Calcutta, July 15: Tata Motors has ascribed a “carrying value” to the Singur car wreck on its books: Rs 309.88 crore.
“This is the carrying value of buildings and sheds as per the books of accounts as on March 31, 2012,” the Tata Motors spokesperson said.
The disclosure was made in the annual report for 2011-12 that the company put out on Friday (July 13).
The carrying value takes into account the current cost of all the assets — plant, machinery, sheds, etc — that the Tatas were forced to abandon at the site when they pulled out.
This is the first time that the Rs 170,677-crore automobile giant has given its accountants and external auditors permission to put a figure on its books for its Nano setback in Bengal.
Tata Motors was forced to pull out of Singur in October 2008 after Mamata Banerjee unleashed a political agitation against the then Left Front government’s decision to hand over 1,000 acres in Singur for the small car project.
The mention of Singur is tucked away in the notes to an entry under the head “capital works in progress” in the automaker’s consolidated financial statement.
“Capital work-in-progress as at March 31, 2012, includes building under construction at Singur in Bengal of Rs 309.88 crore for the purposes of manufacturing automobiles. In October 2008, the company moved the Nano project from Singur in West Bengal to Sanand in Gujarat. The newly-elected government of West Bengal enacted a legislation on June 14, 2011, which was notified on June 20, 2011, to cancel the land lease relating to the project at Singur,” the auditors say in the notes.
The auditors said that based on the management’s assessment, “no provision is considered necessary to the carrying cost of the buildings at Singur”.
This is a position that the automaker has consistently maintained, which indicates that it is confident of recovering the cost by way of compensation from the Bengal government if and when it chooses to finally say goodbye to Singur.
Conversely, by treating it on its books as a capital work in progress, it is indicating that the Singur project is very much on.
The carrying value of Rs 309.88 crore will form one of the important components of the indicative compensation claim of Rs 1,400 crore that Tata Motors made in its petition filed before Calcutta High Court.
“Let us not confuse this figure with the claim that the company has made before the court. There are various heads under which it has demanded compensation,” a Tata Motors official said.
The Trinamul Congress and its battery of lawyers are expected to pounce on the figure to contest the Tata compensation claims that they have already denounced as way too high in their arguments before the high court.
On June 22 this year, a division bench of the court had struck down the Singur Land Rehabilitation and Development Act, which the Mamata government passed last year, as “unconstitutional and void” since it hadn’t secured the President’s assent.
The Bengal government has time till August 20 to file a petition before the apex court challenging the high court’s verdict.
“The company has challenged the legal validity of the legislation, including the process of compensation in the courts of law, the outcome of which is pending as of the date of approval of these financials by the board of directors. Based on the management’s assessment no provision is considered necessary to the carrying cost of buildings at Singur,” the company says in this year’s annual report.
The court battle between Tata Motors and the Bengal government has gone through many twists and turns.
Last September, a single-judge bench of Calcutta High Court had upheld the validity of the Singur Act.
The division bench’s verdict has been stayed till August 20. If the government fails to file its appeal and obtain an extension of the stay by that date, it will have to honour the terms of the lease that the Left government had signed with the Tatas and hand back possession of the land.
The timing of the Tata disclosure is curious. For close to four years since it steered the Nano project out of Bengal, Tata Motors had refrained from making any accounting disclosures on the Singur project.
Tata group and Tata Motors chairman Ratan Tata had signed off on the annual report on June 21 — one day before the division bench of Calcutta High Court gave its verdict in favour of the company. However, the annual report was put into the public domain only last Friday.
There could be one explanation for the timing of the disclosure. Tata Motors did not have any real reason to disclose the “carrying value” on its Singur project until the Mamata government enacted the Singur act. The legislation set the stage for a battle in the courts even as the government seized possession of the land.
“The Tatas were in possession of the land as per the lease agreement and were paying a lease rental of Rs 1 crore every year. But the Singur act was passed last year and the court battle ensued. The company now faces a situation where the fate of the land rests with the Supreme Court if the state government moves the apex court. Hence, it may have decided to make an accounting entry in its books pertaining to the carrying value of its on-site assets,” said one expert.
The Tatas have shown no desire to give up the lease on the land, which was meant for a project that was supposed to produce 3.5 lakh Nanos a year.
Tata Motors has already set up a Nano plant in Sanand with the capacity to produce 3.5 lakh cars. Sales of the Nano have been sluggish and the Sanand plant has never produced more than 1 lakh units a year, leaving a lot of unutilised capacity there and virtually no chance of resurrecting Singur as a producer of the small car.
One observer said the latest disclosure could be an overture by the Tatas to arrive at a realistic settlement with the Mamata government.
“If the state is ready to pay a compensation to Tata Motors and its vendors (who also built facilities on the land), it could look to re-possess the 997 acres, including 600 acres directly leased to Tata Motors. This will fast-track a resolution to the dispute,” said the observer.