Global automobile major PSA Peugeot Citroen, which had exited India in the 1990s, has returned to set up a new manufacturing plant at the country’s newest automobile hub at Sanand, Gujarat.

It plans to invest nearly Rs 4,000 crore in the facility and hopes to start production by 2014.

The French company signed a State support agreement (SSA) with the Gujarat Government here in presence of the Chief Minister, Mr Narendra Modi, on Thursday.

Welcoming Peugeot to the State, he expressed confidence that Sanand would become a global automobile manufacturing hub as Tata Motors and Ford India had already arrived in the town, 30 km from Ahmedabad.

General Motors started its plant in the nearby district of Vadodara in 1996.

The fully-integrated manufacturing unit, the first one in India, will be set up on a 584-acre plot and encompass a cutting-edge vehicle manufacturing facility integrating stamping, body paint and assembly operations with an initial capacity of 1.65 lakh vehicles annually.

Additionally, an engine and gearbox plant using state-of-the-art technologies will help constitute a full-fledged modern industrial automotive facility. The company proposes to expand capacities to 3.40 lakh vehicles, three lakh engines and three lakh gear boxes by 2020.

Industry regulator Gujarat Industrial Development Corporation (GIDC) has reserved another 25-acres for ancillary units. Peugeot envisages exporting 25 per cent of the production, paving the way for Gujarat to emerge an automobile export hub”, a government spokesperson said.

The Sanand plant, which will be Peugeot’s 17th globally, will provide direct employment to 5,000 people and indirect employment to another 25,000 persons. Construction work near Sanand is scheduled to begin this year end and the project will be commissioned by 2014.

The SSA was signed by Gujarat’s Principal Secretary for Industry, Mr Maheshwar Sahu, and the Vice President of Emerging Market Programs and India of Peugeot Citroen Automobiles, Mr Frederic Fabre.

Mr Philippe Varin, Chairman of Managing Board of PCA, said India could potentially become the third largest automobile market by 2020.