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Amid uncertainty, Tata Nano suppliers to halt investment

Amid uncertainty, Tata Nano suppliers to halt investment
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First Published: Thu, Aug 28 2008. 12 46 AM IST

Facing roadblocks: Tata Motors’ Nano factory at Singur in West Bengal.  Construction work at the plant stopped on 24 August as the Trinamool Congress launched an indefinite sit-in demonstration at Sin
Facing roadblocks: Tata Motors’ Nano factory at Singur in West Bengal. Construction work at the plant stopped on 24 August as the Trinamool Congress launched an indefinite sit-in demonstration at Sin
Updated: Thu, Aug 28 2008. 12 46 AM IST
New Delhi: Auto parts makers contracted to supply components to Tata Motors Ltd’s small car Nano have put on hold further investment in the so-called vendor park at Singur until the company decides whether to stay put in West Bengal.
Facing roadblocks: Tata Motors’ Nano factory at Singur in West Bengal. Construction work at the plant stopped on 24 August as the Trinamool Congress launched an indefinite sit-in demonstration at Singur. Photograph: AP
On 22 August, Tata Motors’ chairman Ratan Tata had said his company could pull out of West Bengal despite having invested Rs1,500 crore in Singur, if the situation there didn’t improve.
Construction work at the small car factory stopped on 24 August as West Bengal’s principal Opposition Trinamool Congress party launched an indefinite sit-in demonstration at Singur.
The Trinamool Congress wants the vendor park carved out of the 997-acre project area, and 400 acres returned to farmers, who were unwilling to sell land for the project. However, the government has ruled out separating the vendor park from the car factory.
With the crisis intensifying, at least half a dozen component suppliers told Mint that they would wait before spending more money on their Singur units.
Paban K. Kataky, director (automotive) of Kolkata-based battery maker Exide Industries Ltd, went to the extent of saying: “With the way things are, commencing supplies from next month and an October launch looks unlikely.”
“Given the tough stand taken by Mamata Banerjee (Trinamool Congress leader), we don’t see the deadlock breaking,” said an official of Rane (Madras) Ltd, requesting anonymity. The Chennai-based company, which is going to supply rack and pinion steering for the Tata Nano, has almost written off Singur.
It had planned to invest Rs20 crore in Singur in phases, but has so far invested only some Rs2 crore, despite having taken possession of 5 acres in the vendor park a year ago.
Kiran Deshmukh, deputy managing director of Sona Koyo Steering Systems Ltd, said his company had already invested Rs20 crore in Singur, but had not yet shipped the machines to the vendor park. “We would initiate that as and when the situation is conducive. We would go with the company (Tata Motors) and do as desired by them,” he said.
Sharda Motor Industries Ltd, which has been given the mandate to supply exhaust systems and seat frames, has imported machines from Taiwan, but has not moved them out of the Kolkata port as yet. Some of the equipment is lying in a city godown. “We are right now supplying the exhaust system and frames from our Nashik and Gurgaon plants. Everyone is waiting and watching,” said a company executive, who didn’t wish to be named.
According to West Bengal chief minister Buddhadeb Bhattacharjee, some 55 ancillary units have already been allotted space in the 290-acre vendor park. “Half of them have started construction work. Returning 400 acres would mean scrapping the project,” Bhattacharjee had said on Tuesday.
With the stand-off unlikely to end soon, companies, such as Caparo Engineering India Pvt. Ltd, the Indian arm of UK-based Caparo Group Ltd that is supplying inner steel panels, said costs are set to escalate if the project gets delayed. “We are one of the first companies to meet the deadline. With the delay, our costs have escalated by 20%,” said Uttam Bose, who heads Caparo’s India operations.
The component suppliers were expected to invest up to Rs2,000 crore in Singur and generate many more jobs than the car plant.
The implications for the state, however, override all auto parts makers’ and Tata Motors’ concerns. “It’s a testing time for both Tata Motors and the West Bengal government. Irrespective of whether plan A, or B works, the project is going to be delayed and all the stakeholders in the project will suffer as a result,” said Addul Majeed, partner at audit and consultancy firm PricewaterhouseCoopers.
Aveek Datta in Kolkata and Shally Seth in Mumbai contributed to this story.
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First Published: Thu, Aug 28 2008. 12 46 AM IST