Breaking News : Tata Motors says looking for alternative Nano site

MUMBAI/KOLKATA : September 2, 2008 - India's Tata Motors Ltd (TAMO.BO: Quote, Profile, Research, Stock Buzz) said violent protests had forced it to suspend all work at a plant in eastern India where it planned to make the Nano - billed as the world's cheapest car - and consider alternative sites.


The automaker said it canceled work at the site in Singur, an hour's drive from West Bengal capital Kolkata, for the past five days due to threats from protesters, who have been led by a regional opposition party.

The dispute reflects a larger standoff between industry in India and farmers unwilling to part with land in a country where two-thirds of the billion-plus population depend on agriculture.

"This decision was taken in order to ensure the safety of its employees and contract labor, who have continued to be violently obstructed from reporting to work," the company said in a statement.

The suspension came just as protesters agreed to talks over land seizures for the project, which analysts said stepped up pressure on the protesters to resolve the dispute.

The prospect of talks had raised hopes that the 100,000 rupee ($2,250) car could roll out on time in October to coincide with the Indian festive season.

"I am wondering how Tata can make a statement when talks are on (to resolve the dispute)," said Partha Chattopadhayay, a leader of the Trinamool Congress party spearheading the protests. "I don't go by this statement. I have to wait."

Tata Motors said it was putting together a detailed plan for the relocation of the plant and machinery, and was evaluating options for manufacturing the Nano at other company facilities.

It said the project's partners, who had started work at their respective plants at the site, had also suspended work.

Chairman Ratan Tata said last month he was prepared to move the plant from West Bengal state despite having invested $350 million in the project because of the risks to employees from the protests.

The Nano project has been billed as key to the rejuvenation of industries in West Bengal, where the world's longest-serving democratically elected Communist government has changed tack after decades of focus on helping agriculture and poor farmers.

The state government urged the Trinamool Congress to work together to retain the Nano plant in the state.

"It is very unfortunate. It is a very sad day," said Nirupam Sen, West Bengal industry minister. "I could never imagine the opposition would be so irresponsible."

The unveiling in January of the snub-nosed Nano was hailed by the state's ruling Communists, but protests have since gathered steam.

Trouble began after the government took over 1,000 acres of farmland for the factory. The government offered compensation, but some farmers with smaller land holdings have refused compensation, demanding that land be given back to them.

The disputed land measures about 400 acres.

The Trinamool has come under pressure to find a way out of the stand-off after industry lobbies and analysts warned the protests could scare away investors.

"I think this could create pressure on those opposing the project," said Abhirup Sarkar, a Kolkata-based economist and social commentator.

Eager to resolve an issue threatening its industry-friendly image, the state government has offered to discuss fresh compensation packages.

[Source : REUTERS]