Lucknow, Jan 30 (IANS): Faced with threats by Tata Motors to shift its operations from the state to neighbouring Uttarakhand, the Uttar Pradesh government has approved a capital subsidy of Rs 187 crore to retain it in the state, officials said Friday.

Tata Motors had sought the subsidy from the state government under the 'Industrial Investment Scheme-2006' failing which the company had threatened to shift its truck assembling unit from Lucknow to Uttarakhand.

The company had claimed that levy of 12 per cent 'production tax', added Rs.1.50 lakh per unit to the cost of trucks assembled in the state.

Following the levy of the tax, Tata Motors had slashed orders of spare parts to vendors in Kanpur and Lucknow for its truck '3118' considerably over the past few months, suggesting its plans to end assembly of these trucks in the Lucknow unit, an official said.

An official informed that the state cabinet that met earlier this year had approved the capital subsidy after Chief Minister Akhilesh Yadav pitched for it.

"The chief minister is very clear on his views about creating an industry positive environment and the decision of the cabinet is in this direction only," the official further said.