JAIPUR: After facing a series of labour unrest at its existing plant in Manesar, two-wheeler maker Honda Motorcycle & Scooter (HMSI) India Private Limited has finally decided to step out of Haryana for its second manufacturing facility. The auto major has selected Rajasthan for this facility with an initial investment of Rs 500 crore.

The plant, spread across 60 acres near Bhiwadi, would have an initial capacity of 6 lakh vehicles per annum. The company intends to scale up its capacity to 12 lakh vehicles per annum after five years with an additional investment of Rs 600 crore. Bureau of Investment Promotion commissioner Purshottam Agarwal told ET that the state government has cleared the company’s proposal. Bureau of Investment Promotion is Rajasthan government’s investment promotion agency.

“We have offered them a customised package which includes land at concessional rate, cash subsidy on VAT, 50% subsidy on stamp duty, 50% concession on electricity duty and special rate of 0.05% on central sales tax. The civil work is likely to begin this month,” he said.

After roping in Honda Siel’s second car plant in Khushkhera near Bhiwadi in 2008, this is the second big-ticket investment for Rajasthan in the automobile sector.

“The car plant of Honda Siel is one of the magnetic factors for the company to select Rajasthan for setting up its two-wheeler manufacturing facility in the state. It will help the company manage both plants in a better way. Another pulling factor is the Japan External Trade Organisation (JETRO) complex in Neemrana where dozens of Japanese companies have already set up shops. The HMSI plant will also attract various auto ancillary and accessory units that supply auto parts to this company,” he said.

Labour unrest at its existing plant too is said to have played a key role in prompting company to step out of Haryana.

Incidentally, the company, in October last year, had threatened to shut down its factory at Manesar in Haryana and move to an alternate location after production fell by nearly 50% due to workers’ strike. This agitation had forced the HMSI management to give a salary hike of Rs 4,400 across the board besides special incentives as per respective remuneration structures.

The company has so far invested Rs 1,300 crore in its plant at Manesar. It is expected to reach 100% capacity utilisation by 2010-11.

The company expects a sale of 1.25 million vehicles this financial year and expects the figure to rise to 1.5 million next year. “Apart from robust domestic sales, we export scooters and motorcycles to 35 countries including most of the countries of the European Union. To fulfill the growing demand, we needed the second manufacturing facility,” said a company official.