Critics claim Nano is reliant on subsidies

 By Joe Leahy in Kolkata Published: September 2 2008 01:29 | Last updated: September 2 2008 01:29

A much-lauded plan by India’s Tata group to build the world’s cheapest car, the diminutive Nano, would not be possible without heavy government subsidies, one of the project’s key opponents claimed on Monday.Partha Chatterjee, leader of the opposition in West Bengal state, claimed the group was building the plant to make the Rs100,000 ($2,259) car for the project in Singur, near Kolkata, on land provided by the government at low rents.Chatterjee’s party, the Trinamool Congress, has besieged the Singur plant over the past two weeks, blocking the national highway outside the site with protests attended by tens of thousands of people. The mass protests have forced the Tata group to stop construction work at Singur and have prompted the group’s chairman, Ratan Tata, to threaten to withdraw from the state, potentially delaying full-scale production of the Nano for at least a year. “Let the Tatas have their factory, the grim project of killing the farmers and giving the upper middle class a car,” Mr Chatterjee said.The Tata group, which has become a household name in the UK for its acquisition this year of Ford’s Jaguar and Land Rover marques, is due to release the Nano in India in October, with plans to eventually export the car.

The project has led some to dub the Tata group’s chairman as a latter-day Henry Ford, and has prompted a global race among carmakers to produce ultra-cheap vehicles for emerging markets.

But the protests against the Nano plant have also turned the project into a test case for the industrialisation of India, whose population still lives mostly in rural areas, often under conditions of crushing poverty. Citing figures he said had been submitted to the parliament’s industrial standing committee, Mr Chatterjee claims the Nano is costing the state government Rs31bn ($704m, £393m, €484m) in foregone rents, soft loans, value added tax relief and other benefits. “Tata is moving towards [becoming] the Henry Ford of India by producing a car at a cost of one lakh (Rs100,000),” Mr Chatterjee said. “To me, it is not possible unless it is heavily subsidised.” The West Bengal government, which is led by the TMC’s rivals, the Communist Party of India (Marxist), argues, on the other hand, that farmers have been heavily compensated for their land and the project is bringing jobs to the area.

Tata Motors declined to comment. But people familiar with the matter said the project had also driven up land prices in the area to the benefit of residents. They said the popularity of the project was shown by the fact that most farmers in the area of the proposed factory had accepted government compensation for giving up their land.