Nano vendors seek guarantee on loans to invest in Sanand

Mumbai: Key ancillary suppliers associated with the Nano project have indicated that they would ideally like Tata Motors to guarantee their loans for investing in the Sanand plant in Gujarat.

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This is because the compensation package for expenditure incurred at the originally earmarked site at Singur has still not come through.

"It was in principle decided that the company would arrange for the loan (for the compensation amount) but a guarantee would be a lot more helpful," said a supplier.

From the suppliers' point of view, it would be a double whammy to reinvest in Sanand.

"We do know that the compensation will eventually come from Tata Motors but cannot afford to earmark crores of rupees all over again in a difficult period when order books are not so buoyant," one of the suppliers who did not want to be identified told Business Line.

A Tata Motors spokesman said in an email response, "Tata Motors has not received this particular request from any vendor. In any case, the company has been in discussions with vendors who are moving from Singur to support them with mutually acceptable terms, which are being finalised and will be implemented."

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Original investments

The original investments at Singur roughly involved the 55 suppliers paying Rs 15 lakh an acre for land with an additional Rs 23 lakh an acre payable to Tata Motors towards provision of infrastructure such as roads and electricity. This was the 300-acre cluster that became the bone of contention during the protests led by the Trinamool Congress chief, Mamata Banerjee.

Each supplier spent Rs 7-10 crore on land and building. Only a handful installed machinery on the premises while most preferred to wait and watch.

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Expenses

Suppliers spent "quite a handful" on filling up the land - as this was a low-lying area - which involved hiring trucks to dump tonnes of sand.

Sources said that depending on individual requirements in land space, this is estimated to be "anything between Rs 2 crore and Rs 6 crore."

Piling work for the foundation also involved some expenditure. Transport costs for carrying equipment "were yet another bother".

The vendors earmarked for Singur (practically the same number will be part of the Sanand project) could have spent anything above Rs 350 crore on land, building and other expenses.

Some estimates put this at closer to Rs 500 crore, but an exact figure is difficult to ascertain.

The terms of the compensation package are not clear.

Compensation

Sources said that Tata Motors has agreed to make good 75 per cent of the costs incurred while the vendors would, naturally, like to have the entire spend reimbursed.

Another story doing the rounds is that the company will refund only the building costs, which means other expenses may have to be written off consequently.

The compensation package, in this case, would only be in the region of Rs 120 crore.

"We are keeping our fingers crossed for timely compensation because the last fiscal has been tough and the near future looks uncertain from the viewpoint of orders," said a supplier.

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The good news is that work at the Sanand facility is continuing at a brisk pace. At least 35 suppliers have been allotted land at the vendor park and trial runs for the Nano are tipped to begin soon.

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If everything goes according to plan, the rollout of the "people's car" could even happen by end-January 2010.

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