The unprecedented sops given by Modi to lure the Tata Nano project to Gujarat have met with stiff opposition from local politicians and rival business groups.
The cat is out of the bag. In a desperate bid to score political points for himself, Gujarat chief minister Narendra Modi has gone overboard and offered unprecedented sops to bag the Rs 2,000-crore Nano car project after Rattan Tata decided to move it out of the Communist ruled West Bengal.
A document, said to be a leaked Cabinet note of the Modi government, is doing the rounds of the state secretariat in Gandhinagar. If one were to monetize the exemptions and facilities mentioned in this note, it seems the Modi government ended up offering sops in excess of Rs 30,000 crore to make Ratan Tata choose Gujarat as the final home for the internationally-acclaimed Nano project.
The note says that the government agreed to provide a soft loan of Rs 9,570 crore at an interest of 0.1 per cent to set up the project and additionally allowed deferred repayment spread over 20 years besides meeting infrastructure development costs, a reduced power tariff rates and even meeting the shifting cost of Rs 700 crore for bringing machinery and equipment from Singur to Sanand in Gujarat.
To put it in perspective, the loan to the Tatas constitutes about a quarter of the Gujarat government’s annual budget put at around Rs 40,000 crore. Among the other facilities are provision of 200 KVA power supply up to project receiving station, exemption from electricity duty, 14,000 cubic meter per day water supply at project site, facilities for disposal of hazardous waste, provision of 100 acres of land for a township, facility for a transport hub, and pipeline for supply of natural gas to the project site.
These unprecedented sops have caused intense heartburn among rival industrial groups who have been denied such privileges and are believed to be responsible for the leak of the note. The Congress and the MahaGujarat Janata Party, a party set up by BJP rebels, are up in arms and are agitating against such sweetners at the cost of the people. “The sops add up to a whopping Rs 30,000 crores”, says Gujarat state Congress president Siddharth Patel.
The incentives given to the Tatas are a quantum jump over the ones given to General Motors (GM) for their facility at Halol in the backward areas of Panchmahals district. GM had got a soft loan of 10 per cent of the investment with a cap of Rs 28 crores, and a deferment in sales tax. GM had forged a joint venture with Hindustan Motors which was already producing HCVs at the plant but was given a new project categorization.
While chief minister Narendra Modi had decreed that all details of the deal be put under wraps and the government even declined to make available information under the Right to Information Act taking the plea that it was business secrets, the opposition Congress has gone to town with the details with the Gujarat Congress president and former leader of the opposition in the state Assembly Arjun Modhvadia terming the concessions as a complete sell-out which would be unacceptable to the people of Gujarat. “We are not for obstructing the project. Tata is a worthy son of Gujarat and is welcome to set up five factories instead of one, but he must do business at his own cost and not at the expense of the people of the state,” Siddharth Patel added.
The Congress leaders said that in view of the deferred payment and various other facilities and tax concessions granted to the Tatas, the company would benefit to the tune of over Rs 30,000 crores in the next 20 years. The installed project capacity is 2.5 lakh small cars per annum, so over a 20 year period the number of cars produced at the Sanand plant will be 50 lakh. Congress leaders say that a quick back of the envelope calculation shows that if each Nano is sold at the promised cost of Rs 1 lakh then the each car that rolls out of the Sanand plant will be subsidised to the tune of Rs. 60,000 at the cost of the state exchequer.
According to the leaked official document, the state government has granted exemption to the Tata Motors even in the payment of stamp duty of Rs 20 crore for the 1,100 acres of land given at a subsidised price of Rs 400.65 crore to be paid in eight equal installments at eight per cent compound interest with a moratorium of two years. There would be no charge for transferring the land from agriculture to non-agricultural purpose and the registration fees, too, would not be charged while the state government would meet the entire infrastructure cost of developing roads, electricity and gas supply as well as providing an additional 100 acres of land on the outskirts of Ahmedabad to build up a township for the Tata employees.
The Congress leaders charged Modi with compromising the interests of Gujarat for his personal publicity. “Is Nano the only project to give a boost to the industrial development of the state?” Patel asked and demanded that similar concessions should be allowed to other sick and closed industrial units in the state to help their revival. He said if similar rehabilitation packages were worked out for the closed 80,000 odd small and medium industrial units in the state, more than a million job-less people would have been re-employed.
State Tourism minister Jaynarayan Vyas who is also the state government spokesperson countered the allegation by saying that all through Congress rule in Gujarat, incentives and sops were encouraged. “The volume of incentives offered by them during their time is a whopping Rs 2 lakh crore. So they have no right to make any allegation. The project is a pride for Gujarat. However, the Congress fails to see the growth of state, he added.
The government, meanwhile, has steered clear from either confirming or denying the claims in the purported Cabinet note. Officials and even Cabinet ministers were seen scurrying for cover when mediapersons approached them for their comments on the note.
The leak of the Cabinet note, nevertheless, has left the Modi government red faced and an internal probe has been launched to trace the journey of the document from the state secretariat to the newspaper offices. Such was the secrecy around the Nano deal that even Cabinet ministers and secretaries who had signed the papers had very little knowledge about it. Though Modi never got tired of saying that there is no secrecy about the deal, yet, in reality it was exactly the opposite. In fact, all Cabinet decisions are promptly circulated to all heads of departments in the secretariat. This one was an exception.
Meanwhile, political opposition to Tata Motors’ ambitious Nano project is now snowballing. The agitating farmers, who have knocked the doors of the High Court for compensation, now have company. Opposition Congress party’s youth wing and MahaGujarat Janta Party have launched protests separately and have staged dharnas against it. Leaders and party workers of both the parties have for the first time taken to the streets protesting against the various issues such as incentives given to Tata Motors and local employment in Nano plant. MahaGujarat Janta Party president Gordhan Jhadapia who hails from VHP said that if despite being given so many incentives, Tata Motors is unwilling to employ 85 per cent local people for its Nano plant then it should be prepared for the consequences.
As per the employment policy of Gujarat government, any private or public sector enterprise, which sets up its base in the state, is required to employ 85 per cent local people in its unit. The cap for managerial level employment is 65 per cent. The Youth Congress has also opposed the incentives given to the project.