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Nokia Going To ‘Un-Make In India’

By Oct. 8, 2014
Nokia Oyj Nokia Plant in Chennai

Chennai: Nokia Oyj, the Finland based multi-national corporate, is reported to suspend its mobile handset production unit at its troubled Chennai facility from 1st November given that the company has yet to resolve a tax dispute with the Indian government.

Nokia sold its mobile phone business to Microsoft in April, but it was forced to leave the Indian factory out of the deal due to the tax dispute with Indian authorities. It continued to operate the factory as a contract manufacturing unit for Microsoft.

Microsoft continued sourcing handsets – mainly the popular Asha series devices – from the factory on a contract basis, but with its recent decision to cull the Asha series, has now decided to end the agreement.

“Microsoft has informed Nokia that it will be terminating the manufacturing services defined in the agreement with effect from 1st of November. In absence of further orders from Microsoft, Nokia Oyj will suspend handset production at the Sriperumbudur facility,” Nokia said in a statement to Reuters on Tuesday.

Over the past ten months only 10 lakh phones were only manufactured on their chennai plant which has a production capacity of over 1.3 crores. The plant had an employee strength of 8000 including 6600 permanent staff employees were cut short to around 850 by now. In April this year Nokia introduced a voluntary retirement scheme at the factory after a review in which it considered the “predictability and stability of the regulatory environment” in countries where it operates.

The Finnish based multinational telecom brand Nokia Oyj had a grand entry in to the Indian arena with setting up their biggest plant around the globe for manufacturing handsets. In 2005 an agreement was signed between Nokia India and Tamilnadu goverment lead by the DMK to set up an Industrial unit at sriperumbudur and was supported by then ruling UPA government at the center.

Tamilnadu government provided lot of concessions and offers to the Finnish mobile giant for starting its unit in chennai expecting a major economical growth and employment opportunities in the sector. Nokia was provided with 200 acres of SEZ site by SIPCOT, the industrial investment agency of Tamilnadu government, on lease for a period of 99 years. The lease was agreed on a mere Rs. 4.5 lacs per acre. The usual condition for paying 4% of the total cost towards land registration was also removed for the company.

The government offered facilities like uninterrupted power and water supplies to the plant. They were exempted from several types of taxes for a term up to 10 years, which comes to cease by next year. Since its inception the unit had a turnover above 1,50,000 crores. The agreement was to export the manufactured handset to overseas and restricted the direct sale of these handsets in the domestic market.

Last year the commercial taxes department alleged that devices made in Chennai plant were not exported and were instead sold domestically in India. The company was assessed with a tax due of Rs.2400 crores towards this. But the company rejected this claim by the taxes department and filed a writ against the tax claim by the tamilnadu state government. In a separate tax case, the Supreme Court had ordered Nokia India on March 14 to give a Rs 3,500 crore guarantee before it transfers the plant to Microsoft.

Nokia Oyj said that it will be informing all stakeholders including the Labour Commissioner of the suspension. “As a responsible employer, Nokia is currently evaluating options to minimize the impact on existing employees at the manufacturing facility. It will share further information once details have been finalized,” Nokia said.

‘Following the crisis, around 20000 employees had to go jobless at the electronic manufacturing units in sriperumbudur’, states Mr. Soundar Rajan, CITU leader and honorary president of Nokia India Employees Union. Many companies like Flextronics, Litton, Sanmina, Foxconn India were manufacturing accessories for the Nokia handsets and have started to dismiss their employees in massive numbers. Mr. Soundara Rajan says that around 15000 employees have gone jobless in recent crisis.

Earlier in June this year, Nokia Oyj announced that over 5,000 of the factory employees had agreed to opt for a voluntary retirement scheme (VRS) introduced by the company a month ago. At present, about 1,100 employees, including 851 operators, have been left jobless. According to the company’s statement, Nokia is currently evaluating options to minimize the impact on existing employees at the manufacturing facility.

These employees who have joined Nokia at their younger age of 19-20 years are diminished hopes for getting another job as their current job profile in the assembling units does not provide any skills specific to manufacturing industry. They are now left to realize that the beautiful springs in their life are going to set forever.

The current developments seems to be a major setback to the ambitious ‘Make In India’ campaign launched by the Prime Minister Narendra Modi in last month. The global manufacturers were attracted by Modiji’s pledge during the campaign to end what is called “tax terrorism.” While his Digital India is attracting global attention and accolades, “Make in India” has a long way to go with these kind of policy issues leaving behind bitter memories.

Article: Nokia Going to ‘Un-Make In India’

 

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