End of an eco system: Nokia hangs up on India

It will be a sad day for the telecom industry, Dayanidhi Maran on Nokia plant shutdown
End of an eco system: Nokia hangs up on India
End of an eco system: Nokia hangs up on India
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Sameera Ahmed| The News Minute| October 9, 2014| 2.20 pm IST

Once, the world’s largest producer of mobile phones, the Nokia plant at Sriperambudur near Chennai will be stopping production on 1 November, affecting the jobs of over 800 employees, following countless lay-offs over the years. 

Nokia which was bought by Microsoft has been courting income tax cases with both the State Tamil Nadu and the Central Income Tax departments over alleged Income Tax fraud. While the TN government gave Nokia India a Rs 2,400 crore commercial tax notice on sale of Nokia products sold domestically instead of overseas, the Rs 21,000 crore tax dispute with the Centre disallowed the plant’s inclusion in the deal between Microsoft and Nokia during its USD 7.5 billion deal buy over.

Bid for the plant’s location was won by Tamil Nadu after joint-efforts from then Minister for Information and Technology Dayanidhi Maran as well as the AIADMK-led Tamil Nadu government. On the plant shutting down, Maran who was instrumental in its setup told The News Minute that it was a sad day for the telecom manufacturing in India, “No one believed me in 2005 when I told them that Nokia will establish manufacturing facility in Chennai but the truth is that it was the most successful and profitable plant for Nokia in the world.”

With the stop in productions resulting in loss of around 900 jobs at the plant, he said, “ It is very unfortunate that a success story in telecom manufacturing in India has to end this way.”

Not even a month after the launch of Prime Minister Narendra Modi’s Make in India venture urging Indian entrepreneurs to transform the country into a manufacturing hub, the Nokia plant in Chennai has brought down production to two million units and gradually moved operations to its Vietnam plant which currently producing about eight to ten million phones by now, said a BusinessToday report. 

"We will certainly see how best (such) matter don't occur again and we will encourage 'Make In India' campaign," Commerce and Industry Minister Nirmala Sitharaman .

A Soundararajan, general secretary of the Centre of Indian Trade Unions (CITU) who spoke to TNM said that it is illegal that the company was shutting down. “It is cheating the employees. Nokia should run the factory,” said Soundararajan on the issue.

Nokia in a statement has said, "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.”

Image source: Nokiarevolution.com

In 2013, the Finnish-based Nokia group offered to pay the government Rs 2,000 crore of the total Rs 21,000 crore that it owed the government in the income tax case for import of software made under the label of ‘purchase transactions’ instead of royalty payments which would have included tax.

While some international tax experts believe that Nokia was not erroneous according to reports, the question arises whether the Nokia could have skirted shutdown of operations via part payment of the income tax to be paid. Nokia in a statement also said that due to the assets freeze after the income tax dispute it was unable to seek other opportunities to allow the factory set up in Sriperumbudur to other use.

In March this year, around 5000 of the total 6,600 employees at the plant opted for the Voluntary Retirement Scheme (VRS) option offered by the company. While at its peak, the plant had over 8000 employees, half of whom were women, producing about 15 million phones. The company even initiated a Global Bridge Programme for employees who opted for the VRS to be trained in diverse skills to allow for better employment opportunities elsewhere.

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