To make up for 80% of losses incurred by component suppliers
Tata Motors Ltd has finally been able to sort out differences with vendors on the issue of compensation arising out of its decision to shift the Nano plant from Singur in West Bengal.
Tata Motors has agreed to compensate 75-80 per cent of total losses incurred by each component supplier, at least two key component vendors for the Nano project told NewsWire18 today.
“Broadly, everything has been finalised. There are, however, still some operational issues which are being worked on, and they should be resolved in a month's time,” a vendor said.
When contacted, a Tata Motors’ spokesperson said the company was still discussing the issue with vendors. “Whatever is mutually acceptable would be implemented,” he said.
“Almost 80 per cent of the vendors have already signed the compensation pact. The remaining are expected to come on board by January,” another vendor said.
Shares of Tata Motors fell on news the company will compensate up to 80 per cent of vendors’ losses. The shares, which were trading at Rs 763.55 on the National Stock Exchange, slipped off the day's high to Rs 761.30 at 1.31 pm.
Component suppliers lost almost Rs 1,000 crore as a result of the project being shifted to Sanand from Singur. Several component suppliers were reportedly seeking compensation from Tata on the ground they would incur huge losses if their units were to be relocated to Sanand, where the car maker is now setting up world’s cheapest car facility.
Vendors had already set up plants near Tata’s Singur unit for supplying components to the Nano project when the company had to beat a retreat.
According to vendors, the final compensation pact envisages them to take bank loans of an amount equivalent to 75-80 per cent of their total loss in Singur, with Tata Motors reimbursing the principal amount as well as the interest on the loan.
“Tata Motors has asked us to take bank loans after which they would reimburse the principal and interest amount,” the vendor said.
Singur vendors had earlier rejected Tatas’ offer to bear up to 75 per cent of losses incurred by vendors, free of cost shipment of machinery from Singur to Sanand, and allotment of land on easy terms, including a long-term lease. Instead, Nano component vendors sought full compensation in cash and not through loans or any other financial instrument.
The component supplier said there were some operational issues still waiting to be resolved in the full and final settlement of the Singur losses.
"There is still some ambiguity in the compensation deal. For example, on whose books should the loan be availed and how should it be taken," the supplier said. He said vendors are not comfortable with a long-term loan on their books.
“It is also not clear whether Tata Motors would guarantee the loan," he said, adding that financial teams from both sides are in talks on a daily basis and the matter should be resolved in a month.
Tata Motors had announced it was pulling out the Rs 1,500-crore Nano project from Singur in October last year, following violent protests over land acquisition. Around 60 vendors had intended to set up their units at the Singur site.
The vendors include Caparo Engineering, Bosch Chassis Systems, Gabriel, Lumax Industries, Kinetic Engineering, JBM Auto, Rasandik Engineering, Rico Engineering, TI Metal Forming, Sona Koyo Steering Systems Ltd, Exide, Subros, Beher, Rucha Engineers Pvt Ltd and TataRyerson.