Wednesday, November 12, 2008

Unconfirmed reports about the Tata Nano plant in Gujarat

Publication: Times Of India Ahmedabad; Date: Nov 11, 2008; Section: Front Page; Page: 1

Deal is out: Win-win for Tata, Gujarat TIMES NEWS NETWORK

Gandhinagar/Ahmedabad: If this is the deal, it is a win-win situation for both Tatas and Gujarat. A loan of Rs 9,570 crore and that too at an amazingly soft 0.1% simple rate of interest. That’s the big sweetener along with other carrots that the Gujarat government is understood to have doled out to draw Tata’s Nano project to Gujarat.

This, as per a document circulating in Sachivalay on Monday which the Modi administration refused to either confirm or deny was authentic. The government has denied the information sought under the Right to Information Act to the media.

If the document is official, it is a deviation from Chief Minister Narendra Modi’s hard stance on sops. But then look at it another way. Tatas need only Rs 2,900 crore for setting up the Nano plant, including the relocation cost of Rs 700 crores. The remaining Rs 6,670 crore will be spent on infrastructure development, including roads and rail, gas pipelines, effluent treatment plant, electricity, water and all that goes in the name of providing infrastructure to the Nano plant.

This infrastructure will be of use not only to Nano but to fuel the CM’s vision of turning Gujarat into a global auto hub, as more players follow the Nano trail from Singur to Sanand. It is just that Modi is picking up the bill first and Ratan Tata is paying back in easy instalments spread over 20 years. The document is believed to have been put before the Cabinet for approval. Just to give an idea about the size of the loan, it would be a quarter of Gujarat government’s annual budget of Rs 40,000 crore. Tatas have got their share too. They get a 100% exemption on electricity duty in addition to a concessional power tariff. The 1,100 acre land comes highly subsidised without any stamp duty, registration and transfer charges. The payment for land would be made in eight equal annual instalments at a compound interest of 8% per annum.


Tata wants only Rs 2,900 cr for Nano plant

Infrastructure cost of Rs 6,670 cr also billed to Tatas

Repayment of Rs 9,570 cr loan @ 0.1% over 20 years


100% exemption on electricity duty

Concessional power tariff

1,100 acre land comes cheap

No stamp duty, registration and transfer charges

Payment for land in 8 equal annual instalments
How the Nano deal is structured


The soft loan of Rs 9,570 crore that the Gujarat government has offered to Tatas will have to be repaid by them in 20 years but the repayment schedule will be linked to the VAT outgo on production capacity of 2.5 lakh cars in first phase.

For first four years, Tatas will have to repay the state government at 200% of the gross VAT payments per month. Estimates are that Tatas will have to pay an annual VAT of Rs 375 crore to the government based on its declared phase one annual capacity of 2.5 lakh cars. This means, the company will have to pay three times this amount or Rs 1,125 crore to the government as its loan repayment for the first four years.

Thereafter, repayments will reduce to 150% of its VAT payment till the state government recovers 150% of the proposed Rs 2,900-crore investment that Tatas will put up in phase one. This repayment will further come down to 100% of the VAT payment over the following years.

Various infrastructure facilities to be provided by the state government to Tatas include construction of a two or four-lane road connecting the project site, construction of a natural gas pipeline to the site, a 200-kva power supply, a 14,000-cubic metre per day water at the project site as well as facilities for waste disposal.

The state government has also promised to provide facilities for development of a ‘Tansportnagar’ on a publicprivate partnership for loading/unloading, lodging and boarding and other facilities in addition to providing 100 acres of land near Ahmedabad for a township at a later stage.

The leak of details of the sops being offered to Tatas, which has been a closely guarded secret, is understood to have set off a scramble within the CMO to find out how the document got leaked. The note was prepared by state industries department on the basis of the MoU with Tatas to get it approved by the Cabinet.