The Gujarat government has given tax relief to Ford and Peugeot which are building or planning new car and engine factories in the state.

The relief will be in the form of exemption from stamp duty and registration charges, the Economic Times of India (ETI) reported, citing a written reply by minister of state for industries, Saurabh Patel, to a question asked by Congress president Arjun Modhvadia in the assembly. 

According to Patel, Ford will also have Value Added Tax (VAT) repaid for the next 15 years. A simialr deal has been offered to Peugeot. 

PSA Peugeot Citroen said at the end of January it might delay its planned EUR650m (US$850m) plant investment in India, adding only that it was "reviewing the investment calendar”.

The company said at the time this would likely lead to “some timetable adjustments" but declined to confirm whether it was still committed to begin production in 2014 as originally planned.

ETI's report said minister Patel added the government has signed a state support agreement with Ford and Peugeot while leading domestic automaker Maruti's proposal to set up a factory in the state was under consideration. 

Maruti said in January it would start construction of its new Gujarat factory in fiscal 2013-2014. MD Shinzo Nakanishi told The Times of India internal targets and slowing demand meant no physical work would be done on the new plant for now. The Gujarat plant will be the company's first outside Haryana state where it currently has two manufacturing plants which were both affected severely by industrial action during 2011.

Ford India is spending about US$1bn to build a new vehicle manufacturing and engine plant in Gujarat with the first vehicle and engine scheduled to come off line in 2014. The new facility is expected to create 5,000 jobs, and will be able to initially produce 240,000 vehicles and 270,000 engines per year, ETI noted. 

Peugeot had performed a ground breaking ceremony for its integrated manufacturing plant at Sanand in November last year and had projected to achieve full production capacity of 3,40,000 units by early 2016. 

The factory, costing about EUR680m will capacity for 100,000 engines annually, ETI added.