It said the project's partners, who had started work at their respective plants at the site, had also suspended work.

Chairman Ratan Tata said last month he was prepared to move the plant from West Bengal state despite having invested $350 million in the project because of the risks to employees from the protests.

The Nano project has been billed as key to the rejuvenation of industries in West Bengal, where the world's longest-serving democratically elected Communist government has changed tack after decades of focus on helping agriculture and poor farmers.

The state government urged the Trinamool Congress to work together to retain the Nano plant in the state.

"It is very unfortunate. It is a very sad day," said Nirupam Sen, West Bengal industry minister. "I could never imagine the opposition would be so irresponsible."

The unveiling in January of the snub-nosed Nano was hailed by the state's ruling Communists, but protests have since gathered steam.

Trouble began after the government took over 1,000 acresof farmland for the factory. The government offered compensation, but some farmers with smaller land holdings have refused compensation, demanding that land be given back to them.

The disputed land measures about 400 acres.

The Trinamool has come under pressure to find a way out of the stand-off after industry lobbies and analysts warned the protests could scare away investors.

"I think this could create pressure on those opposing the project," said Abhirup Sarkar, a Kolkata-based economist and social commentator.

Eager to resolve an issue threatening its industry-friendly image, the state government has offered to discuss fresh compensation packages.