Andhra government slams Volkswagen

It's a new twist to an old story. States, falling over themselves to attract investment, are faced with investors apparently trading commitments from one state to bargain for more from others.

The Andhra Prdesh government has taken a serious view of Volkswagen's decision and demanded that it reconsider the move.

"Volkswagen had written a letter to us 10 days ago saying they plan to set up in Pune to which we have responded saying they cannot take that sort of a decision because when Schuster entered into an MoU on behalf of Volkswagen even then they had a presence in other states," said Andhra Pradesh chief minister YSR Reddy. "Now taking this decision shows they tried to get maximum commitment from AP and used it to trade commitments of AP with some other state and extract more from others. That sort of a thing a company like VW should not do. We wrote to them saying they will have to reconsider their decision," Reddy added.

The AP government has been in talks with VW to set up a manufacturing unit in Visakhapatanam since January last year and was close to finalising the deal in May. But the venture ran into trouble in June last year when the VW representative resigned under charges of alleged fraud.

The government now says it will wait for a response from Volkswagen before deciding its next move.