Diesel engine plant at Gurgaon gets nod

Diesel engine plant at Gurgaon gets nod

New Delhi: The board of Maruti Suzuki India Ltd on Monday gave its consent for the car maker to set up a diesel engine plant in Gurgaon, chairman R.C. Bhargava said.

Maruti already owns a plant in Gurgaon that make petrol engines.

“After an intense discussion, we have come to a conclusion that we need a diesel plant," said Bhargava. “We will be making an investment in Gurgaon for the new plant and keep adding capacity there."

Bhargava said the board suggested some changes in the original plan and the new engine plant should be up and running in a year’s time.

“The board asked the management to plan a modular model where more and more capacity can be added over a period of time," he said.

According to another Maruti executive, who was present at the board meeting, the new engine plant will fall under Maruti rather than its parent Suzuki Motor Corp.

“The board has in principle agreed that there is a requirement for a separate diesel engine plant in order to sustain company’s growth in the country," said the executive, who didn’t want to be named.

Maruti is planning to set up a diesel engine plant in India, Mint reported on 14 December. The report quoted chairman Bhargava as saying that Suzuki Powertrain’s plant was running to full capacity and if the demand for diesel cars continues to grow after the national budget is presented in March, Maruti will look to produce diesel engines.

An analyst with a leading brokerage firm said that it is surprising the company is opting for Gurgaon as the location of the plant.

“Gujarat would have made more sense as they could have utilized the incentives to their advantage and made engines at a cheaper cost," said the analyst, who didn’t want to be named. “One reason which appears is that Suzuki Powertrain’s balance sheet could have been weaker. Their ability to raise funds could be a constraint and Suzuki’s investment in yen as equity could be costlier. So, Maruti is making investment from its own balance sheet."

Bhargava said the land deal to build a factory in Gujarat is yet to be finalized and Maruti wanted the diesel engine plant to be up and running soon. That’s why Gurgaon has been chosen, he said. Bhargava refused to share investment details.

Suzuki Powertrain, a joint venture of Maruti and Suzuki Motor, has a plant in Manesar near Gurgaon capable of manufacturing 300,000 diesel engines a year.

Another Maruti executive said the board had informed the Maruti management that it will identify a location for the plant. It asked the management to keep in mind the government’s fuel policy, including the possible deregulation diesel prices.

“The total investment could be to the tune of 1,000 crore with an initial capacity of 100,000 engines per annum," this person said, also speaking on condition of anonymity.

The share of diesel cars sold in India rose 6 percentage points to 23% in the past nine months as the difference between petrol and diesel prices widened to 30 a litre.

Maruti has four models— Ritz, Swift, DZire and SX4— that run on diesel as well as petrol. Of these, the diesel versions have accounted for 80% of its sales this fiscal.

As a stop-gap arrangement, Maruti has tied up with Fiat India Automobiles Ltd for the supply of 100,000 diesel engines a year for a period of three years. Suzuki Powertrain also manufactures 1.3 litre diesel engines under licence from Fiat.

amrit.r@livemint.com

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