The Indian conglomerate Tata has snubbed Lord Mandelson, the business secretary, rejecting a £10m loan for a technical centre in the Midlands.

Mandelson announced the loan last month, saying that Britain was backing Tata’s research into electric cars. The money was awarded as part of his Automotive Assistance Programme (AAP), a scheme that was designed to help the car industry over the worst of the recession and foster investment in new technology.

Senior motor industry sources said that Tata, one of India’s biggest business empires and the owner in Britain of Jaguar Land Rover and Corus, the steelmaker, has in the past few days told the government that it doesn’t want the money. It has decided it can get better terms from commercial lenders, the sources said.

This year Tata and Mandelson were involved in tortuous negotiations over aid for Jaguar Land Rover. Tata, which bought the carmaker from Ford last year for £1.3 billion, asked the government for a £500m loan guarantee when vehicle sales slumped. After lengthy talks, Tata eventually decided not to accept a government offer, saying it could find better terms elsewhere.

Jaguar Land Rover is considering whether to close one of its three UK plants as part of a plan to cut costs.

The £10m government loan was designed to bolster a £25m investment by Tata Motors, the Indian group’s car-making subsidiary, in its European Technical Centre, which is based at the University of Warwick.

The money will be used to develop an electric version of one of its existing models. Tata declined to comment yesterday, while Mandelson’s Department for Business, Innovation and Skills said that the loan was still on offer.

The Warwick technical centre was set up in 2005 to develop technology to be used in Tata cars manufactured in India and give the group access to European automotive talent.

It is working on a European version of the Nano, the affordable so-called “people’s car”, which was introduced in India last year.

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