SEZ delay may drive Nokia to China

Company seeks early clarification on pending notifications on customs duty benefits.

Nokia India Pvt Ltd, the wholly-owned subsidiary of Nokia, has warned that its investments in India could be affected due to a delay by the government in notifying customs duty benefits for a Special Economic Zone being put up by the company near Chennai.

The revenue department is yet to notify the benefits for the company's SEZ at Sriperumbudur in Tamil Nadu, which will enable Nokia to import components free of duty.

At the last meeting of the Board of Approvals on November 25, the Nokia representatives said the company would begin to consider alternative locations like China if the pending notification was not issued soon, senior government officials told Business Standard.

"We were promised duty-free benefits on the investments and the components. If you are promised benefits but are not given then it will impact investments, but not the operations," a senior Nokia executive said.

In response to a questionnaire, the company did not comment on whether it was looking at China as an alternative.

"At these regular meetings issues such as the progress of the SEZ, delays for customs notification are discussed along with other matters to strengthen mutual understanding, support and co-operation to ensure the progress of the overall project... These issues do not necessarily impact the Chennai manufacturing facility," the company said in response to the questionnaire.

The revenue department is yet to issue the notification despite the area being cleared by the Board of Approval and subsequently notified as an SEZ in August this year. Revenue department officials maintain that the notification would be issued soon.

Sources said the company has indicated that it would suffer a daily loss of Euro 3 million if the duty benefits were not granted as per the SEZ policy by January 2006, when the company is slated to begin production.

The company already has claims of around Rs 8 crore due from the government. The amount has been paid by the company in form of customs, excise and service tax and has to be reimbursed by the government as these duties are exempt in the SEZs.

Nokia company executives declined to comment on the outstanding dues and said they had paid taxes for investments in the country and would like to be reimbursed for the duties paid. The executives said the company was in talks with the government for the reimbursements.

Nokia has obtained 210 acres of land in Sriperumbudur for setting up an SEZ to develop telecom equipment, and undertake research and development work. The company intended to invest Rs 675 crore for developing the infrastructure in the zone.