Tata Motors stands ground, Nano plant stays shut
MUMBAI (Reuters) - India's Tata Motors said on Monday it would not start work at the low-cost Nano car site, where work was suspended last week, until it was confident of smooth operations and the continued viability of the project.
Tata Motors Ltd (TAMO.BO), India's top vehicle maker, said it was "distressed" at the limited clarity in the outcome of talks between the government of West Bengal, where the Nano plant is located, and protestors who had caused disruptions.
"Tata Motors is obliged to continue the suspension of construction and commissioning work at the Nano plant," it said in a statement.
"We will review our position only if we are satisfied that the viability of the project is not being impinged, the integral nature of the plant and ancillary units are being maintained and all stakeholders are committed to developing a long-term congenial environment for smooth operations of the plant."
In Singur, about an hour's drive from Kolkata, camps and makeshift stages that had been set up for the protest have mostly been dismantled, and the expressway that had been blocked for days with trucks backed up, saw normal traffic flow on Monday.
Shares in Tata Motors were up more than 4 percent at 437 rupees, after having risen as much as 6.7 percent in early trade, in a Mumbai market .BSESN that was up nearly 4 percent.
"The shares are getting a boost as it looks like the confusion is beginning to get cleared and a resolution will be arrived at soon," said Ramnath S, a vice president of research at IDFC-SSKI Securities.
"But if this drags on any further, there may be delays."
COST IMPLICATIONS
Farmers in Singur, who had forced Tata Motors to suspend work last week, said on Sunday they were ending their protest after the state promised to return some land.
Chairman Ratan Tata said last week the company was doing everything possible to launch as planned, around October, the peak of the festival season in India.
Existing Tata Motors plants are expected to make up for any shortfall caused by the disruptions to the Singur plant, which was scheduled to have an initial capacity of 250,000 units. Tata Motors said last week they were looking for alternative sites.
"They clearly have a way to build the car elsewhere, but moving to an alternate location means they can't start off with 250,000 units of dedicated capacity for Nano," said Ian Fletcher, automotive analyst at research firm Global Insight in London.
"Shifting the location now, or further delays in Singur will cause an initial lag that could cost them," he said.
The Nano, billed as the world's cheapest car, is expected to be priced at just above 100,000 rupees ($2,262).
Other carmakers including Bajaj Auto (BAJA.BO) with Renault (RENA.PA) and Nissan Motor Co (7201.T), as well as General Motors GM.N, Ford Motor (F.N), Fiat (FIA.MI) and Toyota Motor (7203.T) have also announced plans for low-cost cars for emerging markets.
Trouble in Singur began after the government took over 1,000 acres of farmland for the factory last year. The government offered compensation which some farmers rejected, demanding that at least 400 acres of land be given back to them.
The protests in Singur reflect a larger standoff between industry and unwilling farmers in a country where two-thirds of the population depends on agriculture, and has also led to calls for speedy reform of a colonial-era land acquisition act that has tripped up several large industrial projects.
($1=44.5 rupees)
(Additional reporting by Sujoy Dhar in KOLKATA; Editing by Ranjit Gangadharan)
