GANESH Dhank is busy bundling his sisal crop and laying it in a pond to loosen the fibres, and ignoring the marches, the singing and the slogans. Stripped to the waist, his head wrapped in faded, pink-checked fabric, he has long ceased paying too much attention to the siege of Tata Group's plant for it new Nano car, which is entering its 12th day.


"The thing is," he says, waving his gnarled hand towards the hulking new grey and blue factory building across the road, and flashing a toothless smile, "that part of the land was really not that fertile. It was four-feet lower than the land level elsewhere, and once in five to six years, if the monsoon was really good, you could get some plantation going there."

Shobal Mandal, a farmer who is working with Dhank, disagrees, shouting that the land used to produce three good crops a year. And over at the stage, Dinesh Trivedi, a former member of parliament for Trinamool Congress, the opposition party leading the protests, says the land actually yielded five crops.

"The yield per acre here was the highest for rice, not just in India, but for the world," he says solemnly.

The facts have long ago been lost in the protests against compulsory land acquisition for the plant in the village of Singur, led by Trinamool's rabble-rousing leader Mamata Banerjee.

The protest has engulfed Tata's plans and risks undermining India's place in the global economy. Tata was forced to suspend production and talks to resolve the situation were continuing yesterday, but no one is underestimating the seriousness of this latest clash between a local community and India's industrial expansion.

At stake is Tata chairman Ratan Tata's dream of producing his new people's car at 100,000 rupees (about £1,300), planned for October, plus the £190m Tata is thought to have invested in the plant.

The strike also threatens India's emerging reputation as an industrial as well as an IT economy: more even than Tata's acquisition of Jaguar and Land Rover, the car has become an icon of India's industrialisation, catching the world's imagination with its unconventional, low-cost engineering. But on Thursday, Banerjee showed little concern for any of this. "We are not interested in Nano or Fano or Jano," she said abruptly. "This is not our business."

Trinamool, which means 'grass roots', is demanding that the Tatas and the West Bengal government hands back 400 acres of the 1,000 acres of land cordoned off for the factory, or at least provide alternative land to farmers. It has offered to help Tata Motors buy less fertile land on the other side of the road, where its suppliers can set up their factories. Mamata has suggested she might accept a solution where the farmers are given equivalent land nearby.

Last Tuesday, Tata brought the crisis to a crunch, announcing that it had suspended construction and commissioning work at the plant and revealing that a "detailed plan to relocate the plant and machinery to an alternate site is under preparation".

The move has succeeded in turning many educated Bengalis against Banerjee, sparking protests by the IT industry, and complaints from Singur inhabitants who had been given jobs at the plant. But Banerjee is still adamant: "We are not going to compromise with the Tatas because of their money, and we are not going to bow our heads to the government."

Dr Saugat Mukherjee, regional director for the Confederation of Indian Industry in Kolkata, says: "The people of West Bengal really need this project. This project is very critical, not only for the state but for the entire country."

For Banerjee, Singur is part of the long battle she has waged against the Communist Party's 32-year rule in West Bengal since setting up Trinamool in 1997, focused on winning votes in the Communists' agricultural heartland.

Rabble-rousing politicians are seeing the same opportunities elsewhere. On the same day Tata said it was considering leaving Singur, thousands of protestors descended on the site of the steel plant planned by Korean steel giant Posco in the state of Orissa.

A strike is planned for this Wednesday in protest against both Posco's plant and an aluminium mine planned by London-listed mining company Vedanta in the Niyamgiri hills. In fertile West Bengal, which with 900 people per square kilometre, has the highest population density in India, the competition between industry and farmers for land is even more intense. Plans for a 10,000-acre chemicals hub in the Nandigram region were abandoned last year by Indonesia's Salim Group after clashes between armed police and activists affiliated to Trinamool left 14 dead.

But Tata Motors' has not always managed Singur well. Jindal Steel secured land rights for its Salboni steel plant, also in West Bengal, partly by offering farmers unwilling to sell their land shares in the project. Back in 2006, Tata did little to build bridges with the 2,251 of Singur's 13,050 farmers who rejected their compensation cheques.

And then when Ratan Tata unveiled the Nano at the Delhi auto show in January, he joked wryly that it came "despite Mamata" – something Trinamool took as a taunt.

Even now, Tata Motors management has remained distant. Ratan Tata, attending an automotive conference in Delhi, said on Thursday that the resolution of the crisis was in the hands of Bengal's politicians, not his company. The Tatas have refused to send a representative to take part in crisis talks, despite an invitation from West Bengal governor Gopalkrishna Gandhi.

Tata Motors has been firm in its refusal to alter its landholding, arguing that shifting the companies supplying the Nano's parts, who were to set up on about 300 acres near the plant, would add too much to the cost of the car.

If Tata does abandon the plant, it won't be the first time. Back in the 1990s, Tata was forced by protestors to drop plans for two plants, one for steel and one for aluminium in the nearby state of Orissa after protests.

Even today, the steel plant Tata Steel began work on last month at Kalinga Naga in Orissa faces considerable opposition form displaced tribal villagers, and its planned port at Dhamra in Orissa has come under attack from environmentalists.

International car-makers, such as Volkswagen, Ford, General Motors, Hyundai and Nissan, have so far got away with building car plants in India without much protest. But with more than twice the population density of China, the competing demands for land from agriculture and infrastructure will only intensify as India industrialises.