Tata close to signing aid deal with UK

After year-long negotiations, Tata Motors edged closer to signing a financial aid package with the British government for its struggling UK subsidiary Jaguar Land Rover, a media report today said.

The agreement could now be reached as early as this week, The Observer claimed.

Tata wants the government to underwrite a £170 million commercial loan to secure the short-term survival of Jaguar Land Rover but baulked at the conditions the government originally set.

Executives from Tata and Jaguar Land Rover met officials from Lord Peter Mandelson's business department on Friday to discuss the agreement. Tata's advisors are still going through each clause but no substantive areas of disagreement remain, the report said.

The British government had originally demanded representation on the board of Jaguar Land Rover and a veto on redundancies in return for loan guarantees. These conditions were now off the table, it said.

Tata Motors is now seeking government guarantees for a much smaller loan than the £400 million it had sought earlier because it is confident it can raise the capital independently.

In May, it successfully completed the refinancing of the $3 billion (£1.8 billion) bridging loan it had taken out to buy Jaguar Land Rover from Ford in 2008. Moreover, the drastic decline in vehicle sales in India has eased.

The consortium of banks that has offered loans to Tata Motors now includes Indian banks. Ministers had envisaged that Lloyds Banking Group, in which the government has a 65 per cent stake, would take a lead role in providing the loans, but other banks have offered to lend more.

Simultaneously, separate talks were on between the government and JLR about providing guarantees to the £340 million loan offered by the European Investment Bank. This proposed loan is designed to help JLR adopt more fuel-efficient technologies and is not tied to its short-term survival.