Sri Lanka’s Board of Investment (BOI) has stepped into a festering row in India over the establishment of the Tata Nano car plant and invited the Indian company to set up the controversial plant here.
The BOI said in a statement last week that it was interested in establishing an automobile manufacturing plant at the Special Economic Zone at Mirigama in Sri Lanka to build the Tato Nano Car, after the construction of the plant's proposed site at Singur near Kolkatta in the Indian State of West Bengal was opposed by local farmers. Tata Motors is looking at alternative sites for the plant estimated to be worth US$350 million.

According to media reports in India, the Singur plant has been struck by repeated protests. Demonstrations from the political opposition against the land seizures have been threatening the launch of the Nano in India. Described as the world's cheapest car, the Indian government secured approximately 1000 acres of land from farmers for the project. Some allege they have not received their dues promised by the government as compensation in lieu of the land. Repeated protests have led to protracted violence between police and farmers.

A Reuters news agency report this week said conditions are still not favourable to resume work at the Singur Plant according to a statement by Tata Motors released last Saturday. "There has been no improvement in the ground situation so far, hence the conditions are still not conducive for resuming work today," a Tata spokesman said. "We continue to assess the situation closely." Tata Motors Chairman Ratan Tata said he was prepared to move the plant from Singur if violence continued despite having invested US$350 million in the project. Tata Motors has since been flooded with offers from other states for the Nano Plant.

Reuters said the protests reflect a larger standoff between industry in India and farmers unwilling to part with land in a country where two-thirds of the billion-plus population depends on agriculture. Shares in Tata Motors have fallen about 40 percent from the start of the year, underperforming the broader stock market which has declined nearly 30 percent in 2008.

The BOI press release quoted Minister of Enterprise Development and Investment Promotion Dr. Sarath Amunugama as saying Tata would benefit from the advantages of the Indo Sri Lanka Free Trade Agreement which makes it possible for Indian companies to manufacture goods in Sri Lanka for re-export to India or other markets. Tata Nano's are described as small, affordable and rear engine passenger cars aimed primarily at the Indian market.