MUMBAI - Tata Motors' plans for the
world's cheapest four-seater car, the US$2,500
Nano, to reach the market in October are in danger
of crashing as violent protests over the auto
factory site in eastern India's West Bengal state
threaten its production lines.
National
Highway-2, or NH-2, connecting Kolkata, the
country's third-largest city, with the national
capital of New Delhi, is the latest battleground
over the Nano factory site, with protesters
alleging that the local communist government
forcibly took about 162 hectares of the land from
"unwilling farmers", out of a total project area
of 400 hectares.
Protesters want the
disputed land returned to farmers. Tata and the
local government say it is required by suppliers,
which have to
be located next to the
factory so that production and transport costs can
be squeezed low enough for the car to meet the
ambitious sales tag. Wherever the Nano car factory
site goes its suppliers have to go with it, say
suppliers such as Sona Koyo Steering Systems Ltd.
Protest leaders have rejected talks aimed
at reaching a compromise. Meanwhile, the estimated
30,000 protesters besieging NH-2 since August 25
have caused hundreds of long-distance trucks to be
stranded on the highway, plunging the region into
economic turmoil.
The Truck Owners'
Association of Bengal has threatened to strike if
the highway remains clogged, which would further
damage a local economy already feeling the impact
of the highway blockade. Hindustan Motors, the
only remaining automobile unit in West Bengal, put
up a closure notice on August 27 due to
non-arrival of materials such as tires and glass
from neighboring states. Protesters have called
for an indefinite agitation at the Nano factory
site from Sunday, August 30.
Tension over
the site, in Singur, Hoogly district, 45
kilometers from Kolkata, has been growing since
2006, when the local government decided to sell
400 hectares to Tata Motors, part of the $61
billion Tata group. The government decided to
compensate local landowners, but independent
studies say the livelihood of more than 6,000
daily wage earners would be threatened if the
agricultural land on which they worked was sold to
Tata.
Allegations of the project hurting
local people contrast ironically with Tata dubbing
the 623-cc Nano as the "People's Car", one that
would enable millions of less-well-off families
worldwide to own an auto vehicle for the first
time.
The prospect aroused global interest
when the Nano, set to undercut China's $2,600,
800cc Chery QQ, was announced, with the Tata
Motors website claiming nearly 7.9 million hits on
January 10, 2008, when the car was unveiled amid
much fanfare during an auto exposition in New
Delhi. Tata group chairman Ratan Tata at the time
drove a Nano onto the stage in front of a cheering
international audience, but the prospect of one
being driven on an Indian road 10 months later
seems increasingly unlikely.
With the
latest escalation of violent protests, Ratan Tata
has threatened to take the $340 million car
project out of West Bengal state. "We don't care,"
belligerently shot back the opposition Trinamool
Congress party leader Mamata Banerjee, leading the
protests. "Mr Tata, go home," she called out to
the protesters.
Tata Motors could not have
asked for a more unrelenting opponent. A white
saree-clad spinster, Banerjee frequently hosts
rallies that choke the busy Chowringhee Road
intersection in the heart of Kolkata city,
creating nightmarish peak-hour logjams of cars,
trams, auto rickshaws and buses. With the Nano
demonstration, Banerjee has graduated to holding
up national highways, and peaceful coexistence
between the firebrand politician and the unit of
one of India's biggest conglomerates seems hard to
imagine.
Leading Bengali industry
stakeholders worry that the Nano-land clash could
set back West Bengal a decade or more in terms of
investor mistrust. If the plant is relocated out
of West Bengal, "the state will have a 10- to
15-year setback in its efforts to generate
employment and self-employment through the
manufacturing sector," said Tarun Das, who holds
the title of chief mentor at the Confederation of
Indian Industry and who hails from West Bengal.
"If the pullout indeed happens, the losers
will be West Bengal and its people," Das said in a
signed article in the daily Hindustan Times.
"Already, the state is lagging well behind others
in attracting investment. The timing of a pull-out
will be disastrous."
Other state
governments, including Maharashtra and Karnataka,
have quickly offered alternative land to Tata
Motors, but relocating the factory at this stage
would cost Tata Motors and its 56 supplier
companies an estimated $230 million from already
constructed factory buildings in Singur. The
$2,500 Nano price tag, already under pressure from
rising costs of materials, would also be further
challenged.
The Nano firefight is part of
a bigger bushfire over India's controversial
special economic zones (SEZs), where local
governments and big business combine in ambitious
industrial projects on large areas of land sold to
corporations at lower-than-market prices, with
government tax sops thrown in as further
incentives - the zones get a 100 % income tax
exemption on profits for the first five years of
production, and 50% for the next five years.
If total investments in SEZs are around
$82 billion in 2007, revenue loss to the exchequer
due to tax concessions would be over $39 billion,
estimates C P Chandrasekhar, a professor at the
Center for Economic Studies and Planning, School
of Social Sciences, Jawaharlal Nehru University,
New Delhi. That is besides thousands of people
losing their livelihood through being forced to
move out of ancestral land.
Even so, Tata
Motors and its parent have shown remarkable
naivety and lack of business and political savvy
in basing a cost-critical major project in a state
replete with a history of trade union violence and
frequent political agitation, not to mention the
controversial climate over the tax-attractive
SEZs.
Nor is this an isolated instance.
The Tata group in July abandoned plans for a $3
billion investment in various projects in
neighboring Bangladesh, first proposed in 2004,
after running into flip-flopping Bangladeshi
politicians since 2006.
Uncertain clouds
are also gathering over Tata Motors' $2.4 billion
acquisitions of Jaguar and Land Rover from Ford
Motors in June, with rising fuel prices denting
the attraction of gas-guzzling autos such as Land
Rovers and the global economic woes eroding the
prospect of boosting sales of upmarket vehicles.
Tata investors are voting with their feet, driving
the Tata Motors share price down by more than 37%
this year, compared with a 31% drop in the
benchmark BSE Sensex 30 index.
Ratan Tata
has said that his inspiration for making the
world's cheapest car came after he saw a young
couple and their two little children suffering
while riding the family scooter during a wet
monsoon day in Mumbai. Right now, he could do with
some shelter from troubles raining over his
cheapest-car dream.
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