Government mulls escrow account for Nokia plant sale

The government is looking at creating an escrow account to facilitate the sale of Nokia's mobile handset facility at Sri Perumbudur in Chennai at the earliest and wants to plug any further losses, both financially and in terms of its reputation as a manufacturing hub, said a senior government official, who did not want to be named.

"(Right now), there is no specific plan (for the revival of the Nokia plant) but we are exploring different possibilities. It can't wait till the case is determined. Party (Finnish telecom major Nokia) is not interested. If they are not interested then someone else can take up the facility at whatever is the fair value. The disputed value can be put in an escrow account and sale of the plant can happen," he said.

Nokia's Indian plant, which is one of the largest in the world, was shut down late last year due to its ongoing tax tussle with the state and the central government on retrospective taxation and asset freeze. The closure of Nokia plant was also reflected in November's consumer durable output which slipped 14.5% during the month when telephone equipment, including mobile phones and accessories, output saw a sharp drop of 67.3%.

The government official said even though, at present, there was no interested buyer, the escrow account could be set up with the permission of all stakeholders; "We are exploring this at this stage".
India's mobile phone production has slumped over 60% to 58 million last year from 130 million in 2013, largely due to the shutdown of the Finnish mobile phone maker's plant. It has also hit India's telecom exports, which tumbled to 14 million from 72.5 million during the same period.

The government official, however, said in value terms the mobile handset exports were not so badly hit as Samsung has made up for the losses in a big way. He said this was because Nokia used to play mostly in the low-end segment of the market and Samsung is pre-dominantly present in the top-end segment.

"It's a big relief (that Samsung's higher export has made up for a large part of losses due to Nokia's drop in export)," said the government official. According to Telecom Equipment Manufacturing Council (TEPC), demand for telecom equipment, including mobiles handsets, is projected to be around Rs 1.08 trillion for 2015-16 and by 2020 its size will expand to Rs 1.8 trillion. The government has suggested reviving the plant by "lifting the asset freeze by way of an acceptable settlement that could be ratified by the court".

There has been speculation about the domestic mobile phone manufacturer Lava looking at buying the plant, but a corporate communication executive of the company refuted it saying his firm did not have a "concrete deal" for it. The MNC is entangled in a tax dispute with the Tamil Nadu government, which has slapped Rs 2,400 crore notice on it for evading tax on mobile handsets sold in the domestic market. Simultaneously, it is involved in a legal tussle, where the Supreme Court has ordered it to produce Rs 3,500 crore guarantee before transferring its plant to Microsoft, which recently bought over Nokia's handset division.