Sources in the West Bengal government's finance department said the state had made budgetary provisions that would run into several hundred crores every year for 20 to 30 years to attract Tata Motors' Nano project to Singur.
This payout was to begin from the scheduled start of the production in 2008. The project is now facing problems owing to protests by land-losers unwilling to compensation from the government.
Responding to questions raised on the basis of the contract signed between the state government, Tata Motors and West Bengal Industrial Development Corporation (WBIDC), the source said the state would also match any additional benefits accruing to factories in hill states like Uttarakhand, were these states to receive any further incentive packages in the future.
At the end of 2006, the state government had disbursed the first part of its support to Tata Motors in the form of a soft loan of Rs 200 crore at an interest of 1 per cent per year repayable in five equal annual instalments from the 21st year from disbursement of the loan, entailing a lock-up of the capital and loss of interest income on the amount for the entire tenure.
At a simple rate of 12 per cent a year, the interest subsidy would cost the state about Rs 25 crore a year.
The state had committed to extend a loan of around Rs 400 crore a year at 0.1 per cent interest, payable monthly, for 30 years, as a matching amount for the value added tax (VAT) received by the state at the rate of 12 per cent