INDIA'S TATA Motors yesterday said it was withdrawing its low-cost Nano car project from the state of West Bengal after more than a month of violent protests by local farmers brought construction to a halt.

The decision by Ratan Tata - one of India's most respected industrialists - to relocate the $350 million factory for its "people's car" comes as the factory was nearing completion.

The company had set a late October deadline for rolling out what is intended to be the world's cheapest car.

The pullout - which followed weeks of negotiations between Tata, West Bengal's government and its opposition leader Mamata Banerjee - highlights the severe difficulties companies face in acquiring land for industrial development in densely populated India.

Farmers claimed they were forced to give up land for the car factory with insufficient compensation, and their protests were stoked and encouraged by Ms Banerjee, seeking to build her political base for her challenge to the state's communist authorities.

"It is an extremely painful decision - a decision that shatters many dreams that many of us had and a great disappointment to the people who have worked on the project on the ground," said Mr Tata. "But there is also a feeling that we are doing the right thing . . . there is no other option.

"We have faced enormous disruption and assaults and intimidation to some of our people."

The tiny Nano, which is intended to make cars affordable to working-class Indians, is supposed to be the world's cheapest car, initially priced at Rs100,000 ($2,100).

- (Financial Times service)