Mumbai: While Ratan Tata chairman of Tata Motors may be heaving a sigh of relief in relocating to Sanand in Gujarat, as this will enable the company to roll out the small car on the promised date and price point, the company's vendors are a worried lot.
These auto parts suppliers basically want to be compensated for having to relocate their ancillary units from west Bengal to Gujarat. Failing that they feel the company should agree to increase the price of parts to be supplied for Nano. For Tata Motors, these options would increase the cost of making the Nano or push the break-even point further than what was originally expected.
The monetary damage to ancillary units is estimated by market sources to be collectively between Rs250 and Rs500 crore. This includes the price paid for the land by the vendors, and also investments for the plant and machinery many of them have made.
Vendors are currently said to be collecting information on losses suffered by them that could lead to Tata Motors making a claim with the West Bengal government. Tata Motors has not said anything until now about compensation for the vendors for the losses they suffered on account of moving out of Singur saying that the Nano project is as much theirs as it is Tata Motors' a Tata spokesperson said.
According to industry sources, the vendors entered into an agreement with the West Bengal Industrial Development Corporation (WBIDC), and were given two years to set up buildings at the plant site. A 'building' under the terms of the agreement is a four-walled structure. The vendors coming to West Bengal built such structures much ahead of time as the two year period expires on September 2009 and spent quite a decent sum for this. The vendors had taken land directly from WBIDC on lease.
The vendors may also approach the state government for compensation.
However, senior officials in the state say they have not yet received any claims from the vendors. The vendors have also sought incentives from Tata Motors. Though Tatas have offered to help, they have not made clear what sort of incentives they would offer. Importantly, while announcing the decision to pullout from Singur, Ratan Tata had said the company would try to protect the vendors "to the extent we can."
On the whole however, the vendors are a relieved lot as the suspense over the Nano project is over and there is clarity now and one thing that is clear is that all the vendors will shift their manufacturing base to Sanand in Gujarat to cater to the Nano.
More clarity on the vendors' compensation issue will emerge when Tata Motors' senior management led by managing director Ravi Kant meet the company's parts vendors on 16 October in Mumbai.
A Tata Motors spokesperson said the meeting will discuss, among other matters, the relocation of the Nano's mother plant and its impact on the vendors.
For Tata Motors the important thing is to ensure that the Nano is in the market by the end of this financial year as suggested by the company's chairman, Ratan Tata, when he announced the relocation of the plant.