New Delhi: Once the world's largest mobile phone manufacturing plant, Nokia's Tamil Nadu factory will officially shutdowns its plant in the state on November 1.
Nokia's closure will be the first major wind up by a multinational after the Narendra Modi government took charge in May.
In September 2013, Nokia announced it would sell its devices and services (D&S) business, including assets in India, to Microsoft for $7.2 billion by March 2014. The deal was completed on April 25 but Chennai facility could not be transferred to Microsoft because of legal issues related to tax demand by Indian government.
Nokia started manufacturing in Chennai in January 2006 and exported to markets including in the Middle East and Africa, Asia, Australia and New Zealand from there.
Nokia has transferred most of its production work to its facility in Vietnam. As many as 5,700 of its 8,400 employees in the plant, 3,800 of them women, had been forced to take the voluntary retirement scheme (VRS) offered by the company. The company has also laid off indirect employees ranging about 10,000.
“Microsoft has informed Nokia that it will be terminating the manufacturing services defined in the agreement with effect from November 1, 2014. Hence, in the absence of further orders from Microsoft, Nokia will suspend handset production at the Sriperumbudur facility [near Chennai] from November 1,” Nokia in a statement said.
In March, the Tamil Nadu government served a Rs 2,400 crore notice on Nokia, saying the firm had also sold products from the Chennai plant in the domestic market instead of shipping them overseas.
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.
As a consequence, Nokia entered into a transitional services agreement with Microsoft to address their immediate production needs and keep the factory operational.
"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," the statement said.
Nokia 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.
Experts say the on its part the government can lift the freeze on Nokia's assets which may pave the way for other manufacturers to take over and possibly re-employ the people who lost their jobs.
(With Agency inputs)