investment to at least Rs 350 crore to Rs 400 crore in three to five years.

However, the cabinet sub-committee has decided to include the proposed project in the "pipeline" category, and give concessions under the Package Scheme of Incentives, 1993, which ended on December 31, 1999. The decision has been taken as Skoda Auto has received clearance from the Foreign Investment Promotion Board, and has also signed a memorandum of understanding with the Director General of Foreign Trade on localisation.

Besides, the company has sought 250 acres of land at Shendre near Aurangabad from the Maharashtra Industrial Development Corporation at Rs 50 per square metre.