Dispute with Nissan Motor: Tamil Nadu pays Rs 1,500 crore

CHENNAI: The state government has settled a long-pending dispute over tax incentives with Nissan Motor by paying nearly Rs 1,500 crore to the Japanese car giant’s Indian arm. In return, Nissan will withdraw international arbitration proceedings it has initiated against the government. According to sources, the Japanese automaker had claimed nearly Rs 5,000 crore in dues, interest and other damages.“We settled the dispute and made the payment, due to them for the period 2012-2017 in January this year much before the Covid crisis. It has come to light now since Nissan has filed for withdrawing the international arbitration proceedings,” state government officials said. The settlement is expected to boost Tamil Nadu’s image among international investors.
“Ever since the dispute arose, we have kept aside the money due to the company and that was used to make the payment,” the official added.
“The non-settlement of the dispute was proving to be a pain point, when we approached international companies to come and invest in Tamil Nadu. This is a positive development for the state, as non-settlement would have led to huge repercussions. We have only paid what was due to the company and have saved a huge sum by holding to our ground on not paying the interest for the period,” the sources said. The interest part works out to nearly Rs 400 crore.
The genesis of the dispute was an agreement signed in 2008 between the state government and Nissan Motor India along with its alliance partner Renault India to jointly establish a passenger car manufacturing facility at Oragadam near Chennai.
The agreement envisaged the car makers to avail incentives of nearly Rs 5,125 crore over a 21 year period. The state government reneged its obligation stating that Nissan changed its business model, in contravention to the original agreement thereby making themselves ineligible for the incentives.
Not convinced, Nissan initiated arbitration proceedings against the state government.
And sought Nissan Motor is seeking over Rs 5,000 crore or $770 million in dues under the 2008 agreement.
The Japanese car maker brought the case against India too for alleged violation of a Comprehensive Economic Partnership Agreement (CEPA) the country has with Japan. The CEPA gives some protections to Japanese firms investing in India and vice versa.