State government sources told The Financial Express that the mega project will be eligible only for sales-tax incentives with monetary ceiling at 10 per cent of the fixed capital investment for a period of two years. The sales-tax incentives so availed by the mega project in the form of deferral will become repayable in five equal annual instalments after 10 years.

Analysts say that the government's move will benefit the Fiat Uno as well as the owners of ailing textile mills. In Mumbai, the excess land held by both private and state-owned mills is more than 10lakh sq mt which can be used for investments in mega projects in the auto sector.

The mega project in the auto sector in MMR will be required to make a fixed capital investment within a period of five years from the date of the last final effective steps or commencement of commercial production, whichever is later. The government has made it clear that failure to comply with this condition will automatically result in de-recognition of the mega status and as a result, the quantum of incentives availed by the mega project will be recoverd forthwith with interest.

The existing industrial units in the auto sector in MMR going in for expansion or diversification or modernisation with fixed capital investment of the level laid down for the mega project will be required to maintain a separate record of production. In case, if the industrial unit fails to maintain such separate records, the benefit of the mega project will be available in the ratio of additional fixed capital investment made by it in the autosector to the total investment.

The mega project in the auto sector will not be eligible for incentives other than sales tax under the Package Scheme of Incentives, 1993.

The Industiral Location Policy formulated during the Congress rule in 1993 has put restrictions on the development of industrial units except cotton textile industries, godowns, service industries and service industrial estates in the MMR. This decision was taken with the objectives of decongestion and ensuring pollution-free environment in MMR, especially in Mumbai and its suburbs.

MMR comprises Greater Mumbai, areas of Thane Municipal Corporation and Mira-Bhayander Municipal Council (zone -I), areas of Kalyan and Navi Mumbai municipal corporations, Ulhasnagar, Ambernath, Kulgaon-Badlapur municipal councils, Bhivandi and Uran (zone - II) and areas excluding those covered by zone I and zone II.

However, with an amendment, expansion, modernisation, diversification or change of manufacturing process was allowed for industries in ThaneMunicipal Corporation areas.

Moreover, the Package Scheme of Incentives, 1993, was not applicable to the industrial units situated in Group A comprising the Mumbai Metropolitan region and Pune Metropolitan Region. However, the scheme was applicable to the industrial units from Group B, C, D and D+ (less developed and backward areas).