It came with a bang, but as it leaves, it has caused heartache all around. For Chennai, and perhaps the rest of India, it is a lesson on the good and the bad of liberalisation. What is certain is that life will never be the same for the 8000 former employees of Nokia and for the larger group that was employed by the ancillaries of the company, as they all wind up and leave.
When Nokia set up base in Sriperumbudur, it was held up as an instance of the positives that can be wrought by an open economy. The State Government bent over backwards in the wooing process – guaranteed power, land at concessional rates and fast track clearances of all approvals. The agreement was signed in 2005 and within a year, the first batch of cell phones was being shipped out. Nokia was then the world leader, controlling over 60 per cent of the international cell phone market. By 2010, when its performance peaked, the Chennai facility was its largest unit worldwide and together with its ancillaries employing over 40,000 people.
And it took good care of them. Salaries were higher than what they would have got in the traditional auto ancillaries. Moreover, women were preferred for the jobs and that transformed the lives of several of those who lived in Sriperumbudur and around. Buses came to pick them up from their homes and drop them back. There was job security and some wonderful facilities such as crèches where mothers could leave their infants while working. There were some negatives too – not that many people were bothered about them while the going was good – farmhands were no longer available in Sriperumbudur and so agriculture declined. The land was divided into housing plots and sold as real estate – but who cared?
Then came the swift descent. With smart phones making their appearance and Nokia having overlooked their potential, it began losing markets worldwide to companies such as Samsung, Apple and Chinese manufacturers. The behemoth was soon in the red worldwide and was acquired by Microsoft. All except the Indian plant that is. It remained outside the purview of the sale thanks to a dispute with the Indian Government over income tax. The IT authorities allege that the company evaded tax to the tune of Rs 21,000 crore while paying royalties to its parent since 2006. Microsoft made it clear that it was not interested in sorting out matters concerning complicated Indian tax laws and so the plant here was a clear untouchable. It continued manufacturing phones for its parent under a contract till earlier this year when Microsoft stopped releasing orders. With that there was no option but for the plant to close.
There are some firsts in this closure. Chennai has never before been impacted this way by something that it strictly had no control over – demand for phones changed all over the world. Secondly, this is perhaps the first time that the Government is remaining silent when a large employer has folded up in the city. Earlier instances, such as Binny’s and Standard Motors, saw the State intervening and messing matters up to a great extent. Lastly, beyond making a few feeble noises, the Unions have remained passive as well. They view the severance package to be quite generous and would not like to interfere in the process.
Some things have changed forever however – for instance, land in the area can never go back to agriculture. The clutter of real estate is here to stay. And most employees are finding it difficult to work for other companies, having become used to Nokia’s good practices.
Can the plant be revived? That will happen only if another cell phone manufacturer is interested. And they are unlikely to come if the tax case takes its own time for resolution. If there can be a quick settlement, prospects can brighten. After all, India is the largest market for cell phones and it would make sense to manufacture here. Amma phones, anyone thinking?