Tata Group reportedly declines UK loan offer

S Kalyana Ramanathan / London November 29, 2009

The £10-mn loan was offered to develop electric cars in the UK.

Tata Group, which owns British car maker Jaguar Land Rover, has rejected a £10 million loan offered by the UK government to develop electric cars at the group's European Technical Centre, according to a report in The Times today.

A Tata Motors' spokesperson refused to comment on this.

The £10-million loan was part of the Automotive Assistance Plan announced last month by UK Business Secretary Lord Peter Mandelson, to help car makers in the UK recover from the worst recession to hit the industry in recent memory and also help in developing new technologies in the automotive sector.

This development is another clear sign of the strained relationship between Tata Group and Mandelson's Department for Business, Innovation and Skills. Earlier this year, Tata's JLR and Mandelson's office were engaged in intense negotiation to secure a loan guarantee from the UK government for a £340 million loan approved by European Investment Bank. This negotiation finally broke down and Tata Group finally raised the money from other sources in India and the UK.

It was widely reported that the negotiations broke down on account of some of the conditions put forward by Mandelson's office, including a demand for a berth on the board of JLR that would give the UK government a say in the car maker's future business plans. JLR had openly rejected the idea of having a UK government representative on its board.

JLR's CEO David Smith, in an interview to Business Standard earlier, had said JLR would accept support from the British government only on regular commercial terms.

David Bailey, of Coventry University Business School and an expert on the Midlands (in Britain, where Tata’s technical centre is) economy said, "The government wants to make UK the centre for making electric vehicles. The £10 million loan to Tata was for making electric cars in the UK. I hope the Tata Group (despite rejecting the loan) still intends to make electric cars in the UK."

Last week, Tata Motors' vice-chairman Ravi Kant, in an international automotive conference in London, attended by Mandelson, reminded the audience that the Tata Group was as British as any other British Group and the UK government must support the manufacturing sector as much as it is supporting the financial services sector.