Tata Motors [Get Quote] on Friday got a major relief when the Uttarakhand cabinet accepted the company's demand to lower the lease rent of the Pantnagar industrial plot from where the first Nano is expected to roll out.

The cabinet approved the auto major's demand to lower the rent from Rs 5 per sq metre to Rs 1 per sq metre.

The decision was arrived at the cabinet meeting, which was  presided over by Chief Minister B C Khanduri. The decision will cost the state exchequer an annual revenue loss of Rs 1.5 crore.

However, to make up for the loss, Tata Motors has opened a subsidiary firm,  Tata Motors Distribution Company, through which it will sell 80 per cent of the vehicles made in Pantnagar, namely, the Nano and Ace trucks. With this, the state government can earn a revenue of Rs 200 crore annually, through VAT.

Meanwhile, the state government has still not settled the issue of allotting 55 acres to Tata Motors for housing. "The issue is still being worked out," said Khanduri.

The State Industrial Development Corporation of Uttarakhand Limited, which was given a huge tract of land by the Pantnagar Agriculture University for developing an industrial estate, will make the balance payment to the varsity, so that it can allot a portion of the land to the Tatas. A

griculture Secretary Om Prakash has said that Sidcul would make the remaining payment of approximately Rs 25 crore to the University. The corporation has already paid Rs 55 crore to the varsity in the first installment.  

For the government to allot the varsity's agriculture land to Tata Motors for housing purpose has virtually become a hot potato in view of opposition by Agriculture Minister Trivendra Singh Rawat. He is opposing the use of farmland for industrial purpose.

Although the Uttarakhand government had reiterated its commitment to allot 55 acres to Tata Motors in various meetings held so far, the officials said the auto major would have to wait till a favourable environment is built in the hill state over the issue of land transfer to it.