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Anyone who’s been watching the news on Tata Motors (NYSE:TTM) is feeling pretty frustrated right now. I have the urge to wail every time I look at our loss on the stock. We’re sitting at 40% down, although, many of you may have hit your stop loss a while ago and sold out.

If not, you may want to sell your shares and buy back when TTM finds a bottom. But I’m in the stock for the long-term. And I think Tata can dig itself out of this hole.

What hole would that be? A grave dug by the less-than-above board (would that be "below board"?) government of West Bengal.

West Bengal, as a state, is a democracy the same way Sicily is. And unfortunately for us, one political party has decided the construction of Tata’s new car factory in Singur (a city of 20,000 people about 30 miles northwest of Kolkata) is the perfect opportunity to clean up the state’s corruption.

Whose Land Is It, Anyway?

Tata bought the property for its Singur factory, which is supposed to begin pumping out the company’s revolutionary (for its $2,260 pricetag) Nano automobile later this year, from the West Bengal government. It’s too bad the government didn’t actually own the land to begin with (or maybe it did - you can’t be too sure), and it did the Indian equivalent of declaring eminent domain on a bunch of poor farmers to get said land.

This is where you should be thinking, "Wait a minute. You can’t declare eminent domain on land you’re planning to sell to a private enterprise (unless it’s 1869, and the U.S. government really wants a transcontinental railroad.)." The same is true in India.

But this is where the plot thickens:  Property rights in West Bengal aren’t as clear as they are in the U.S. Some ideas of collective farming are leftover from India’s off-again, on-again dabbling in communism, and (take this with a grain of salt, it’s from Wikipedia) ownership is controlled not by deeds and leases, but by a contingent of politically connected "thugs" who dole out property like candy. So no one’s really confident about the actual legal ownership of the land Tata bought.

Politics Gets Ugly

And into this mishmash of land rights comes Mamata Bannerjee and her Trinamool Congress Party, who want to fight for the rights of the poor farmers (many of whom were quite happy with the government money they received for land that may or may not have been legally theirs).

Bannerjee, like other politicians in India, uses her followers as a weapon. Instead of going through legal channels, she orders protests that shut down major highways for weeks and trap Tata workers, terrified for their lives, inside the company’s factory for days on end.

The pro-factory side is just as volatile and possibly even less conscionable in its actions. After the state government fenced in the disputed property a couple of years ago, a few members of the political party opposing Bannerjee, who were guarding the property, were implicated in the rape and murder of a teenage protester.

So it’s all rather distasteful. Naturally, Tata wanted to continue in its current factory. But with neither side in the dispute willing to budge, the company, which could have brought much-needed income into the impoverished Singur economy, has decided to pull out of West Bengal altogether.

But a loss to West Bengal is a gain to another Indian state. Tata still plans to have the Nano on the market on time, meaning speedy (and very profitable) revamping of another of its six existing Indian factories.

Our Tata shares will see a rise when the company chooses a new site. But the real gains will come when the first Nanos go on sale, and again when Tata reports its first Nano profits.

Stock position: None.

Source: Tata Motors Makes Its Move Out of Singur