Tata Motors has drawn up a unique compensation package for over 40 vendors who were forced to relocate their manufacturing base to Sanand (Gujarat) from Singur (West Bengal) in 2009 following protests from the locals.
As per the arrangement with each vendor, Tata Motors would pay up to 20% of the total loss incurred by vendors upfront. The remaining 80% would be amortised and paid back gradually over a period of eight years. ?Tata Motors is going to pay us a higher sum of money each year in lieu of the components they purchase from us. Thus, they would repay us the total amount gradually,? one of the vendors told FE.
He said despite the heavy losses incurred due to the sudden shift in plant location, Tata Motors has taken several steps to bear the financial burden with the component makers. In fact, the company is also said to be acquiring land on behalf of its vendors at Sanand for putting up the Nano factory.
When contacted, a company spokesperson said, ?The compensation issue has been resolved. Beyond this we cannot comment any further?.
Commenting on the compensation package, an auto analyst said, ?Tata Motors have a very profitable commercial vehicle business which has helped offset the losses at Singur. The repayment arrangement with vendors seems a smart move by the company?.
The West Bengal Industrial Development Corporation had set aside more than 250 acre of land at Singur beside the Nano factory for accommodating the vendors. But due to protests by Mamata Banerjee-led Opposition, Tata Motors, along with its vendors, had to shift out. However, Tata Motors is still in possession of the land.
Following its forced ouster from West Bengal, the Tatas worked overtime to sign land deals with the vendors in Gujarat. As per the arrangement, Tata Motors bought land for its vendors at Rs 2.5 lakh per acre with an external development charge of Rs 50,000 per acre on a 20-year-lease. The vendors have also been given an option of paying the due amount after a lag of five years.
Earlier this month, in a last attempt to salvage its image, the CPI(M) had offered to return 10% of the acquired land at Singur to the famers if Mamata allowed Tata Motors to set up the Nano plant. Mamata, however refused.
Since the Sanand unit is ready, Tata Motors has started shifting the entire production from Pantnagar (Uttarakhand). Though the cheapest car in the world by a long shot, Nano sales have witnessed a gradual decline over the last four months. In July, the firm sold an impressive 9,000 units, followed by 8,103 units in August, 5,520 units in September and only 3,065 units in October.