Ford India owes Rs 602 cr as deferred sales tax liability

Chennai, Sep 17 The US automobile major Ford Motor Company that had announced the closure of manufacturing facilities in Tamil Nadu and in Gujarat owes about Rs 602.3 crore as deferred sales tax liability, as per a research report.

Ford Motor Company's Indian manufacturing operation is carried out by its subsidiary Ford India Private Ltd with two manufacturing plants one at Chennai and Sanand in Gujarat.

The Rs 13,520 crore revenueFord India set up its first plant near Chennai with Tamil Nadu offering tax incentives like sales tax waiver/ deferral.

Similarly, the Gujarat government too offered tax incentives to Ford India when it decided to set up a plant in Sanand.

A day before the Ganesh Chaturthi festival September 9 Ford India announced that it will wind down vehicle assembly in Sanand by the fourth quarter of 2021, and vehicle and engine manufacturing in Chennai by the second quarter of 2022.

Ford India has four plants in the country vehicle and engine plants in Chennai and Sanand.

Ford India has decided to continue operating the engine plant in Sanand while closing down the other three.

In its report, credit rating agency India Ratings and Research last month said Ford India's unguaranteed external debt was largely in the form of a deferred sales tax liability of Rs.602.3 crore.

Queried on payment of the dues to the governments and the timeline following the decision to close down the plants the company told : "We continue to work closely with the relevant governmental agencies in relation to the restructuring and are thankful to Governments in Tamil Nadu and Gujarat, as well as the Centre, for their support and understanding."

According to India Ratings, Ford India has strong legal linkages with its ultimate parent, Ford Motor Company that has extended corporate guarantees to 85 per cent of the former's sanctioned working capital facilities at the end of FY21.

The credit rating agency said it expects a major portion of Ford India's future external debt will continue to be backed by a guarantee from Ford Motor Company.

Announcing its decision to shut down Indian plants, Ford Motor Company said it currently expects to record pre-tax special item charges of about $2.0 billion, including about $0.6 billion in 2021, about $1.2 billion in 2022 and the balance in subsequent years.

"Within that total will be about $0.3 billion of non-cash charges, including accelerated depreciation and amortization. The remaining cash charges of about $1.7 billion will be paid primarily in 2022 and are attributable to settlements and other payments," the company said.

According to India Ratings, Ford group companies accounted for over 49 per cent of the sales volumes of Ford India, which exports to various countries on a cost-plus basis, during FY21