Hyderabad: Last week a four-member team of Volkswagen legal experts led by their project leader Peter Walters visited the Mambattu village near Tada in Nellore district in the south eastern tip of Andhra Pradesh to inspect 500 acres of land, just 60km away from Chennai.

The site adjacent to multinational glassmaker St.Gobain's India unit seems to have attracted the Germans. The VW team has now returned to Germany. Happily for the state government, VW's India representative and goodwill ambassador, Frank Elbee, Germany's diplomat to India, personally came to invite Indian officials to visit VW's headquarters at Wolfsberg in Germany to take the project further.

The state advisor on industrial promotion and investments, D A Somayajulu confirmed that an official team of the AP state government would leave for Germany by the first week of December, if not earlier.

"The ball is in their court now. We have done whatever we can do to get the project to AP. No other state government can better our offers and utilities," he told this correspondent last week.

The efforts to bag the Volkswagen India car project began in earnest in 2003 when the AP government sent a team of officials, headed by the then industry minister K Vidyadhar Rao, to Wolfsberg twice. But subsequent elections in India and change of guard both at the centre and the state level led to the project being put in cold storage.

The subsequent industry minister B Satynarayana led by officials including the then industry secretary K V Rao, pursued the project vigorously.

The Y S Rajasekhar Reddy government in its eagerness to bag the Rs5, 000-crore car project and provide jobs for 20,000 people living in the poverty-stricken north coastal and Telengana regions of the state even passed orders allocating 360 acres of land near Vishakpatnam to the company.

Stalled by a scam
The state government also authorised the state infrastructure corporation to invest €5 million (Rs27 crore) in the equity of a company floated by Volkswagen official Helmut Schuster, Vashista Wahan, allegedly the Indian arm of Volkswagen-AG.

In January 2005, on the directions of Schuster, the state government undertaking deposited €2 million in the accounts of Vashista Wahan and waited till June for the project to be finalised.

"We did not invest in the company on any orally given directions. During our last visit to Germany we had reviewed the final draft of the memorandum of understanding and also signed a memorandum of protocol " says former industry minister B Satynarayana, who was shorn of his portfolio after the bribery scam emerged.

The exposure of Schuster's scam and his subsequent dismissal from Volkswagen's services on June 15, this year, embroiled the state government and the concerned minister neck deep in charges of bribery and a cross border scandal. However, Schuster was proved to have had similar operations in six other Asian and African countries where he was said to have offered the Volkswagen car project to the governments concerned, collecting millions of dollars in investment and bribes in illegal companies he floated along with associates.

CBI inquiries have revealed that the AP government's investment of €2 million were deposited in bank accounts in Hong Kong.

At present the Indian associates of Schuster, Jagdish Alagh Raja and Ashok Jain are in CBI custody. The investigating agency is also said to have recovered a large part of the €2 million (Rs11.76 crore). Gayatri Rai of London, a lady associate of Jagdish Raja and the beneficiary of over Rs1 crore is also in police custody at Hyderabad.

Minister B.Satyanarayana lost his portfolio following the exposure of Schuster's scam in Germany that revealed that Vashista Wahan was not a legal organisation or had any links with Volkswagen. The party however refused to oblige the opposition and kept him in the cabinet with a minor portfolio.

According to Sutheertha Bhattacharya, the state industry commissioner, the project for which the outgoing Telugu Desam government did the groundwork hit a bottleneck with the Schuster issue. "It took VW almost two months to repair the damage done by Schuster and his associates and take the project further."

Still nursing the wounds of a major financial expose of its corrupt officials, Volkswagen-AG has been treading cautiously on its India project and has appointed Elbe as its goodwill ambassador.

Mutual wooing
Elbee in his first interaction with the Indian media at Hyderabad said that if at all the company puts up the India car project, it would be in Andhra Pradesh. "The VW India car project will come to AP" he said at a press conference.

Though VW did try to salvage the situation by offering to return the €2 million to the AP government as compensation, the Rajashekhar Reddy government rejected the amount and instead asked the VW emissaries to speed up the project.

Last month, legal teams from Wolfsberg visited Hyderabad and reviewed the project threadbare. Among other things the negotiators have asked for additional concessions like providing a special economic zone to facilitate exports on low cost production terms.

On its own, the AP government has offered land free of cost, infrastructure to bring water and power to the factory, plus a 15-year moratorium on sales tax. Apart from this, the state government has also offered cheaper power at a subsidised rate of Rs1 per unit.

Earlier the German company had evaluated Vishakhapatnam as a site for the project, which it later rejected in view of it being a Tsunami-affected area with several related deaths and the fact that the recent rains in the state led to the Vishakhapatnam airport being closed for two weeks.

The present site at Mambattu village, near Tada in Nellore district has several advantages. For one, VW need not build a township there, as the site's proximity to Tamil Nadu will enable it to leverage manpower availability from automobile plants in Chennai. For another, it can procure ancillary equipment from the large engineering goods units all located within 200-km radius of Chennai.

"All said and done, we have ensured VW's requirement of a rail and road, port and airport connectivity on a 24x7 basis," says state industry advisor D A Somayajulu. Having waited this long the political leaders and the bureaucracy in AP is waiting with fingers crossed for a final statement from Germany for the go-ahead to the Indian project.

Chief minister YS Rajashekhar Reddy, whose tenure in the hot seat depends a lot on the success of the VW car venture, says, "I am only waiting for the Germans to come with a business plan,".

"This achievement will improve Reddy's image not only among farmers but also among the urban youth and educated unemployed in the state," explains Andhra's finance minister K.Rosaiah the CM's anxiety to speed up the project. If all goes well, Reddy may get to lay the foundation stone for the project before his government completes two years in office in May 2006.