The car parts plant on the outskirts of the Indian capital where chief executive Lalit Chaudhary was clubbed to death last week by a vengeful mob of dismissed workers is deserted these days.

The owners of Graziano Trasmissioni India, part of an Italian multinational, are still mulling whether to keep the plant open after 47-year-old Chaudhary was lynched by an iron-bar-wielding gang who chased him through the plant.

The brutal killing has triggered a flood of condemnation from Indian industry officials.

They also fear it could have repercussions on India's drive to lure foreign investment -- especially after the labour minister appeared to justify the attack, calling it a "warning for management" to treat workers with compassion.

"Nothing in the world that can justify lynching of any person and no dispute can be settled by murdering an adversary," said Rajeev Chandrasekhar, president of the Federation of Indian Chambers of Commerce and Industry.

The death of Chaudhary, victim of a long-running labour dispute over pay and other issues, has thrown an unwelcome spotlight on the difficulties of doing business in India as the still heavily agrarian nation transforms from farms to factories, industrial parks and enterprise zones.

The Italian embassy said threats to the plant "had been repeatedly brought to the attention of the competent Indian authorities" but nothing was done.

India already has enough investment horror stories without any more bad publicity.

Observers cite a slew of examples -- chiefly, the violent land row pitting farmers against Tata Motors that looks set to force the auto giant to pull out of West Bengal state, where it was due to roll out the world's cheapest car.

The events in West Bengal "will unleash fear and uncertainty in investors -- Indian or foreign," N.R Narayana Murthy, chairman of Infosys, India's second-biggest outsourcer, commented recently.

The row embroiling the Tata Group has sparked concern among Indian firms because the Tata Group is regarded as one of the country's most socially responsible due to its raft of social programmes.

Other mega projects around the country like South Korean steel giant Posco's 12-billion-dollar steel-and-power plant in eastern Orissa state have been stalled by a mix of land acquisition and environmental disputes.

And British-listed Vedanta Resources' proposal to mine bauxite to feed a 900-million-dollar aluminium refinery, also in Orissa, has come up against stiff opposition from tribals who say the company is building on sacred land.

There have also been deadly clashes over India's plans for Special Economic Zones, touted by the government as a way to woo foreign investors and spur economic growth and job creation.

"Indian society is passing through a revolutionary kind of situation where every section of the community is seeking to express their voice," said T.K. Bhaumik, economic advisor to Indian industry lobby Assocham.

"It's democracy to the boiling point," he said.

Still, India looks set to remain the world's second most preferred global location for foreign investment behind China, at least for the next couple of years, according to the latest UN World Investment Report, released last week.

Foreign direct investment (FDI) inflows will continue to be robust despite the global financial crisis expected to impact economies across the world, the report forecast.

India expects to draw 35 billion dollars in FDI in this financial year.

"Investors are attracted by India because of the spurt in economic growth -- averaging 8.8 percent in the last five years -- and the continuing strong growth prospects," while economic expansion globally slows sharply, said Deepak Lalwani, India director at London's Astaire & Partners.

"There is just this huge bottom line about India -- that high economic growth and a huge population equals huge markets," Lalwani said.

"Investors just have to choose carefully," he warned.

Indian protesters on Monday suspended a siege of a factory set to build the world's cheapest car, but the site stayed shut as Tata Motors demanded pledges it would be able to operate smoothly.

The decision by India's top vehicle maker came one day after the Marxist government in West Bengal state announced a deal to end violent demonstrations over farmland seized in order to build the Nano car factory.

The company said it would only move forward if "satisfied the viability of the project is not being impinged, the integral nature of the mother plant and our ancillary units are being maintained and all stakeholders are committed to develop a long-term congenial environment for smooth operations."

Tata Group chairman Ratan Tata warned last month he would abandon the plant unless his workers' safety could be assured, even though the company has poured 350 million dollars into the project.

The Nano, targeting millions of Indian first-time car buyers, is slated to retail at just 100,000 rupees or 2,264 dollars.

Protests against the Tata plant have been going on for two years, but they deteriorated in recent weeks, with demonstrators besieging the factory and threatening to kill workers.

Earlier, West Bengal's Trinamool Congress party, which has been spearheading the opposition to the plant, called the promise by the state government to return seized land "a big victory" for evicted farmers.

The pledge was given after three days of talks between the protesters and the government in state capital Kolkata. Tata was not part of the talks.

However, Tata sources insisted Monday no land from the factory site could be returned to the farmers as the car project was conceived on such a tight-costing basis.

The "integral nature of the mother plant and ancillary units is sacrosanct and must be recognised as such" before the plant can reopen, a senior company source who asked not to be named told AFP.

Any move to shift the ancillary units -- mainly automotive part vendors -- from the plant site to other areas would affect the tightly managed supply chain and drive up costs, the source added.

"We are not closing the window" on a settlement but "we are going ahead with Plan B" to roll out the Nano from other Tata plants, he said.

"We have a business to run -- this a project of national importance, the whole world is watching it."

The plant in Singur on the outskirts of Kolkata is 90 percent complete, and Tata Motors, part of the tea-to-steel Tata Group, has said it aims to launch the Nano in October, in time for the big-spending annual Hindu festival season.

All work on the factory was halted over a week ago when protesters barred workers from entering the plant.

Even though Tata was keeping the plant shut, people in Singur were optimistic it would be saved and praised the agreement between the state government and protesters.

"It's a new dawn," said plant worker Subal Manna.

The West Bengal government had wooed Tata Motors to set up the plant here, hoping it would lead the way for the state's industrial resurgence and create jobs.

Scrapping the plant would hit Tata Motors' finances, already under pressure from its 2.3-billion-dollar acquisition of British motoring icons Jaguar and Land Rover earlier this year, and from slowing domestic vehicle sales.

The dispute reflects a wider conflict between farmers and industry over land rights across the nation.

On one side are many farmers who say they will starve without their land, while business and government say India must industrialise to create jobs for its army of young people.

Talks to end violent protests over a factory in eastern India designed to manufacture the world's cheapest car entered a second day Saturday, with both sides expressing optimism.

The Marxist government of West Bengal state said it was hopeful of reaching a deal in the talks that began Friday with farmers and opposition parties.

"We are hopeful of a breakthrough," West Bengal industry minister Nirupam Sen said before entering the discussions.

The talks were chaired by state governor Gopalkrishna Gandhi, a grandson of Indian independence icon Mahatma Gandhi.

Sen's expression of optimism followed a statement late Friday by Partha Chatterjee, a leader of the Trinamool Congress party that has spearheaded the protests, that the two sides were "heading toward a solution."

The protesters claim farmers were forcibly evicted by the state government to make way for the car plant and are demanding a return of land.

"The government is offering a package that will help all farmers whose land was acquired," Sen said.

Tata Motors, India's largest vehicle maker which shot to international prominence when it bought British motoring icons Jaguar and Land Rover earlier this year, did not attend the talks.

Tata Group chairman Ratan Tata warned last month he would move the plant out of West Bengal if the demonstrations continued, even though Tata Motors has poured 350 million dollars into the project.

The plant in Singur is 90 percent complete, and Tata Motors has said it aims to launch the Nano in October.

Protests have been going on for two years against the plant. But demonstrations got uglier in the past few weeks, with protesters besieging the factory and threatening workers.

Tata Motors can produce the car at its other plants, but mass production could be set back by a year if it has to build a factory elsewhere, analysts said.

Protesters opposed to a factory being set up to manufacture the world's cheapest car in eastern India said Friday they were stepping up their blockade of the plant.

The new threat came a day after demonstrators prevented workers from Tata Motors, which is manufacturing the Nano car, from leaving the factory in Singur, 35 kilometres (20 miles) northwest of the eastern city of Kolkata.

"We will not allow anyone to enter Tata's plant on Friday," Becharam Manna, a member of the Save Farmland Committee.

The activist group says poor farmers were forcibly evicted to make way for the factory, and want the land returned.

Manna said protesters will surround the plant on Friday afternoon and lay siege on roads across the West Bengal state where the factory is located.

Police said they were ready to escort Tata Motors engineers and workers who were confined to the factory premises after work on Thursday evening for several hours.

Last week, Ratan Tata, chairman of the Tata conglomerate, warned he would move the factory out of the state if protests continued.

Tata Motors has invested 350 million dollars in the project to make the 2,500-dollar compact car, billed as the world's cheapest.

Activists have said they will only call off their often violent protests if the government returns 400 acres (160 hectares) taken from farmers.

The government acquired 997 acres for the project but activists insist the project needs only about 600 acres.

According to the state government, the factory is 85 percent complete. Tata Motors hopes to start selling the car in October.

Opposition leaders on Monday rejected a fresh offer of talks from the head of India's West Bengal state and vowed to continue protests against a plant where the world's cheapest car is being built.

The head of opposition Trinamool Congress Mamata Banerjee, who launched an "indefinite" protest Sunday at the Tata Motors plant, said no talks would take place until hundred of acres of factory land were returned to villagers.

"Unless the government returns the land to the farmers there is no question of opening a dialogue," Banerjee told reporters after receiving an invitation Monday to meet from West Bengal Chief Minister Buddhadeb Bhattacharjee.

"Our agitation will be intensified if the government does not consider our demand."

Bhattacharjee had expressed hope earlier Monday that the issue could be resolved.

"I've sent a letter to Mamata Banerjee asking her to end the protests and I hope we will be able to resolve the issue through talks," Bhattacharjee, whose Marxist government wooed the project, told reporters in the state capital.

The call for talks came after Ratan Tata, chairman of the conglomerate that owns the plant, warned he would move it out of the state if protests continued. His company has already invested 350 million dollars in the project.

But the opposition leader's response dimmed prospects that the siege at the Tata plant would quickly end.

Bhattacharjee has already rejected the protesters' demand that 400 acres (161 hectares) of factory land be given back to farmers from whom it was forcibly taken.

Demonstrators blocked roads near the factory at Singur, 35 kilometres (20 miles) northwest of Kolkata for a second day as riot police protected the factory premises.

Police estimated the number of protesters at 2,000, far below the 40,000 who turned out Sunday when the Trinamool Congress launched its demonstration against the factory constructing the 2,500-dollar Nano car.

The government acquired 997 acres of land for the project, but activists insist the project needs only about 600 acres.

The gates of the factory have been heavily fortified, with an October deadline for the first Nano car to roll off the assembly line appearing in jeopardy.

K.N. Kammkar, a police inspector on duty, said: "We are spending sleepless nights to guard the plant."

The Trinamool chief has proposed that low-lying land near the plant could be given to Tata for ancillary production units rather than using the farmers' fields.

India's Tata Motors threatened Friday to pull production of the Nano, the world's cheapest car, out of Marxist-ruled West Bengal state if violent protests continued against the plant.

"It is for the people of West Bengal and Kolkata to decide whether we are unwanted or to accept us as a good corporate citizen," Tata Group chairman Ratan Tata told reporters in the eastern state capital Kolkata.

If the protests do not end at the Singur plant, "we will very reluctantly need to move," Tata said following the Tata Motors annual meeting.

"The move will be at great cost to Tata Motors and to shareholders (but) there is a concern about our people, a definite concern about not being wanted," he said.

The company, India's top vehicle maker, has invested 350 million dollars in the project.

The Nano -- which Ratan Tata conceived with the aim of getting Indians off their motorcycles and into safer cars -- was unveiled with huge fanfare early this year at India's premier automobile show in New Dehi.

But since the sporty four-door, five-seater was shown to industry acclaim, its ride has been anything but smooth.

There have been frequent, often violent, protests by activists angered by the state government's acquisition of farmland for the project. There has also been strong political opposition.

The walls of the plant are plastered with warnings to workers to leave or "face the consequences."

"There is a sense of tension, violence and disruption (at Singur). Obviously, it is not a conducive atmosphere," Ratan Tata said.

Despite the unrest, Ratan Tata said the company hoped to have the Nano in showrooms by October -- its target launch -- or "close to October."

The plant is slated to initially produce 250,000 Nanos annually.

The Singur Land Protection Committee protesters said earlier the group was "not against industry" and wanted the factory.

But the group is angered at how the state government took land for the plant, and wants it to return 400 acres (161 hectares) of 997 acres seized from farmers who wanted to stay on their property.

Powerful West Bengal Trinamool Congress chief Mamata Banerjee, a fierce critic of the project, said she would not budge from her demand for the government to return the land.

Her party has threatened to cut off the plant's power and water supplies starting Sunday.

"We don't want anybody to move out of West Bengal, but at the same time, we will not bow to any kind of pressure," Banerjee said.

Leading business lobby the Confederation of Indian Industry warned if Tata was forced to abandon the plant it "could take the state back to an age of industrial vacuum."

"Industrialisation is critical for the development of social infrastructure as well as rural development," said the organisation's director-general Chandrajit Banerjee.

The West Bengal government is keen to draw investment to create job-generating industries in the poverty-hit state. But the shift from agriculture has stirred debate and demonstrations as many projects encroach on farmland.

Tata Motors has said it could have built the Nano plant in other parts of India with better infrastructure, but wanted to develop under-industrialised West Bengal "as our gift."

"We have not come to exploit the people of West Bengal," Ratan Tata said.

But "if anybody is under the impression that we have made this investment and will not move, they are wrong. It is not a hypocritical investment. Whatever be the cost, we will move out if the situation so demands."

Police on Friday fired teargas at farmers protesting the acquisition of land in eastern India for a Tata Motor plant to build the world's cheapest car, the Nano, officials said.

Some 200 farmers tried to block visiting Tata executives from entering the Nano plant in West Bengal state's Singhur district, police officials said.

Police inspector-general Raj Kanijia said police used teargas and beat back the farmers after they tried to demolish a factory wall.

"Villagers and policeman clashed outside the car factory and some six policemen and a number of villagers have been injured," Kanijia said in state capital Kolkata.

Officials from Tata Motors, which says it will sell the Nano for 2,500 dollars a unit, were not immediately available for comment.

Protests in Marxist-ruled West Bengal erupted after a local court in January approved the Tata group's plan to build the 10-billion-rupee (226 million dollar) plant on nearly 1,000 acres (400 hectares) of farmland in Singhur, located 50 kilometres (30 miles) north of Kolkata.

Some farmers have charged that the government took the land against their wishes, and that they had been paid half its market value.

Despite the protests, the company says it is going ahead with plans to roll out the jelly-bean shaped car off assembly lines later this year.

Tata has said the plant, which will have an initial annual production output of 250,000 units, rising later to 350,000, will create more than 10,000 jobs in the area.

Opponents say 1,200 sharecroppers and 300 agricultural labourers in five villages derived their living from the land.

Thirty-four people died in protests in Nandigram village in West Bengal last year as locals clashed with police and local government supporters over plans to acquire land for a low-tax Special Economic Zone.

India's truck and car-maker Tata Motors announced Monday it had completed its acquisition of Jaguar and Land Rover from ailing US carmaker Ford for 2.3 billion dollars in an all-cash transaction.

In a statement to the Mumbai stock exchange, it said the deal includes the "ownership of Jaguar and Land Rover, all necessary intellectual property rights, manufacturing plants and two Britain-based advanced designing centres."

Tata Motors had announced the deal earlier this year.

"Jaguar and Land Rover are two iconic brands with worldwide growth prospects. These brands will retain their distinctive identities," Ratan Tata, chairman of Tata Motors said in the statement.

"We plan to work closely to support the Jaguar-Land Rover team in building the success and preeminence of the two brands," he added.

David Smith, acting chief executive of Jaguar and Land Rover, will be the new chief executive, the statement said.

The Tata Motors chairman called it a "momentous time" for the Indian group, according to the Press Trust of India (PTI).

"Jaguar and Land Rover will retain their distinctive identities and continue to pursue their respective business plans as before," Tata said in the statement.

"We recognise the significant improvement in the performance of the two brands and look forward to this trend continuing in the coming years, Tata added.

Acting CEO Smith said the cash purchase spelt a "bright future" for stakeholders.

"We are very pleased with the association with Tata Motors and we look forward to a sustained bright future for the company and its stakeholders," Smith added, according to the PTI.

Long-term agreements have been forged for the supply of engines and other components to Jaguar-Land Rover.

The purchase, part of the Tata's bid to expand its reach beyond Asia, capped months of talks with Ford Motor Co., which is selling the brands to focus on turning around its North American operations after losing 15.3 billion dollars over the past two years.

Jaguar sales dropped more than 30 percent in the United States and Europe in the first two months of this year year-on-year while Land Rover sales slipped 13 percent in the US and close to eight percent in Europe in the same period, analysts say.

India's Tata Motors is also set to launch the world's cheapest car, Nano, at just 100,000 rupees (2,500 dollars) later this year.

The company says it will raise about 72 billion rupees (1.7 billion dollars) through three simultaneous but unlinked rights issues to finance its purchase of Jaguar and Land Rover.

Besides funding the Jaguar-Land Rover acquisition, Tata will also use the cash to partly finance its Nano project, the PTI quoted unnamed company sources as saying.

Tata Motors, part of the giant Tata Group, last year staged India's biggest foreign takeover when it bought Britain's top steelmaker Corus for 13.7 billion dollars but faced a tough task in financing the buy.

But analysts say that Tata Motors may be taking on too much debt.

The Indian company, whose long-term credit is already rated one notch below investment grade, is seeking to raise funds at a time when the US-led subprime crisis is making investors shun all but the safest debt.

Tata Motors has asked the automotive safety component maker Autoliv IFB India to develop a $10 air bag for its small car Nano. This will be the world's cheapest air bag, as those fitted in other small cars like the Zen Estilo start from $150.

Nano is likely to have two frontal air bags for the two high-end deluxe variants. The deluxe version will also have air-conditioning, music system and alloy wheels while the base variant will be a no-frill car.

While companies like Bosch has developed a special low-priced CRDi fuel system for Nano's diesel variant and Honeywell Turbo India has also made a similar miniature turbo-charger system for the small engine, Autoliv, a worldwide leader in automotive safety components, is understood to be working on the ultra-cheap air bags.

Nano's closet rival Maruti 800 does not have an air bag. According to market sources, each of the twin air bags in the Zen Estilo is priced around $150. Air bags are passive safety components in motorised vehicles which cushion the passenger during a frontal crash. They inflate within a fraction of a second to save passengers from any serious injury. International studies have reported that air bags reduce accident fatalities by 10%, when seat belts are worn.

A Tata Motors spokesperson said: "The company is under discussion with various suppliers for such equipment. The company has not taken any decision on air bags, and, therefore, there is nothing specific to Autoliv IFB India Ltd." An email message to Autoliv IFB India president V Raghu went unanswered.

According to sources in the automobile industry, Tata Motors had been looking for global standards for air bags and other safety equipment as Nano will be launched in overseas markets in future.

"Autoliv is the largest manufacturer of air bags with 28% market share in the world. Like other Nano suppliers, it can reinvent and minimise the manufacturing process and bring in innovative product design to meet stringent cost targets for Nano. It is banking on the large volumes envisaged for Nano. Keeping in view the global experience of Autoliv, Tata Motors has asked it to develop air bags that are compliant with worldwide safety standards," sources said. "The new air bags are expected to be much simpler than those fitted in expensive cars," he added.

India's Tata Motors said Wednesday it was buying British luxury icons Jaguar and Land Rover from ailing US carmaker Ford for 2.3 billion dollars as it vaulted into the premium global car market.

The cash purchase, part of plans by India's top vehicle maker to expand its reach beyond Asia, capped months of talks with Ford Motor Co., which is selling the prestige brands to focus on turning around its North American operations after losing 15.3 billion dollars over the past two years.

"We are very pleased at the prospect of Jaguar and Land Rover being a significant part of our automotive business," Tata group chairman Ratan Tata said, pledging to keep "intact" the emotive emblems of the once reigning British auto industry and "build on their heritage."

Tata Motors, part of the steel-to-outsourcing Tata Group empire, said the amount to be paid would be 2.3 billion dollars and added Ford would kick in up to 600 million dollars to the Jaguar and Land Rover pension plans.

"Jaguar and Land Rover are terrific brands. We are confident they are leaving our fold with the products, plan and team to continue to thrive under Tata's stewardship," said Ford chief executive Alan Mulally.

"Now it is time for Ford to concentrate on integrating the Ford brand globally as we implement our plan to create a strong Ford Motor Co. that delivers profitable growth for all," he added in a joint company statement.

Ford is getting less than half what it paid for the two marques after buying Jaguar in 1989 for 2.5 billion dollars and Land Rover in 2000 for 2.7 billion dollars. It has also pumped in millions of dollars to turn around the brands.

Jaguar is still unprofitable but Land Rover is showing progress, analysts say. Ford does not supply profit figures for the two brands.

"One of the main advantages they (Tata Motors) have got now is access to global markets," said Hormazd Sorabjee, editor of Autocar India.

The new purchase by the group, led by racing car enthusiast Ratan Tata, is another sign of corporate India spreading its global wings and comes a year after the conglomerate bought British steel giant Corus Group for 13.7 billion dollars, the biggest-ever acquisition by an Indian company.

The purchase "is once again a landmark in the march of Indian businesses... Kudos to Tatas for this leap ahead," said S.S. Mehta, director general of the Confederation of Indian Industry.

Ford will continue to supply Tata with engines and other parts and provide engineering support. Tata will make a big technological leap by gaining access to the sophisticated engines of Land Rover and Jaguar, analysts say.

Britain's Unite union joint general secretary Tony Woodley said he was "pleased" Tata was buying the brands and safeguarding 16,000 jobs.

The deal is expected to close by the end of the June quarter, subject to regulatory approvals, the companies said.

With the purchase, Tata Motors is in the unusual position of making the cheapest car in the world as well as some of the costliest, with the sleek Jaguar XK selling for around 80,000 dollars.

In January, Tata unveiled the no-frills Nano at a price of 2,500 dollars in a bid to revolutionise travel for millions in India and elsewhere.

Analysts have questioned how the Indian firm, which controls more than half of India's truck market and nearly 20 percent of its passenger car market, will absorb the high-end marques into its staid but pocket-friendly vehicle line-up.

The purchase of Jaguar and Land Rover also comes at a time when an economic downturn has put the squeeze on demand for prestige vehicles. Of late, tough global economic conditions have put sales of expensive cars into reverse.

"Both brands are already experiencing declining sales," said Aniket Mhatre, auto analyst at Mumbai brokerage Prabhudas Lilladher. "The US is going through a slowdown so sales (of luxury vehicles) are not going to be that good."

Some analysts also questioned whether luxury buyers are going to be keen on purchasing cars made by an Indian firm, saying it may devalue the prestige aura.

"There may be an image issue in the US," Global Insight associate director Neil King said from London.

Tata Motors plans to acquire the brands through a mix of existing cash reserves and new debt. It recently announced plans to raise up to one billion dollars to fund its domestic and global expansion.

It is reportedly planning to launch an additional three-billion-dollar syndicated loan, much of it bridge financing, to cover its working capital needs for the purchase.

Analysts have expressed concern the company may be taking on too much debt for the purchase. Tata, whose long-term credit is already rated one notch below investment grade, is seeking to raise funds in a tough global climate, with the US-led subprime crisis making investors shun all but the safest debt.