Tata Motors puts Gujarat government under pressure
Gujarat government is in a fix after Tata Motors demanded afresh that the sops provided to Nano be extended to other car models it plans to manufacture at its Sanand plant. If it agrees to Tata's terms, other auto companies like Ford and Maruti would demand the same. If Tata Moves out of Gujarat like General Motors, it would vitiate the investment climate.
In May 2006, Tata group chairman Ratan Tata announced Nano project at Singur, 40 km from Kolkata. Farmers joined by environmentalists and politicians held angry demonstrations accusing Tata Motors of "forcible" acquisition of land. In 2007, Tatas and West Bengal state government inked the Singur land deal lease. Continued protests and farmer suicides over one year forced Tatas to reconsider their plans in Singur.
The agitating farmers in Singur were provided political support by the then opposition leader of West Bengal, Mamta Banerjee. Her "Save Farmland" movement was supported by environmental activists like Medha Patkar, Anuradha Talwar and Arundhati Roy.
Amid violent protests, Tatas said they will move out of Bengal. It received invitations from various states like Haryana and Maharashtra, to relocate Nano factory. On 7 October 2008, Tatas announced the relocation of their Rs.2,000-crore Nano plant to Sanand, Gujarat. Ratan Tata said that the 'reputation of Gujarat' and the 'speed' at which provisions were made, forced him to opt for Gujarat.
Soft loan of Rs.9,570 crore at 330% of phase-1 investment of Rs.2,900 crore (including relocation expenditure) for 20 years was given. 330% of VAT was renogotiated to 230% reducing the loan amount to Rs.6669.99 crore. Loan amount was to be disbursed monthly in the form of gross-VAT. Payment for government land was to be made in 8 equal instalments at 8% compound-interest per year.
Tata Motors tried to get the Gujarat government to expand the scope of the agreement regarding sops and incentives for the Nano plant in Sanand to include other Tata car models as well. Tata Motors may have to sign a new agreement if it wants to make other cars at the Sanand factory said the State Industry Minister, Saurabh Patel.
Tata Nano sales in 2014-15 were a meagre 16,903 units. It is not even 10% of the planned capacity of 250,000 cars per year. The low sales have caused Tatas to demand extension of sops to other Tata car models.