Tata Nano – Small Affordable Car, Big Exorbitant Troubles

The Moment of Pride

On January 10, 2008, Ratan Tata unveiled what was believed to be an impossible achievement. The unveiling of the Tata Nano once and for all silenced all the critics who said that the Rs 1,00,000 car is just a figment of Mr. Tata’s imagination and merely a hype. The four-door Tata Nano is almost 3 meters long, and is powered by a 623cc two-cylinder engine at the back of the car. With 33 horsepower, Tata Nano is capable of 65 miles an hour. Its four small wheels are at the absolute corners of the car to improve handling. Though it seems to be a small car, it can very comfortably seat 4 people and even promises to fit 5 people at a slight squeeze.

The car is the culmination of five years’ research and input from across the world, including Italy and Germany. But what makes it more special is that it was designed and made in India, defying expectations that a company best known for its heavy Lorries and Trucks could manufacture a cutting-edge passenger product. More importantly, the Rs. 1000000 price tag seemed to be an unrealistic selling price for even the major players in the automobile industry. The very fact that its nearest competitor Maruti 800 is almost priced twice as this figure is a proof enough about the competitiveness of this pricing.

All this limelight seemed to be a dream, it is a project that will shows the shine of India’s future prospects, and a wonder in itself. It does make a pride moment in the history of modern India and also, people like me feel proud to be an Indian. What we did not know then was the nightmare that would follow. The turmoil which would follow was a part of these statements, which an elated Ratan Tata had said on January 10, 2008. A team of 500 engineers worked on the car, to be produced at a plant in Singur, West Bengal. The car will be sold first in India from the second half of this year, with an initial annual production run of 250,000, but it is expected to be made available in Latin America, SouthEast Asia and Africa. It could find its way to Europe in a few years but enhancements to meet higher standards would raise the price considerably.


The Reality Strikes – the Dream breaks

The main issue with the entire plan was the way in which the land was acquired by the Government to get Tatas’ to make the plant at Singur. The Government claims to have offered a compensation of Rs. 8,00,000 per acre of land to the farmers, which is substantially higher than the prevailing market rates. The farmers complain about 2 major things:

1. The compensation is useless to them. As was said by one Prasenjit Das in Khaserbheri village says "What use is cash to me? Putting money in the bank and earning interest is not enough, especially looking at the rising inflation. With land, my asset remains intact and what I earn from selling my produce is a bonus." Das has another argument to press his case: "Even if the government promises to give me a job, it fails to secure my children's future."
2. Lack of faith that the people have from the Government in getting the money and that too in time.

These two facts were taken up by Mamata Banerjee’s Trinamol Congress and they began a protest against the Chief Minister Buddhadeb Bhattacharjee and the West Bengal Government for allocating the land to Tatas’ after acquiring it forcibly.This protest movement gained momentum, with her performing dharnas and it also took an ugly turn when her supporters physically threatened TATA officials and people working in a small plant set up there to prevent them from entering plant.

The other thing that does not make sense is the fact that in last November, Mr. Nirupam Sen, the State Commerce and Industry Minister had made a statement which said, “The acquisition of the entire 895 acres of private land is virtually complete. Each of the landowners has given his consent to acquisition at prices which are much higher than the prevailing rates. We have already disbursed payments for 550 acres and the rest will be completed within this month”. What we don’t understand is, are the farmers agitating because they haven’t been paid, or is the agitation due to another political game-play where the common man is once again made a victim.


The Warning from Ratan Tata

With the support of Mamata Banerjee, the agitation in Singur has reached a dead-lock. Neither is the Government able to give back land to the agitating farmers and nor are they stopping the protests. The things got worse when farmers protesting the Tata plant have resorted to beating up the staff of the Singur plant. Serious physical damage has been inflicted on the staff and family members of Tata Motors at Singur. What also made this worse is that a set of people are also supporting the Tata Project and Singur and things have gone violent.

Looking at the grave situation in Singur, Ratan Tata made a statement on 22nd August in a Press Conference, “We perceive that we may not be wanted… if people think that we will not move out of Singur, they’re wrong. We would, whatever be the cost.”


The Aftermath that followed

Ratan Tata is one serious businessman, and the statement he made turned the world around. For West Bengal, the fact that it had housed the Tata Nano project was not only a thing of pride, but it has already invested almost 1500 acres of land into this project. Moreover, this project is to bring almost 6000 jobs to West Bengal state and also usher in a lot for projects in the future.

If Tatas’ move out of Singur due to this political issue between the Government and the Opposition over the Government’s “capture” of Farmer agricultural land, it would set a disastrous precedent for the state of West Bengal, and wooing both Indian and Global investments after “booting out” what is probably the biggest Auto-investment after the early 1990s project of Maruti and Suzuki, will be a major challenge.


The Reconciliation That Failed

Even after the entire saga that followed Mamata Banerjee still slammed a desperate Buddhadeb who wanted a resolution over the problem. He called for a meeting with the Governor to find a “middle-way-out”. Mamata said, “West Bengal government doesn't respect us. It has broken the terms of agreement. We are not ready for any more talks.” The Trinamool chief called for 'March to Singur' on September 16 and threatened agitation programme after September 19. Mamata's statement has come barely hours after Governor Gopalkrishna Gandhi called for a "spirit of accommodation" that was evident during the talks he presided over to break the Singur deadlock. The Chief Minister had offered 70 acres in lieu of the Tata Motors project site at Singur to "unwilling farmers" and monetary compensation to those whose land fell outside, but was rejected by Mamata Banerjee at a face-to-face meeting.

Those who had discounted the possibility of the Tatas leaving the state got a wake-up call after Karnataka offered 900 acres in Dharwad and its farmers - unlike Singur - gave the impending acquisition the thumbs-up. The other states which also gave “red-carpet” for the Tata Nano project include Gujarat, Uttaranchal, Punjab, Haryana, Andhra Pradesh.

Even Mamata seems to have realized that Tatas’ might exit West Bengal, albeit late. Her calling on the Governor just hours after Leader of the Opposition Partha Chattopadhyay talked to him points to her desperation for an honourable exit. She was given the opportunity once, but missed it. Now at this stage, “The package, or nothing”, was the curt message from Buddhadeb Bhattacharjee after a desperate Mamata Banerjee called on Governor Gopalkrishna Gandhi on Friday, seeking a way out of the Singur impasse. The CM’s statement buries the faintest possibility of a compromise beyond 70 acres from within the Tata Motors project area. With the CM firm on the announced package, there is hardly any room left for negotiations through Raj Bhavan.


The Last Straw

Five Unidentified armed men sneaked into the plant and assaulted two security guards in the paint shop of the Tata Motors small car plant at Singur at around 10 PM on Monday. This added fuel to the fire about the Tatas leaving West Bengal.

As of this moment, the Tata Motors is dismantling the Plant at Singur and truckloads of materials, including the moulds, casts and the other machinery parts, are being loaded and sent out to an unknown location. The move is seen as a first step towards the company’s Plan B: launching Nano, the Rs one-lakh car, from its plant in Pantnagar in Uttarakhand. Company officials said some men were already being relocated. Sapoorji Pallonji, the firm engaged by the Tatas for site construction, has already withdrawn its workforce of 260 personnel, including 60 engineers, and have transferred them to other sites. This shows clear indications that work in Singur is not going to resume anytime soon.


In a nut-shell

For investors and shareholders of Tata Motors, this is a major development which could go either way for them and simultaneously their investments. If Tata Motors decide to move out then almost 2 years worth of work will have to be re-started somewhere else. Despite Tata’s confidence that they are capable of rolling out the Nano by October, future production will be hampered if they are forced to shift their project elsewhere. The Singur drama will also cost the Tata Motors almost Rs. 1500 crores, and this might be a major impediment in making the Tata Nano price to remain as competitive as was announced and expected.

Last but not the least, with so many states giving the Tatas’ a Warm Welcome, and the stalemate in West Bengal, the Singur Dream, remains a nightmare. Mamata Banerjee is sticking to her land-for-land demand, hoping that her stubborn stand will yield electoral dividends in rural Bengal it doesn't matter if Tatas exit Singur. With a belligerent Opposition not ready for a compromise and Tata Motors set to wind up operations in Singur, Bengal will again go down as an "unfriendly state" a tag that it had shaken off in recent years. Buddhadeb is worried about the repercussions to the state if Tatas exit with such a prestigious project and he sent a letter to Ratan Tata offering police protection and other contents are yet not known, but it is said that Ratan Tata has agreed to have a talk with Buddhadeb.

All in all, the only question that still remains is,

“Will Tata (Ratan) say ‘Tata’(good-bye) to Singur?”