Cash flow at Singur

Cash flow at Singur
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First Published: Fri, Aug 24 2007. 12 14 AM IST
Updated: Fri, Aug 24 2007. 12 14 AM IST
Tata Motors has told the Calcutta high court on Wednesday that it will pay the West Bengal Industrial Development Corp. (WBDIC) Rs1,000 crore for leasing land at Singur, where the company plans to make small cars. WBDIC paid only Rs118 crore to acquire the land, which makes it sound like a good deal for the government corporation.
But is it? Tata Motors will not be paying the Rs1,000 crore at one go. It will pay Rs1 crore a year for the first 10 years, Rs10 crore a year for the next 10 years, Rs20 crore a year for the next 30 years and then the rest at a rate not revealed in the court that day.
Money in hand is more valuable than money tomorrow, because of inflation. So the lease payments over 90 years should be discounted at a suitable rate for the sake of clarity. It would be good if the net present value of the lease payments is revealed, so that it is clear whether the land is being leased out for more or less than the cost of its acquisition.
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First Published: Fri, Aug 24 2007. 12 14 AM IST
More Topics: Tata Motors | Singur | Lease value | Views | Quick Edit |