Nano Project : Tata Pullout Impact
Source : Forbes
The Indian state of West Bengal is on the verge of losing Tata Motor's Nano production plant, and that could be a serious blow to an area that is already struggling to attract economic investment.
Tata announced Wednesday that it was indefinitely suspending work at its plant in the north eastern Indian state to "ensure the safety of its employees" amid protests by farmers against the plant, even after earlier warnings that it would move the site. Tata said it had begun to look at the possibility of relocating the plant elsewhere. "The situation around the Nano plant continues to be hostile and intimidating. There is no way this plant could operate efficiently unless the environment became congenial and supportive of the project," said a spokesman for the company.
Tata's plan to build the plant for its $2,500 car in the Marxist-ruled state, in Singur, a town near the capital city Kolkata, has generated controversy from the outset. A campaign by the Trinamool Congress Party has drummed up support from local farmers, and has been protesting against the use of fertile farmland for a car plant in a region that is heavily dependent on agriculture. (See "Tata, Mamata's Persona Non Grata.")
The impact for Tata Motor (nyse: TTM - news - people ), part of Ratan Tata's steel-to-IT consultancy empire, is likely to be limited, even though it has spent around $350.0 million on the plant so far. Apart from the fact that the Nano will account for around 1.0% of Tata Motor's group sales, analysts believe that the company is unlikely to postpone the launch of the no-frills car, expected to take the market by storm. The company does have alternative plants it could use, including in Pune, a city in western India, and Pantnagar, in the northern state of Uttarkand.
An exit by Tata would likely put pressure on West Bengal's Marxist government, which has ruled the state since the 1970s. The party is already struggling to encourage investment with its special economic zones, or tax-free areas similar to those that have been created in China and South East Asia. Though these zones have been created across India, they have proved a problem in West Bengal. In 2007, 14 local people were killed during protests against a special economic zone for a chemical plant near the village of Nandigram. The uproar caused by authorities' heavy-handed reaction of the situation in Nandigram could also be a reason why the local government been careful about intervening in the Tata dispute
The Indian state of West Bengal is on the verge of losing Tata Motor's Nano production plant, and that could be a serious blow to an area that is already struggling to attract economic investment.
Tata announced Wednesday that it was indefinitely suspending work at its plant in the north eastern Indian state to "ensure the safety of its employees" amid protests by farmers against the plant, even after earlier warnings that it would move the site. Tata said it had begun to look at the possibility of relocating the plant elsewhere. "The situation around the Nano plant continues to be hostile and intimidating. There is no way this plant could operate efficiently unless the environment became congenial and supportive of the project," said a spokesman for the company.
Tata's plan to build the plant for its $2,500 car in the Marxist-ruled state, in Singur, a town near the capital city Kolkata, has generated controversy from the outset. A campaign by the Trinamool Congress Party has drummed up support from local farmers, and has been protesting against the use of fertile farmland for a car plant in a region that is heavily dependent on agriculture. (See "Tata, Mamata's Persona Non Grata.")
The impact for Tata Motor (nyse: TTM - news - people ), part of Ratan Tata's steel-to-IT consultancy empire, is likely to be limited, even though it has spent around $350.0 million on the plant so far. Apart from the fact that the Nano will account for around 1.0% of Tata Motor's group sales, analysts believe that the company is unlikely to postpone the launch of the no-frills car, expected to take the market by storm. The company does have alternative plants it could use, including in Pune, a city in western India, and Pantnagar, in the northern state of Uttarkand.
An exit by Tata would likely put pressure on West Bengal's Marxist government, which has ruled the state since the 1970s. The party is already struggling to encourage investment with its special economic zones, or tax-free areas similar to those that have been created in China and South East Asia. Though these zones have been created across India, they have proved a problem in West Bengal. In 2007, 14 local people were killed during protests against a special economic zone for a chemical plant near the village of Nandigram. The uproar caused by authorities' heavy-handed reaction of the situation in Nandigram could also be a reason why the local government been careful about intervening in the Tata dispute
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