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UPDATE 3-India's Tata Motors shifts Nano plant after land fight

(Adds analyst, details)

KOLKATA, Oct 3 (Reuters) - India's Tata Motors Ltd TAMO.BO will move the factory for its low-cost Nano car out of West Bengal state after violent protests by farmers who lost land forced it to stop construction, its chairman said on Friday.

“Taking all things into account, mainly the wellbeing of our employees, the safety of our contractors and in fact our vendors also, we’ve taken the very regretful decision to move the Nano project out of West Bengal,” Ratan Tata said.

He made the announcement after meeting state Chief Minister Buddhadeb Bhattacharjee in Kolkata.

Tata Motors, the country’s top vehicle maker, had already started looking for other sites at which to build the Nano, which it had originally said it hoped to launch this month.

“We will have to make the best of the deadline that we have,” Tata said. “We are going to do everything possible to come close to the deadline we had established.”

Tata said the firm had not decided where to build the Nano but was examining offers of sites from three or four states.

“We hope we would be able to find a location that has a congenial environment,” he said. “All these issues we will announce in the next few days when we have a clearer picture.”

The Nano is expected to be priced at just above 100,000 rupees ($2,130) and has been billed as the world’s cheapest car.

The company, India’s third-biggest carmaker, had planned to make 250,000 cars at the Singur plant in West Bengal initially, later increasing capacity to 350,000 units.

Trouble began after the communist state government acquired farmland for the factory using a colonial-era law which allows land to be taken over cheaply.

Work on the plant was nearly complete when farmers, backed by the state’s main opposition party, Trinamool Congress, stepped up their protests, saying they had been forced off their land without adequate compensation.

INDUSTRY-FARMER STANDOFF

The dispute, which followed similar protests in other states, reflects a larger standoff between industry and farmers unwilling to surrender land in a country where two-thirds of the population depend on agriculture for a living.

(For a factbox of disputed industrial projects in India click [nBOM379733]).

The state government then offered compensation which some farmers, backed by Trinamool, rejected as inadequate. Others said they had not agreed to sell their land and demanded the state government return about 400 acres (162 ha).

“This is what happens when you seize land, when you use force,” said Becharam Manna, a leader of Singur’s protesting farmers. “Blame the state government for the Tata decision.”

Cost overruns caused by delays at Singur, where Tata Motors has invested about $350 million, had already raised the cost of producing the Nano, which was unveiled to a rousing reception in January and sent rivals scrambling for their own versions.

Eventual demand for the Nano is expected to be about one million units, Tata has said.

Analysts say the market has factored in the extra costs, but the firm’s share price may fall on Monday because of generally gloomy investor sentiment.

“What has not been priced in yet is if they manage to get a better deal from some other state government,” V.K. Sharma, head of research at Anagram Stock Broking, told Reuters.

Tata Motor's New York-listed shares TTM.N were down 0.4 percent at $7.23 at 1500 GMT. Before the news, the firm's shares listed in Mumbai had closed 2.5 percent down at 330.70 rupees in a weak market.

$1=46.9 rupees Additional reporting by C.J. Kuncheria and Devidutta Tripathy, Writing by Krittivas Mukherjee; editing by Mark Williams and Tim Pearce

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