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Tata retreats from Nano site

2008-09-25 07:18

Mumbai - Tata Motors, India's top vehicle maker, has started moving equipment from its factory in eastern India, the Times of India newspaper said on Wednesday, as the company scrambles to launch the ultra-cheap Nano car as planned.

But a Tata Motors spokeswoman described the newspaper report as "speculative" and said one of the company's contractors had only moved some construction equipment for safety reasons.

"The company has not said it was moving machinery," the spokeswoman said.

Tata Motors, which had planned to launch the Nano around October, had suspended work at the plant in Singur in West Bengal state earlier this month due to violent protests by farmers unhappy with the compensation offered for their land.

Talks underway

While talks between the state and opposition politicians backing the farmers were still underway, attacks on two security guards at the factory on Monday "might have been the last straw", the Times of India said, citing unnamed government officials.

Earlier, NDTV Profit news channel had reported the company was likely to make a public announcement about its exit from West Bengal next week "unless something dramatic happens very soon".

At the time of suspending work in Singur on Sept. 2, Tata Motors had said it was considering alternative locations to make the Nano, billed as the world's cheapest car.

Last week, Tata Motors, which aims to price the Nano at just above 100,000 rupees ($2,180), said southern Karnataka state, where it is already building a commercial vehicle plant, had offered land.

Tata Motors' managing director said at the time the company was "actively" looking at alternatives including Karnataka. Other states have also made offers to the Tatas, India's second-largest conglomerate with interests ranging from salt to software.

Alternatives considered

"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," said Ian Fletcher, automotive analyst at research firm Global Insight in London.

"The other alternative is to move the entire project to one of the other states that have expressed an interest ... but it is uncertain whether Tata would be prepared to undergo such upheaval so close to the completion of the project," he said.

Cost overruns caused by the delays in Singur have already raised the cost of the Nano project.

The company, India's third-biggest carmaker, may be able to roll out a few hundred or a few thousand Nano cars from a plant in northern Uttarakhand state or from the western city of Pune, analysts have said.

But that will fall well below the planned initial capacity of 250,000 units at the Singur plant.

The launch of the Nano in October, the peak of the festival season in India when demand rises, is crucial for the company, which is seeing softer demand for its dominant commercial vehicles because of high interest rates and fuel prices.

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