Ratan Tata Sounds A Warning

Earlier today, the Chairman of the Tata Group made a very strong statement 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.”

In Tata Motors’ long term interests Singur has become a flash point and a hot bed for political activity. The average Indian will however be synonymous with Singur as the chief production facility of the World’s cheapest car. The much talked about 1 lakh people’s car or the Nano.

This statement is the first clear indication by Ratan Tata that he isn’t interested in dealing with the violent politics of Singur. Ratan Tata is not the type of man who uses the media to play around which means that today’s statement is a forecast of what WILL happen unless things change at ground zero in Singur.

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.

What this means for the investor is that he will be forced to wait a while before he makes a profit on his investment in Tata Motors.

Singur has become a political issue between the government and the opposition over the government’s ‘capture’ of Farmer agricultural land. While the opposition alleges that some land has been forcefully acquired, while for some adequate compensation has not been paid; the important fact remains that violent methods are being used to deal with the situation.

Farmers protesting the Tata plant have resorted to beating up the staff of the Singur plant .Serious bodily damage has been inflicted on the staff and family members of Tata Motors at Singur. This has been the main reason why Tata might very well pull out of Singur.

For the state housing the Nano project, things are serious for West Bengal. The Nano project at Singur has put in around 1500 crores and will pump in even more once serious production begins. For a state that is in need of heavy investment, a fiasco like this will set a dangerous precedent and deter future investments by corporates in India and the World.

Tata Motors if booted out of Singur might make their way to the state of Uttar Pradesh. Even Uttaranchal and Arunachal Pradesh with their lenient tax structures could be unlikely gainers. There are also the special economic zones of Gujarat and Karnataka that hold promise. If Tata decide to move, investors can take heart from the fact that despite delayed production and eventually sales, the Nano will still find takers.

But for the government of West Bengal to let go of what is probably the biggest Auto project since the Maruti-Suzuki initiative of the early 90’s in the Indian markets will be a deterrent to future investors in the state and above all, an experiment in stupidity.