Price of a small car: Subsidies, tax breaks got Tata to Singur

Kolkata September 09, 2008, 0:08 IST
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.
Nano, small car
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 documents, which the West Bengal government released today, show that the state government will provide to Tata Motors a loan of Rs 200 crore at 1 per cent interest per year repayable in five equal annual installments starting from the 21st year of the date of disbursement of loan.

If the state had put the sum in a fixed deposit scheme, its principal would be worth Rs 3,000 crore in 20 years. Read more

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 (WBIDC) is to provide Industrial Promotion Assistance in the form of a loan to Tata Motors at 0.1 per cent interest a year for amounts equal to gross VAT and CST received by the government of West Bengal in each of the previous year ended March 31 on the sale of each Nano from the date of commencement of sales.