Ministers yesterday announced a £10m aid package for businesses in the West Midlands as an official report warned that thousands of jobs were threatened by the sale of Rover.
As the Government digested the dire warnings contained in the study, it emerged that a third bidder might be interested in buying the company.
It is thought that Tata, a £150bn Indian conglomerate with a motor industry subsidiary, has signed a confidential agreement with BMW giving it access to the company's financial records.
Telco, the group's automotive offshoot, could be interested in mass-producing the Indica small car at the plant, it is believed. The Italian-designed Indica is the third-highest volume car in the subcontinent and executives believe an upgraded version might sell at the "cheap and cheerful" end of the UK market.
An Indian diplomatic source confirmed that the Tata empire, based at Jamshedpur, had been looking towards expanding in the European Union. Following liberalisation of the commercial sector in India it had acquired businesses overseas, including the Tetley tea group in the UK. Senior management at the Indian conglomerate are known to have been impressed by the rapid inroads made in Britain by Hyundai, the Korean car company.
The news of Tata's interest came as John Towers, a former Rover executive, put his own proposals for the Longbridge plant to Professor Werner Samann of BMW, present owners of the British business.
Mr Towers has asked for more time to draw up a bid for the site on behalf of the Phoenix consortium, which is made up of Midlands businessmen.
The Towers plan has won the support of union leaders at the plant because it involves the retention of mass production and would only lead to between 1,000 and 2,000 job losses.
Hundreds of Rover workers and their supporters staged a rally at Longbridge yesterday to show their support for Phoenix.
Meanwhile, representatives of Alchemy, BMW's preferred bidder, expressed confidence that it would sign a deal to buy Rover, either tomorrow or at the weekend. Alchemy envisages producing MG-badged cars in limited production runs.
A Government taskforce warned in its report that a cutback in output at the giant Longbridge plant near Birmingham could mean the loss of 11,000 jobs, but that a complete shutdown of the works could lead to more than 20,000 redundancies in the area.
The report said the complex was a "linchpin" for the economy of the region supporting an estimated 55,000 jobs, 8 per cent of all manufacturing employment in the region.
The taskforce asked for a short-term injection of £27.5m and put forward an action plan, including help to diversify the local workforce and local suppliers, tackle unemployment and the social consequences of job losses and regenerate the car firm's sites.
The Trade and Industry Secretary, Stephen Byers, said the report stressed the underlying strengths of the economy in the West Midlands.
Mr Byers acknowledged that BMW was now close to striking a deal with Alchemy, but urged the German firm to listen to Mr Towers' offer.
He said: "Even at this late hour BMW should act with fairness towards the Phoenix bid and they should give detailed consideration to John Towers' proposals."