What brought Tata to Singur ?

The agreement between Tata Motors and the government of West Bengal to manufacture the world's cheapest car in the state involved much more than subsidies on land and interest paid on bank loans. Here are few of the allurements:

• The government worked out a package - which included tax paybacks and concessional power, to match the benefits the plant would have enjoyed in Uttarakhand and Himachal Pradesh, both designated backward areas that attracted central tax concessions.

• The state government will provide to Tata Motors a loan of Rs 200 crore at 1% interest per year, repayable in five equal annual installments starting from the 21st year of the date of disbursement of loan.(as per the documents, which the West Bengal government released on Monday)

• This loan was disbursed within 60 days of signing of the agreement in May 2006.

• The West Bengal government will also provide electricity for the project at Rs 3 per KwH, against the going rate of Rs 4.15 per KwH.

• In the case of a more than 25 paise per KwH increase in tariff in every block of five years, the government will provide relief through additional compensation to neutralise the additional increase.

• The state government also promised to revisit the computation of the comparison of benefits offered by Uttarakhand and Himachal Pradesh.

• The incentive package in these states comprised excise exemption for 10 years and 100 per cent income tax exemption for the first five years and 30 per cent for the next five years.

• The state government also subsidised the cost of land required for the factory and the interest paid by Tata Motors on loans taken to build the project. (Thus, the West Bengal Industrial Development Corporation is to provide Industrial Promotion Assistance in the form of a loan to Tata Motors at 0.1% interest a year.)

• In other words, the state government would repay Tata Motors the VAT and CST collected on each Nano sale and as a result not earn anything as tax. This benefit will continue till the balance amount of the benefit offered by Uttarakhand was reached on a net present value basis.

• The agreement also said Tata Motors and the government of West Bengal will make joint efforts to maximise sales of the car in West Bengal.

• Under the agreement, WBIDC would provides 645.67 acres to Tata Motors Ltd on a 90-year lease, on an annual lease rental of Rs 1 crore per year for the first five years with an increase at the rate of 25 per cent after every five years till 30 years.

• The agreement says Tata Motors will manufacture 250,000 cars a year on a two-shift basis, which could be expanded to 350,000 on three-shift basis.

• In addition, the Singur unit would act as a mother plant for many aggregates to tune of 500,000 cars.

• Tata Motors told the West Bengal government it would be investing over Rs 1,500 crore and vendors were likely to make further investment of over Rs 500 crore.