Nokia Cuts Chennai Plant Production By Half: Might Shift To Vietnam Facility

Finnish mobile phone manufacturer Nokia has reportedly cut production by half at its only Indian manufacturing plant near Chennai, according to a latest report by CNBC Awaaz. Also, it has been reportedly informed that production will be further reduced to a fourth in the coming months.

The move is connected to a letter that the Lumia series creator wrote to the Finance minister, informing him of its intentions to move its manufacturing operations to a newly opened facility in Vietnam since it wasn't receiving certain tax benefits that it had been promised.

In response, Nokia has denied all these claims and maintains that the Chennai plant happens to be "an integral part of its global manufacturing strategy", according to BGR India.

However, the report goes on to claim that production will slashed to to about 80 million units in 2013-2014 from the current number of around 150 million units, before further reducing to about 40 million units in 2014-2015.

In the letter, the company complained about how it wasn't receiving the tax benefits that it was promised for having set up a manufacturing plant in an SEZ. It added that importing phones from an alternate location made more financial sense than manufacturing them withing the country.

The Chennai plant currently employs close to 9000 people and these new production cuts could impact about 2000 of those jobs in an adverse manner. It has been around since 2006 and the company has invested close to $330 million (2082 crore Rupees) into it. Nokia manufactures a wide range of feature phones and its popular touch-based Asha Range at the manufacturing unit. Handsets produced here also make their way to other markets in Asia, Africa and even the Middle East.

Following a raid by Income Tax authorities at the factory earlier this year, the company had been asked to pay a hefty fine of 13,000 crore for tax evasion. Authorities claimed that Nokia India had made tax evasions by paying royalties for software transfers to its parent company, Nokia Oyj in Finland.In response, the company filed a complaint against the authorities.