Modi orders inquiry into Nano MoU note

Written by fe Bureaus | Ahmedabad, Nov 10 | Updated: Nov 11 2008, 06:14am hrs
The Gujarat government has ordered an internal inquiry into the leak of an alleged note about the tax and other benefits given by the Narendra Modi government for getting the Nano project of Tata Motors into the state.

The inquiry panel will be headed by industry secretary Gauri Kumar and verify how the leak took place. Officially, however, the government refused to issue any statement either confirming or denying the authenticity of the note. Even the Tata Group, when contacted, maintained a studied silence on the issue.

Interestingly, the leak comes a day after a journalist from a leading vernacular daily filed an application under RTI seeking the contents of the MoU signed between the Modi government and the Tatas. The state government, according to sources, replied back expressing its inability to reveal the contents since the tatas felt it would harm their business interests.

As per the note that chief minister Narendra Modi and his ministers mulled just a day before the final MoU was inked is anything to go by, the Tatas demanded several sops to drive in the nano project into Gujarat.

Gujarat, it would appear, had bent a lot morebackward to wangle the deal than West Bengal or other states did.

While West Bengal chief minister Budhadeb Bhattacharya had made the Tatas agree to do with a Rs 200 crore soft loan from the state government at 1% interest payable in five equal annual instalments after 20 years. But the Tatas sought a whopping Rs 9570 crore soft loan from Gujarat to be disbursed on a monthly basis (at the rate of 330 percent of the same expected Rs 2900 crore worth of Tata investment), at a notional 0.1% interest which would be paid back on a monthly basis after 20 years.

This was although the maximum soft loan allowed under the governments LEEP policy is just 10% of the investment. General Motors, which has a plant in Gujarat, was provided only a Rs 28 crore soft loan under that. Again, the Tatas also asked for a bypass of policy clauses that say the maximum incentives offered under the sales tax deferment scheme was upto 125 percent of eligible investment, besides the one that says deferred tax has to begin being paid from the 14th year and completed on the 20th year.

Also, whereas West bengal had declined to sell the Singur land to Tatas for the project, only lease it for 90 years, at graded lease rate, Modi sold the Sanand land to the auto maker at much less than market rates, payable in eight annual instalments, and handed over the land beforethe Tatas had paid a rupee. The Tatas were also particular that they be exempted from paying even the stamp duty, registration charges and land transfer charges on the land. The Tatas, besides, insisted that they have the flexibility to outsource certain processes.

If Bengal offered to sell power for the plant at Rs 3 per KWH, Gujarat was asked to provide 220 KVA power supply at its own cost. Modi was also asked to exempt Tatas from paying even the Electricity duty.

If the Nano projects employment generation potential is being touted by the Gujarat government as a big attraction, the cabinet note underlines that the Tatas had refused to follow even the state labour policy clauses that insist on 85% local employment, including a 60% quota of managerial and supervisory jobs, at the Nano plant.

The government, the note says, had also not clarified to the Tatas its normal stipulation that 50% worth of the amount granted as state sops should be invested within the State itself and 2% of it should be contributed to the rural welfare programme, Gokul Gram Yojana.

The Tatas had also pushed Gujarat for other things like another 100 acres of land near Ahmedabad to set up a township, pipeline at state cost to supply natural gas to the Nano project site, provision for 14000 cubic meters of water per day at the project site and permission to draw groundwater for immediate needs.

The cabinet note, significantly, says that all the sops the Tatas were being provided were to be considered as special exception, and other similar industries will not be eligible for the same incentives.