Nokia, once the market leader of mobile phones in India is now shutting down its only operational plant here. The plant was earlier manufacturing handsets for Microsoft which currently is the parent company.
Microsoft has informed Nokia that it will be terminating its order for handset production with effect from 1st November, 2014. The company said that without further orders, the manufacturing process has stagnated and there are plans to suspend the plant. In 2013, Nokia announced that it would sell its device and services division including the plant in India to Microsoft for 7.2 Billion dollars with the hand-off by March 2014. The plant couldn’t be transferred to Microsoft owing to tax disputes. In March, Nokia was served a Rs. 2,400 crore notice from the Tamil Nadu government for products made at the Chennai plant which were sold in India instead of shipping them overseas. In a separate tax case, the Supreme Court had ordered Nokia India to give a Rs. 3,500 crore guarantee before it transferred the plant to Microsoft.
The deal was completed by April 2014 but the tax dispute resulted in an asset freeze on the Chennai Plant. The Income Tax department froze the plant over Rs. 21,000 crore charge over royalty paid to the parent company in Finland.
In response to the suspension of the plant, Nokia said – “Unfortunately, the continuing asset freeze imposed by the tax department prevents Nokia from exploring potential opportunities for the transfer of the factory to a successor to support the long term viability of the established, fully functional electronics manufacturing ecosystem.”
At the time of deal with Microsoft, Nokia had 6000 employees at the Sriperumbudur plant, after which around 5000 employees opted for Voluntary Retirement (VRS). “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.