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/CORRECTED REPEAT*/INDIA: Cheapest Car Rides on Govt Subsidies

Paranjoy Guha Thakurta

NEW DELHI, Jun 5 2009 (IPS) - India’s Tata Motors, makers of the ‘cheapest car ever made’, say they have received more than a million bookings for the first batch of cars said to roll out of its factory in a few months.

Meetings like this one which was addressed by Mamata Bannerjee forced the Nano out of Bengal in 2008. Credit: Paranjoy Guha Thakurta/IPS

Meetings like this one which was addressed by Mamata Bannerjee forced the Nano out of Bengal in 2008. Credit: Paranjoy Guha Thakurta/IPS

The company is a part of the Tata Group, an industrial empire with interests in steel, hotels, chemicals, computer software, telecommunications, energy and various consumer products, with an annual turnover exceeding 60 billion dollars.

The Nano is a rear-engined, four-passenger car aimed primarily at the Indian market. Pitched at between 2,500 and 3,500 dollars, the manufacturers claim the car provides affordable transportation together with a low carbon footprint.

Little is said about the direct and indirect subsidies given by various government agencies to Tata Motors for manufacturing the Nano car.

Environmental activists and concerned citizens have argued that these would be tantamount to supporting relatively privileged sections of the second-most populous country on the planet and would go against principles of equity in the world’s largest democracy.

Dubious Rights Record

The Tata group has been embroiled in different kinds of controversies in the past with human rights and environmental activists.

In January 2006, policemen at Kalinganagar in the eastern Indian state of Orissa, opened fire on a crowd of tribals killing some of them.

The tribals were protesting against the construction of a boundary wall on land historically owned by them where a steel plant is to be set up by the Tata group.

In November that year, survivors of the 1984 Bhopal gas tragedy – said to be the world’s biggest industrial accident – were outraged by Tata chief Ratan Naval Tata’s efforts as head of a government panel to bail out Dow Chemicals, the new owner of Union Carbide that ran the chemicals factory where poisonous gas leaked killing thousands in December 1984.

Supplies of transport equipment made by Tata Motors to the military junta in Burma have also been criticised. The multinational industrial conglomerate is now looking at setting up a truck manufacturing plant in the neighbouring country with financial support from the Indian government.

After protests by environmental groups, including Greenpeace, the Tata group has reportedly modified its plans of establishing a port at Dhamra in Orissa that could threaten one of the world’s largest mass nesting sites for Olive Ridley turtles, an endangered species.

But the Nano car project is arguably the most controversial endeavour by the business group that prides itself on its ethical practices.

Supporters of the car say it would be a boon for India’s upwardly mobile middle classes, but others worry that the Nano would only add to pollution and traffic congestion in Indian cities and should not have been subsidised by different government agencies.

With per capita income at 1,000 dollars, a bicycle is even today a prized possession for the poor while a two-wheeled scooter or motorcycle is what many middle-class Indians aspire for. While petrol is not directly subsidised, car owners (mainly middle and upper classes) pay very little or almost nothing for parking, on road tax or for cleaning the environment – in other words, their personal transport is indirectly subsidised.

According to an internal document that was leaked to the media, the Gujarat government is providing Tata Motors subsidies worth a substantial six billion dollars for locating its plant in the western Indian state.

"The total subsidy element work out to roughly half the market price of the cheapest Nano car model," says Anumita Roy Chowdhury, associate director of the Centre for Science and Environment (CSE), a non-government organisation.

In an interview with IPS, she adds that over and above the direct subsidies that have been provided there are various indirect subsidies that Indian government agencies are giving to providers of personalised transport thereby discriminating against public transport like buses.

The document referred to is an internal note that was prepared by state government bureaucrats for the Gujarat cabinet headed by Chief Minister Narendra Modi.

The total subsidies given by the Gujarat government to Tata Motors adds up to more than 30,000 crore rupees (six billion dollars).

The state government has granted Tata Motors 1,100 acres of land at a subsidised price of 400.65 crore rupees (80.13 million dollars) to be paid in eight equal installments at 8 percent compound interest with a moratorium of two years.

There was no charge for transferring the land from agricultural to non-agricultural purpose. Registration fees, too, were not charged, while the state government met the entire infrastructure cost of developing roads, electricity and gas supply and also allotted an additional 100 acres of land on the outskirts of Ahmedabad to build a township for Tata Motors employees.

The state government agreed to provide a soft loan of 9,750 crore rupees (1.95 billion dollars) at an interest of 0.1 percent per annum to set up the project and additionally allowed deferred repayment of the principal amount of the loan spread over 20 years.

The Nano project has been a topic of controversy virtually from its inception. The car was not merely meant to be the cheapest in the world, it was supposed to create many employment opportunities.

In May 2006, Tata Motors announced its decision to manufacture the Nano from Singur in the eastern-Indian province of West Bengal that has been ruled by a Communist coalition for over three decades.

Soon thereafter, the company and the state government had to encounter stiff opposition from agitating farmers claiming that their lands had been acquired forcibly; even those who voluntarily sold their land wanted higher compensation.

The agitation against the Nano project was spearheaded by Mamata Banerjee, who leads the All India Trinamool Congress, a regional political party opposed to the incumbent Left Front government in West Bengal.

As work on the project got delayed, in September 2008, Tata Motors stated it was suspending work at Singur.

Within a few months it had signed a new memorandum-of-understanding with the government of Gujarat for allocation of land for the Nano factory at Sanand near the state capital, Ahmedabad.

The Gujarat government also met the cost of shifting the project to the tune of 700 crore rupees (140 million) – this amount includes expenses for bringing machinery and equipment from Singur to Sanand.

Among other facilities provided by the state government are provisions for power supply of 200 KVA up to the project receiving station, exemption from electricity duty, 14,000 cubic metre water supply per day at the project site, facilities for disposal of hazardous waste, facility for a transport hub, and a pipeline for supply of natural gas to the project site.

"We can afford a car because our government pays for it," says Sunita Narain of CSE in Down to Earth magazine. "… we are not asked to pay the price of its running – the tax on cars (for instance) is lower than what buses pay …"

(*The story moved May 23, 2009 contained an error. The total subsidies given by the Gujarat government to Tata Motors adds up to six billion dollars not 600 billion dollars.)

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