KOLKATA, India (AFP) - - Tata Motors can go ahead with making the world's cheapest car at a factory in eastern India after talks yielded a compromise ending violent protests against the plant, officials said Sunday.

West Bengal state's opposition Trinamool Congress party, which has been spearheading opposition to the plant, said it had reached a deal with the state government that would see some of the land for the nearly-complete factory returned to displaced farmers.

Other farmers in the Singur area near Kolkata, the site of the factory set to mass produce the low-budget "Nano" car, would be given compensation -- addressing their complaints that they were forcibly evicted -- officials said.

"It's a big victory of farmers in Singur," said opposition leader Mamata Banerjee.

The plant in Singur is 90 percent complete, and Tata Motors -- India's largest vehicle maker -- has said it aims to launch the Nano in October, in time for the big-spending annual Hindu festival season.

But Tata Group chairman Ratan Tata warned a week ago 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.

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

Protests against the plant have been going on for two years, but have worsened in the past few weeks with demonstrators besieging the factory and threatening to kill workers.

West Bengal's Marxist state government had energetically wooed Tata Motors, part of the tea-to-steel Tata Group, to set up the plant. It is hoping the factory could lead the way for the state's industrial resurgence and create new jobs.

The state's federally-appointed governor Gopalkrishna Gandhi -- a grandson of Indian independence icon Mahatma Gandhi -- eventually had to be called in to mediate to end the dispute.

"The government has taken the decision to respond to the demands of those farmers who have not received compensation," Gandhi told reporters at the press conference.

"The government will try to give back maximum land within the project area, and the rest in adjacent area as soon as possible," he said, adding the modalities of returning some of the land would be worked out over the next week.

Tata Motors, which did not take part in the talks, could not immediately be reached for comment.

The company unveiled the Nano at the Delhi Motor Show earlier this year, promising to revolutionise the way Indians get around by getting people off dangerous motorcycles and into cars.

But the project has been beset by problems -- ranging from the land protests and rising raw material costs to slowing consumer demand.

Analysts say Tata Motors is unlikely to be able to sell the car at its promised 100,000 rupee (roughly 2,500 dollars) price point for longer than a brief promotional period once it reaches showrooms.

The dispute over the factory also reflects a wider stand-off between Indian farmers and big business across the nation.

On one side are many farmers who say they will starve without their land, while industry giants and the government say India must industrialise swiftly to create jobs for the army of young people joining the work force.

Business leaders have warned the factory row could hurt India's image as an emerging economic superpower and viable investment destination.

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