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Nokia wants early permission to sell off its Chennai plant

October 14, 2014 17:26 IST

Finnish mobile manufacturer Nokia wants early permission to sell off its plant in Chennai and put the money from the deal in escrow account till the time its tax dispute with Indian government is resolved.

"We have said that if we are allowed to sell the factory, any money we get from the sale, we would put it in the escrow account. It won't be ours. We would put it in a place until the tax dispute is resolved," Barry French, Executive Vice President, Marketing, Communications and Corporate Affairs, Nokia, told PTI in an interview.

In first comments by a top executive after Nokia's last week's decision to suspend operations at its mobile manufacturing unit near Chennai, French expressed concern over the status of the plant and its declining value.

"What is particularly crazy is that the value of the facility is going down literally every day," he said. "It would be in the interest of everybody that we get what value we can get from the amount," he added.

Nokia has announced suspension of operations at Chennai plant, once the biggest facility of the company anywhere in the world, from November 1 which has thrown into uncertainty the future of about 1,100 employees currently working there. "We will be happy to put the money into escrow and try to find a buyer to get the jobs back. It is heartbreaking," French said.

The Helsinki-based company was forced to keep the factory out of a  $7.5 billion deal for sale of its handset business to Microsoft Corp, due to tax dispute with Indian authorities.

Tax authorities allege that Nokia avoided paying taxes by wrongfully claiming an exemption on software exports. Nokia has challenged the claims of tax department in courts.

In March, the Tamil Nadu government served a Rs 2,400 crore or Rs 24 billion 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 or Rs 35 billion guarantee before it transfers the plant to Microsoft.

"At a time when 60 per cent of the mobiles in the Indian market is imported, it was a pity that the absolutely world class and cost-effective Nokia unit in Tamil Nadu will be shut down," French said.

The Chennai plant has been frozen by tax department and the company could not transfer the facility to Microsoft. "It is an important issue for us because it is still a property owned by Nokia and we wish it wasn't owned by Nokia.

We would have liked to transfer it (the factory) to Microsoft as part of their purchase of our devices business.

"We believe that would have been the best outcome for everybody and it would have kept everybody happy and work going on there. We were not able to transfer that asset to Microsoft because it was frozen as part of the tax dispute," he said. French said they tried to make the case with pretty much with anybody who would listen to them that they would like to sell that facility before it was too late.

"There is a great ecosystem of suppliers and so on. It just seems like a such a travesty to let it (the mobile unit factory) go waste particularly when the new Indian government has initiated the Make in India policy," he said.

"I do believe that there would be companies out there who would be interested in the facility and as a way to tap into the Indian devices market," he added.

Anil K Joseph in Helsinki
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