Finnish handset maker Nokia will not manufacture its recently launched Nokia X phone at its Chennai plant, which has become the focal point of a Rs.21,000-crore tax dispute, according to people with direct knowledge of the matter.
The phone, which has been widely touted as a game-changer for the company, will be imported from China. Nokia is currently struggling to transfer its plant and other assets to software giant Microsoft before the acquisition is closed.
According to sources, the decision to make the Nokia X in China could have come because rolling it out from India would require more investment at the Chennai plant. Also, with Nokia’s new plant having come up recently in Vietnam, a certain amount of redistribution and balancing in the company’s capacity is taking place.Tax dispute
The Income Tax Department, had, last year, put a freeze on Nokia India’s assets as part of a tax dispute. While the freeze was revoked by the Delhi High Court, additional conditions were imposed on Nokia, which refused to accept them.
Last week, the Supreme Court dismissed Nokia’s appeal, in a decision that implies that the Chennai plant cannot be transferred to Microsoft till the tax dispute is resolved.
Meanwhile, top officials of Nokia India have been meeting union leaders at the Chennai plant to hear and discuss the apprehensions of the local employees.
Several union leaders have alleged that Nokia is reducing the level of production at the Chennai plant. This, however, could not be independently confirmed. Nokia officials did not comment on the charges of reduced production.
According to people with knowledge of the matter, discussions are still ongoing between Nokia India management, the company’s Finland headquarters and Microsoft as to what should be the next course of action. The union may also look to secure the help of the State Government.
The Chennai plant, which was started in 2006, currently employs around 8,000 people and is a crucial part of Nokia’s India assets. A number of indirect employees also depend on the factory.