Tata threatens to pull out of Singur project

The worst fears surrounding the much-hyped Tata Nano project at Singur in West Bengal appear to be coming true. In a move that could have wide-ranging ramifications for the industrial resurgence of the state, Tata group chairman Ratan Tata on Friday threatened to pull Tata Motors? small-car project out of West Bengal in the face of what he described as ?constant violence? and ?disruption?, which he said pose a threat to workers and equipment at the project site.

?If any part of the state feels we are exploiting them?first of all, it is totally untrue?we will exit,? Tata said. Tata Motors, which has already spent a sizeable Rs 1,500 crore to set up the plant for the Rs 1-lakh Nano, has no Plan B, said Tata, who was in Kolkata mainly for the Tata Tea annual general meeting (AGM) on Friday.

?If anybody is under the impression that because we have made this large investment of Rs 1,500 crore? we would not move, we say, no. We would move at whatever the cost to protect our people. I can?t bring our managers and their families to West Bengal if they are going to be beaten and there is going to be violence constantly,? Tata told reporters after the two-hour AGM.

Without commenting directly on Tata?s threat, West Bengal chief minister Buddhadeb Bhattacharjee later in the day made clear the significance his administration attaches to the Tata Motors project in Singur by saying, ?The state?s people want this important project.? Bhattacharjee pointed out that he and his commerce & industries minister Nirupam Sen had met with leaders of the opposition on Wednesday to find a solution to the land issue.

Tata?s statement has raised doubts over the scheduled October rollout of the Nano, which captured the world?s attention with its pricetag. ?Volumes will be an issue for Tata Motors if the company plans to move out of Singur,? sources said. The pullout will also involve relocation of the 55 vendors supposed to anchor in Singur, and could lead to an increase in transportation costs and overall price of the car. An investment of around Rs 2,000-Rs 3,000 crore was to be made by the vendors. Of this, a few have already started construction.

?We do not want to come to an area where we perceive that we are unwanted,? Tata said, adding, ?I am making a very genuine statement and I don?t have any ulterior motive. I made a very major investment here, and if we move, that will be at great cost to the company and Tata Motors shareholders. I think it will be a great cost to West Bengal.?

Tata Motors stock gained 1.83%, or Rs 7.65, to close at Rs 425.6 on Friday on the BSE. The scrip has fallen by more than 44% since January.

The cost for the company would, indeed, be phenomenal. In the short-term, Tata Motors will have to look at setting up an assembly line at one of its existing manufacturing plants at Pantnagar, Jamshedpur or Pune for the Nano, restricting its volume. ?Tata will look for a location with tax benefits and Pantnagar, which has these benefits, looks ideal,? said Vaishali Jajoo, an auto analyst with Angel Broking. A few hundred units of the Nano to be made available from Pantnagar.

?It?s difficult to determine the financial implications on the company in case there is relocation of the plant from Singur, as the company has not come out with the degree of transfer of movable assets,? Jajoo said. ?As far as the deadline for the launch of the Nano is concerned, the company would certainly not like to delay it further as the cost of production is increasing,? she added.

?The Pantnagar plant manufactures the Tata Ace light commercial vehicle and is running at almost full capacity. The Nano requires certain specific parts, so I wonder how overnight the parts could be made available and the capacity scaled up,? says Pinaki Mukherjee, lead analyst, Datamonitor. He added that Tata had gone ahead with Singur over Pantnagar due to its proximity to a seaport, national highway and Jamshedpur.

However, vendors for the Nano project say that since most of them have a presence around Tata Motors? other manufacturing plants, including Pantnagar, Jamshedpur and Pune, supply of parts for the Nano should not be a problem.

In the long run, Tata Motors may look at an altogether new location with the possibility of offers floating in from states like Orissa. Tata Motors managing director Ravi Kant had reiterated after announcing the company?s first quarter results that the company would not produce the Nano only in Bengal.

Speaking at length on the Singur project on Friday, Tata said, ?It?s for the people of West Bengal and Calcutta to decide whether we are going to be unwanted residents or be people?s corporate citizens of West Bengal.?

The Tata Motors plant at Singur, spread over 650 acre (with an extra 350 acre earmarked for parts suppliers), faced resistance as soon as the state government acquired the land in September 2006. ?We leased property that was offered to us, the land that was already acquired? we believe and have no reason to disbelieve, that it was acquired legally,?

Tata said.

Trinamool Congress chief Mamata Banerjee, who has spearheaded opposition to the acquisition of farmland, had said that she is willing to talk to the Tatas. But on Friday, reacting to Ratan Tata?s comments, Banerjee said: ?If the Tatas go away, West Bengal will not be hurt? We are being blackmailed, and we will not bow to blackmail.?

Meanwhile, the industrial community reacted with disappointment to the day?s developments. The Confederation of Indian Industry (CII) expressed deep concern about the situation in West Bengal. Any adverse development with regard to the upcoming Tata Motors plant in Singur will irreversibly hamper the future industrialisation of West Bengal, CII said.

VN Dhoot, chairman, Videocon Industries, said, ?Every industrialist faces such hurdles. Even we faced many hurdles, but we managed to convince our workers and have achieved success.? According to Dhoot, this is what Tata should be doing at Singur.