A Sweet Deal for Tata: 30,000 crore from Gujarat Govt.

A recently leaked Gujarati government document provides insight into why Tata moved the Nano project to Sanand. Tata got quite a deal. The BJP-led government is providing the following:
1) A soft loan of Rs. 9,570 crore at an interest rate of .1% AND deferred payment of 20 years;
2) Meeting all the costs of infrastructure development for the Nano manufacturing site;
3) A cut in power tariff rates; and
4) Rs. 700 crore to shift machinery from Singur to Sanand.

According to the Congress party’s calculations (which is in opposition in Gujarat), the loan and tax concessions total up to 30,000 crore in benefits for Tata over the next 20 years. Let's put that number into perspective: if Tata produces 50 lakh Nano cars during this time, the government handout would be the equivalent to Rs. 60,000 for each car rolled out. That’s 60% of the sticker price for the 1 lakh Nano car.

Personally, the numbers don’t shock me most. The fact that such a deal would not be publicly transparent, and would need to be leaked for the public to be aware when taxpayer money is truly financing the project, is what shocks me most. What kind of deals do state and local government make behind closed doors? Are these types of state government handouts typical in trying to bring businesses to their state?

For more background on how/why Tata moved from Singur, check out Emmerich’s post here, and for more on Gujarat’s handout to Tata, see this Hindu article.