The Tamil Nadu government on Sunday asked the Centre to lift the asset-freeze on the now-defunct Nokia facility near Chennai in order to facilitate other handset makers who are willing to buy the unit, touted to be once the Finnish cell major’s largest production unit outside its home turf.
Nokia suspended operations at its Chennai plant with effect from November 1, 2014 since it could not garner enough orders from Microsoft under a contract agreement. Transfer of the plant to Microsoft did not happen as it was freezed by Income Tax Department in an alleged R21,000 crore tax notice.
Conceding in public, probably for the first time, that the closure of Nokia plant had sent out wrong signals, the state government suggested appropriate policy corrections in income tax and other duty structures in order to make ‘Make in India’ campaign meaningful.
Speaking at the maiden NITI Aayog meeting in New Delhi on Sunday, Tamil Nadu chief minister O Panneerselvam said: “I would like to highlight the factors that are affecting the investment climate in Tamil Nadu. Retrospective amendments to the Income Tax Act in 2012 with effect from 1976 and levy of a huge penalty on the mobile handset manufacturing plant located in Tamil Nadu resulted in the closure of the unit. Other handset manufacturers are willing to step in to open the unit and this has to be facilitated by lifting the asset-freeze imposed by the income tax authorities.”
Though the chief minister did not name Nokia in his speech, the impact of closure of Nokia plant and the subsequent shutting down of Taiwanese electronics parts maker Foxconn’s unit which was heavily dependent on supplies to the handset maker, had been hotly debated among official circles.
Sources said that the issue had been weighing heavily on the government, especially because its first Global Investors Meet is slated for May this year, and the government’s seeking of lifting of Nokia Chennai’s asset freeze was in line with the well thought out strategy not to have negative publicity while gearing up for the event.
Panneerselvam also said that the domestic electronic manufacturing was at a tremendous disadvantage due to the inverted duty structure wherein the finished product can be imported duty-free under ITA Agreement of 1998, while components are levied duty. “Already 65% of the domestic demand is met by imports and Indian electronics import bill is projected to exceed the oil import by 2020,” he pointed out.