Tata's Nano Plant May Face More Delays as Land Dispute Returns

Sept. 16 (Bloomberg) -- Tata Motors Ltd., the Indian automaker planning to build the world's cheapest car, faces further delays as protesters plan to target the company again, demanding the return of land set aside for the factory.

Trinamool Congress, the political party opposed to the plant being built on farmland in eastern India's West Bengal state, won't accept a compensation package announced by the province, Partha Chatterjee, a party spokesman said in an interview yesterday. The party will resume demonstrations today at the factory site in Singur, near Kolkata, he said.

The rejection of the new compensation offer re-ignites a protest that forced Tata Motors, India's biggest truckmaker, to suspend work at the factory last month. Farmers blockading Tata's efforts to set up the factory to make the $2,500 Nano car called off their protests last week, ending a two-week-long impasse, after Gopal Krishna Gandhi, the governor of West Bengal, mediated a truce between the protesters and the state.

``I expect Tata to leave West Bengal if this issue doesn't get sorted out by early October,'' said Gaurav Lohia, an analyst at KR Choksey Shares & Security Pvt. in Mumbai. ``For Tata, the Nano is a very important project,'' said Lohia, who rates Tata shares ``buy.''

The West Bengal state government on Sept. 13 said it's ready to compensate farmers by returning about 70 acres (28 hectares) of land already given to Tata Motors and its component-makers. The state also said it would increase the cash payments by 50 percent, after the governor's mediation.

400 Acres

The offer isn't acceptable to the Trinamool Congress, which is asking for the return of about 400 acres of land, Chatterjee said. The state government had given Tata Motors about 997 acres.

``Land can't be taken for granted by any industrialist,'' Chatterjee said. ``We never withdrew our agitation, we said we were only suspending it.''

Debasis Ray, a spokesman for the Mumbai-based company, declined to comment on the Trinamool's response. Tata Motors said Sept. 14 that it hopes the compensation initiatives by the West Bengal government would evoke a ``positive response.''

Tata Motors fell 5.5 percent to 390.45 rupees yesterday in Mumbai trading, the biggest decline since July 29. The stock has dropped 46 percent so far this year.

The political party's demand isn't ``feasible,'' said Subrata Gupta, Managing Director of West Bengal Industrial Development Corp., the agency responsible for attracting investments in the communist-controlled West Bengal.

``In that case, the project can't be there,'' Gupta said by phone from Kolkata yesterday.

Tata Motors said Sept. 3 that it may relocate the factory from Singur because of the protests. The company was evaluating alternative options for manufacturing the Nano car at its other facilities by relocating the plant and machinery, Tata Motors said in a statement.

source:bloomberg