DMK regime offered sops worth Rs 645.4 cr for Nokia SEZ

CHENNAI:

The DMK regime in Tamil Nadu under M Karunanidhi granted financial sops worth Rs 645.4 crore
for Nokia Telecom Special Economic Zone by offering to reimburse the
Value Added Tax (VAT) and cutting the price of land, says a report
based on information obtained through Right to Information Act.

“The special agreement between Nokia and Tamil Nadu government signed
in 2005 for the SEZ located in Sriperumbadur, Kancheepuram ensures
that the government will refund VAT on domestic sales to the value of
Nokia’s investments in infrastructure,” a Citizens’ Research
Collective’s report titled -The Public Price of Success: The costs of
the Nokia Telecom SEZ in Chennai for the government and workers, says.

The reports says “the MOU reveals that the state government offered an
added fiscal incentive to Nokia by offering to reimburse the Value
Added Tax (VAT) paid by the company with a condition that it would not
‘cumulatively exceed the investment made by Nokia in eligible fixed
assets within three years of signing of MOU.’”

“This adds up to approximately Rs 638 crore that the state government
would have reimbursed to Nokia for its investments in fixed assets,
thereby in effect paying for Nokia’s infrastructure investments,” the
report added.

The VAT reimbursement also indicates that Nokia all along had planned
to sell most of its phones in the Indian market and not for export
since VAT is only applicable when a product is sold within India.

Further, the TN government cut the price of land by half and assured
the company that “no other state/municipal levies would be applicable
on purchases/sales made by units within SEZ”, the report said.  This
resulted in a loss of Rs. 7.4 crore for the State Industrial Promotion
Corporation of Tamil Nadu, as per a 2007 report by the Comptroller
Auditor General, the report says.

The MoU also exempted Nokia from paying stamp duty on the land which
was earlier set to four per cent of land value or Rs 38 lakh.
Furthermore, it allowed Nokia to sublet the land at a higher price.

A number of anti-labour clauses were also offered by the TN government
to Nokia. The MOU says “the state shall declare the SEZ Site to be a
‘Public Utility’ to curb labour indiscipline” severely limiting the
right for workers to go on strike. Frequent use of contract labour and
low wages ranging from Rs 3,400 to Rs 5,400 have also been found.

The report also reveals 45-fold difference in salaries between Nokia
global staff and workers in its India plant.


The state largesse to Nokia included waiver of various other taxes
such as Works Contract Tax, Lease Tax and Entry Tax, and electricity
tax for the first five years of commercial production (offered to any
investment of Rs 200 crore as per New Industrial Policy 2003).




Factfile:
 Government to refund VAT on domestic sales to the value of Nokia’s
investments in infrastructure which is worth 638 crore

The state government cut the price of land by half and waived
state/municipal levies on purchases/sales made by units within SEZ.
The loss incurred is Rs 7.4 crore.

The MoU exempts Nokia from paying stamp duty on the land which was
earlier set to four per cent of land value or Rs 38 lakh

Declaring the SEZ Site to be a ‘Public Utility’ to curb labour
indiscipline” severely limiting the right for workers to go on strike.

Forty five-fold difference in salaries between Nokia global staff and
workers in its India plant.


Incentives
Uniterrupted power supply

If power requirements reach 50MVA, the state through TNEB, proposes to
build a 230 KVA substation at its own cost.

The land for same will be provided by the state and such land shall
not in any manner encroach on the SEZ site

Nokia shall have the liberty to unrestricted generation, transmission
and distribution of captive power within the SEZ, without  having to
pay any electricity duty or cess

The state government to build roads connecting National Highway 4 to
Nokia SEZ site at its own cost