A Tata Motors spokesman has strongly denied a media report in India that suggest the company is delaying payments to vendors and also said steady progress was being made at the new purpose-built plant for the Nano at Sanand, Gujarat.

The Economic Times of India newspaper had reported on Thursday that Tata Motors owed more than INR12bn (US$245m) in delayed payments to vendors. But corporate communications chief Debasis Ray told just-auto: “As we said in a briefing yesterday, [media reports about] Tata Motors’ vendor payment paints a wholly unrealistic picture and is sensationalising the matter beyond all proportions.

“We do not agree with [the reports]. Tata Motors is conducting its business properly, adequately and in full partnership with all its vendors.

He said 75% of Tata Motors purchases from vendors are covered by a tripartite arrangement, called the ‘bill marketing scheme’, between vendors who have chosen to be covered by the scheme, Tata Motors and banks.

Under this scheme the bank pays the vendor and Tata Motors pays the bank.

For the remaining 25% of purchases, there could be some delays, Ray conceded, but said Tata Motors is in constant talks with the vendors.

“We have seen improvement in sales in January. It is expected that February will be better than January, and first indications are that March will be still better. As sales begin to climb, vendor purchases will also improve, and a positive cycle will once again get created. Our standard credit period for vendors is between 30 days and 60 days,” he told just-auto.

Ray said the Automotive Component Manufacturers Association of India (Acma), quoted in the report, had already denied it.

According to Ray it said, in a letter to The Economic Times of India that “ACMA would like to completely dissociate itself from this misleading report”.

The report had quoted unnamed officials and spokespeople within both vendor companies and Tata Motors.

But, according to Reuters, Tata Motors’ managing director Ravi Kant told reporters at a news conference in India on Thursday that the company had in fact been late in making some vendor payments but did not disclose the outstanding dues or say when the payments would be made.

“Yes, there is a delay… there would be a delay. I’m telling you we are in a difficult situation… the whole industry is,” he said, but declined to say what amount of payments were delayed.

“There is a liquidity problem, banks are not lending.”

Reuters noted that Tata Motors last week reported a December quarter loss and data earlier this week showed its vehicle sales fell 33% year on year in January with commercial vehicle sales falling 43%.

“All problems with vendors are being discussed and all mutual solutions are being worked out,” Kant said.

The company has rationalised its vendor base from thousands to a few hundred, and Kant said it was trying to get financially stronger vendors with greater access to technology.

While cuts in official interest rates and two stimulus packages from the government were slowly beginning to make an impact, Tata Motors was also taking steps, Kant said.

“Our plan is to generate as much sales as possible. We’re coming out with new products… we have a pipeline of new products throughout this year. We are giving full support on vehicle financing, we are putting money behind that. We are giving all kinds of incentives,” Kant said.

The company’s finance arm, TATA Motors Finance, was providing loans for almost 40% of sales at present, Kant said.

Shares in Tata Motors ended down 2.8% at a two-month closing low of INR131.50, after having fallen as much as 5.3% during the day, in a Mumbai market that fell 1.2%.

Turning to the Nano, Ray said preparations to launch this eagerly-awaited little car in India were well in hand.

“The process for the Nano being built for customer sale has begun. On 7 October 2008, we announced that a new plant for the Nano was being set up at Sanand in the state of Gujarat.

“On the same day, we also said that while awaiting the Sanand plant’s completion, as an interim measure, Tata Motors would deploy its existing facilities at Pune (Maharashtra) and Pantnagar (Uttarakhand). That is exactly what is being done. You have to await our announcement of the launch” [recent reports have said this will be at the end of this month].

The Nano should have been launched by October last year but protests by local farmers over land seizures for a new ‘green field’ plant in Singur in West Bengal forced the automaker to abandon the 95%-completed facility and relocate to a site it was offered in Sanand.  Ray said today all the equipment from the Sanad plant is now in transit to Singur.

“The equipment from the Singur site will be moved to Sanand. At the Sanand site, the construction of the plant is progressing apace. At present we have already completed piling and foundation work for some of the main shops, and have begun to create in-plant infrastructural facilities, like roads, storm water lines, service lines etc,” Ray said.

Kevin Jacobs in India contributed to this report