Tyre maker Ceat seems to have deferred, for now, its plans to re-locate its bias (non-radial) tyre plant in Bhandup in Mumbai to the outskirts of Mumbai. The company owns land in Ambernath in Thane district, where it had announced its plans to shift the Bhandup plant owing to octroi charges within the city. The decision to defer the plan would mean the company’s margins will continue to be impacted due to the octroi pay-out.
In 2007, Fiat India, the local subsidiary of Italian auto major Fiat, had re-located its plant out of Kurla in Mumbai to Ranjangaon near Pune citing high octroi charges. Fiat, that was paying 4% octroi on its vehicles back then, saw Ranjangaon as a cost-effective location, with tax sops provided by the Maharashtra government.
?The octroi incidence to the company would be around 0.6-0.75%, as a percentage of the turnover,? said an auto analyst. According to this, Ceat that reported a gross sales of R3,752 crore in 2010-11, would be paying around R28 crore as Octroi charges. On raw materials alone, the company pays 4.5% octroi and the Bhandup plant consumes as much as 20-25% of Ceat’s total raw materials purchased. The operating margins of Ceat for the last quarter of 2010-11 stood at 1.5% as compared with 5.1% in the corresponding quarter last year.
Arnab Banerjee, executive director operations, Ceat, told FE, ?We are not going to shift (to Ambernath) in a hurry as it is our biggest plant. It will take us time to undertake the process. The timing is deferred.? He added that the shifting work has not started as of now. In a call to investors, the company had said that the new plant in Ambernath will take another two and half years to come up.
