Tata extends suspension of work at cheap car factory

Sep 8, 2008, 10:24 GMT

New Delhi - Tata Motors Ltd said Monday that it would continue the suspension of work at its factory in eastern India manufacturing the world's cheapest car, the Nano, even though farmers called off their protests over farmland acquired for the plant.

Farmers at Singur near West Bengal's state capital, Kolkata, halted protests late Sunday after the government assured them that they would be compensated with land, but it was not clear where the land would come from.

Tata Motors did not accept the agreement reached between the farmers and the local government, saying it lacked 'clarity.'

'Tata Motors is distressed at the limited clarity on the outcome of the discussions between the state government of West Bengal and representatives of the agitators in Singur,' a statement said.

'Tata Motors is obliged to continue the suspension of construction and commissioning work at the Nano plant,' it added.

The farmers laid siege to the factory on August 24, saying their land was 'forcibly acquired.'

Tata Motors sources told the NDTV news channel that the automaker did not accept the 'political compromise made by people with limited knowledge of the project.'

The company stuck to its assertions that the land was required to set up units for spare parts and component vendors and shifting them would make it difficult to keep the costs of the car low.

'We will review our stated position only if we are satisfied that the viability of the project is not being impinged, the internal nature of the mother plant and our ancillary units are being maintained and all stakeholders are committed to develop a long-term congenial environment for smooth operations of the plant in Singur,' the statement said.

Tata Motors in 2006 began constructing the factory for the Nano, priced at 2,400 dollars a unit. Since then, the automotive giant has faced stiff resistance from farmers led by the state opposition Trinamool Congress party demanding that 400 of the 980 acres of crop land acquired for the project be returned.

Tata Motors suspended work at the plant last week because of the protests, saying its employees felt threatened and warned that it might relocate the project to another state.

On Sunday, farmers and West Bengal Governor Gopal Gandhi reached what they called an 'acceptable formula.' The local government promised that a committee would be formed to look into the demands of the farmers and submit its report within a week.

The Nano, dubbed the 'People's Car,' has captured global attention and was scheduled to roll out in October.

It was unveiled with much fanfare at a car exhibition in January in New Delhi. It has a 623-cubic-centimetre, 33-horsepower, multipoint fuel-injection petrol engine.