DeitY Recommends Steps in Budget to Revive Nokia Chennai Plant

In a bid to improve investor sentiment, the electronics department has suggested to Finance Minister Arun Jaitley that some measures be taken to revive the Nokia plant in Chennai.

The Department of Electronics and IT (DeitY) in its proposals for the forthcoming Budget has suggested that it is "highly desirable" that the mobile handset manufacturing activity at the Nokia plant at Sriperumbudur, Tamil Nadu be revived at the earliest "through a mutually agreed course action", sources said.

The commerce and industry ministry too wants revival of the plant.

DeitY has argued that such a move would send "positive signals to the domestic and global industry".

From November 1, Finnish telecom major Nokia had suspended mobile handset production at the Sriperumbudur plant. The company, over time, ran into trouble with tax authorities and legal tangles.

As per a report of Indian Cellular Association, mobile phone exports are expected to fall to zero in 2015 from Rs. 2,450 crores estimated in 2014, mainly due to suspension of handset production at Nokia's Chennai plant.

Exports of mobile phones have been declining after touching a peak of Rs. 12,000 crores in 2012. Exports crashed by over 70 percent to Rs. 2,450 crores from Rs. 11,850 crores in 2013.

(Also See: India's Mobile Data Traffic Rose 74 Percent in 2014: Nokia Networks)

Nokia began its operations at plant near Chennai, the second biggest facilities by any global firm, in 2006 after Korean auto major Hyundai's came up with its plant in the late 1990s.

The plant directly employed 8,000 people of which 60 percent comprised of women, and another 25,000 were jobs were associated indirectly with the firm when the facility was operating in full swing.

The facility was Nokia's largest plant in the world and producing some of the basic GSM handsets and was serving the local market, besides exports.

However, its decision to sell off the handset business to Microsoft in a $7.5-billion deal last year forced to keep the factory out of the agreement due to tax dispute with Indian authorities.

The Nokia-Microsoft deal was completed (LINK) on April 25, 2014, but the Chennai facility could not be transferred to Microsoft due to legal issues related to tax demand by the Indian government.