With the deadline for farmers to accept an improved compensation package set to expire at the end of today, the dispute over Tata Motors’ site at Singur, in West Bengal, remains deadlocked. A research note from Global Insight suggests that the options for Tata are coming down to either offering farmers yet more cash or biting the bullet and relocating, even at this late stage.
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Neither outcome is particularly attractive for Tata and already tight margins on the Tata Nano are clearly threatened, along with the launch timetable.
Over the weekend (20-21 September), a report in the Kolkata (Calcutta) Telegraph claimed that the automaker had again warned the West Bengal state government that it would leave the state if a settlement could not be reached, with a senior government official telling the newspaper: “Instead of considering resuming the residual construction of the factory, the Tatas have said they will soon start looking at the withdrawal option if things do not improve in the next few days.”
Chief Minister Buddhadeb Bhattacharjee subsequently issued an appeal to the farmers and the opposition party, the Trinamool Congress, but this was met with an ultimatum from opposition leader Mamata Banerjee, who said that the protests at the Singur site will return if land is not returned to farmers within seven days. The newspaper was also told by a senior minister that the state government is considering an intensive security programme to protect workers if construction work is restarted, but this is of no interest to Tata’s management.
Meanwhile, a report in the Hindustan Times has suggested that Tata Motors is already beginning to pull equipment to build the Nano model out of the Singur facility. Senior West Bengal bureaucrats have said that the company began taking dies and components out of the facility on 16 September at night, but since then its actions have been more conspicuous, including the movement of several hundred cars. When approached by government officials, the automaker said that the equipment and parts were being moved to places where they could be used. The newspaper also said that it had learned that companies had been told not to supply further equipment to the plant, and instead to ship it to facilities in Pune and Uttarakhand.
The Mint newspaper has reported that farmers have been told by the Trinamool Congress that if they are prepared to wait, they could be entitled to a further financial windfall. Gopal Santra, a farmer who lost 1.6 acres as part of the requisition of land for the plant, said that the opposition party was not “talking about land anymore—it’s about more money now. We have been assured of another 50% increase in compensation if we continue to support the movement for 10-15 days more.” He added that leaders from the Trinamool Congress had visited him at his home to explain the party’s plans.
Global Insight analyst Ian Fletcher said in a research note that despite the protesters’ demands for the return of land, it seems that the situation could be resolved with an offer of further cash compensation.
However, he also maintains that ‘it is doubtful at this stage whether Tata Motors will be prepared to sit and wait for at least another fortnight for the situation to be resolved’.
With construction work at the site already well behind schedule, but very close to completion, Tata may decide that it is more sensible to offer further cash compensation itself and recoup this at a later date if the West Bengal government is not prepared to do this straight away.
Fletcher notes however, that this would undoubtedly put further pressure on the already tight profit margins on the project.
The other alternative is to move the entire project to another site. Fletcher poses the burning question: would Tata be prepared to undergo such upheaval so close to the completion of the project?
