Nokia India has said it may opt for manpower reduction at its manufacturing plant in Sriperumbudur near Chennai, due to the prevailing uncertainty over the income-tax dispute following which the IT authorities froze the assets last year.

The issue needs to be resolved before March 31 to enable Nokia transfer the asset to Microsoft as part of a $7.4-billion global deal.

“The present situation has led to poor order flow in the last few months. If the situation continues, there could be a possible reduction in manpower,” Nokia management told members of Nokia India Thozhilalar Sangam, an independent union. The meeting today comes in the backdrop of fears that the transfer of Nokia’s largest plant at Sriperumbdur may not take place before the deadline.

The Tax authorities had slapped a notice of ₹21,000 crore on Nokia's Indian subsidiary for violating withholding tax norms since 2006 while making royalty payments to the parent company in Finland.

If the tax issue is not resolved soon, the Sriperumbudur facility will not be transferred to Microsoft. In that case, Nokia will use the unit as a contract manufacturing facility for a one-year period.

Nokia India declined to comment on today’s meeting with union members.

However, sources in Nokia said, “Yes, there is lot of uncertainty at Sriperumbudur plant. We are taking all efforts to sort it out.”

Opposed by union

The union opposed any reduction in manpower. “If they insist on the reduction, we may approach the Labour Commissioner and the State Government to protect our employees,” said M Saravana Kumar, President of the Sangiham.

At the hour-long meeting, the company informed the union representatives that they had no clear communication from the headquarters on what is to be done with the plant. The management will come back in four to five days to give a clear picture, Kumar told Business Line .

Nokia’s Sriperumbudur factory employs nearly 8,000 people (50 per cent women) directly and another 25,000 indirectly. Since inception, it has produced over 800 million mobile handsets.

In the last three months, there has been a considerable drop in the production, he said.

The Supreme Court last Friday asked Nokia to deposit ₹2,250 crore in an escrow account and give an undertaking that it would meet any future tax liability. Nokia had filed an appeal in the Apex Court after the Delhi High Court asked it to waive all rights to challenge the final order related to the tax dispute with the Government.

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