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Nokia Questions Manufacturing Sustainability In India
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Blasts the Indian Government for not complying with the MoU it inked with Nokia.
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Monday, March 24, 2008:
Reacting to the speech given by Shakeel Ahmad, minister of state for communications and information technology, at a conference organised by Telecom Equipment Manufacturer’s Association (TEMA), Sachin Saxena, operations director, Nokia India, blasted the Government of India for not complying with the memorandum of understanding (MoU) it signed with Nokia.
During the conference, Shakeel Ahmad pointed out Government's sincere effort for strengthening telecommunication industry in India. He added that infrastructure has also started improving in the country.
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Saxena on this point could not stop himself and expressed anguish over the problem faced by the company and the industry on the whole.
“It was good to hear from honourable minister and secretary, department of telecommunication, that initiatives have started to improve things. But the question here is how fast we can do it?Not that we keep thinking of the change and ask companies that please put up a shop in my country, and they refuse by saying that we have already put one in your neighbouring country and cannot come to this country,” said Saxena.
He pointed out that China has global leadership in many electronic product segment because it eyes global market and does not limit its production for domestic consumption.
“If our demand for semiconductor is 1 per cent of global demand, then we can target 4 to 5 per cent global market share at least in terms of manufacturing. But we are not thinking about it. In every forum where we talk about it, I am asked what is your demand for semiconductor? Just 0.7 per cent and you need policy for semiconductor. That is where we need to bring change in our thinking,” said Saxena.
Saxena touched upon the challenge being faced by Nokia and other companies due to weak indigenous components base and dependency of OEMs on imports.
“Take the case of component manufacturers. In the morning, both secretary and honourable minister said we are proud to have telecom manufacturing in India but I don't know how much component we need to import. EMS players like Jabil, Flextronics are great OEMs who have put up their shop in India but they have put up their shop with virtually everything getting imported. Is this the right direction through which we can sustain our manufacturing? Is this the right direction taking which we can say we will grow? I don’t think so,” said Saxena.
Citing the problem that Nokia faces when it sources components from local vendors, Saxena said, “I have to keep zero inventory in case we are importing that component from abroad, but in case, we have source it from India, it takes at least one day paper work, and over this transportation time gets accrued. This delay is caused just because things are moving in and out of SEZ.”
Taking a dig at infrastructure he mentioned the time that one has to waste at airport in catching an international flight. “Length of immigration queue at airport is approximately 1km long. It runs out of airport. It takes two hours to clear this queue. There is an additional (two hours) time required for a passenger to check in if he has to catch an international flight. I have travelled in other countries where it does not take more than two hours from check-in to the boarding time,” he said.
On the problems related to the clearance of cargo at airport, Saxena said, “There is no one bothered for airport strike. Our material keeps lying in the rain, and no one is bothered about it. If we put some extra people we get threat from union leader, "don’t touch it, you will lose your life." Then tell me should I export?”
He mentioned that an average clearing time at the Chennai airport -- considered the best in the country -- is one day. He compared this to the short time of two hours taken at the Singapore airport. Saxena pointed out that the delay caused by procedures unnecessarily increased the time taken for in manufacturing.
“We require only four hours to convert raw materials into finished goods but time taken in the whole procedure makes the whole process as long as two days,” he explained.
Power shortage in the SEZ has also added to the woes of the company. “Despite having signed an MoU with the Government which states that SEZ will continue to get uninterrupted power we are informed at a Friday evening that from Monday there will be no power for a day in week and you will have to keep your plant shut for four hours everyday because state is running through power crisis. When we call state electricity board on this, no one picks up the call. This is not the way we can work,” he said.
He requested the Government to at least respect the MoU signed with the company. The company earlier requested for a rail corridor but after long discussion it went in to spin, and the Government asked if the industry could finance it. When nothing happened on this request, Nokia urged the Government that if not rail corridor, can the Government provide housing for employees. But this request was also refused citing the escalating price of land.
Telecom industry is booming and requires large number of skilled people to work in. Nokia asked government to set up an ITI; but this request was also turned down and Nokia only was asked to set up an ITI. Nokia on this has extended its support for taking classes at ITI set up by the Government.
Saxena jibed on the issue of everything being put on to Nokia. He said, “One day, we will be asked by the Government to set up colonies to have the people grow till the age of 17 and then recruit them for the company.”
He spoke on the issue of tax and duties and said that at every six month we get some new surprises. Further he expressed his anguish over a report in Parliament that suggested that SEZs should be considered as Net Forex Earner (NFE) because the manufacturing takes place locally.
“I will put it the other way round. I know there are very intelligent people working on it. If this is the case then why should I put up a plant in India under SEZ? I can put it anywhere. People don’t understand that If we can invest in India where our domestic market is just 30 per cent of what we make in India then we can invest anywhere in the world,” he said.
He said that presenting low cost of labour as advantage of manufacturing in India is a misnomer as cost of labour in India is rising. “The expectation level of people has gone up. When we sit down and discuss wages at our SEZ in Sriperembudur, where minimum wage is not more than Rs 4,000 a month, their temptation is that they can get as much as Rs 10,000 per month.”
Reacting to the problems expressed by Saxena and other telecom manufacturers present at the conference, G.K. Pillai, secretary, department of commerce admitted that though infrastructure is not up to the mark it has improved a lot. “Prime Minister has mentioned that for overall infrastructure, we require $500 billion. But at the moment we have put up $80 billion worth infrastructure project. It is a big amount for India,” Pillai said.
He addressed the issue of delay highlighted by Nokia. “For Nokia, it took 26 weeks to start their first commercial production from the date of application. Have you heard about so fast processing anywhere in the world but still they are dissatisfied. Earlier clearance used to take three days, then two days and now just one day, and I can promise you that within a year it will be 12 hours or may be 8 hours or 4 hours, or we may reach Singapore standard,” Pillai said.
He mentioned that for this the Government has ordered central servers for customs, excise and ports. This will make most of the transaction of companies online. At present companies cannot export till they have not received clearance from other ports. Pillai said these kind of delays caused will be removed by making the transactions online.
Pillai highlighted the efforts being made by the Government on the financial transaction front. According to Pillai, companies will need to have only one core banking account, and this account will enable them to deal with all ports, DGFT, customs, excise and other government agencies by the end of this financial year.
On being compared with China, he said that he is never bothered about this comparison as he considers China as different world altogether. “In China, the Government decided to make 110 lanes road when they were not having 10 cars in Beijing. They got rid of all people living in the area where roads were to be made. The Government just sent the trucks. People were asked to get into those trucks, and they were relocated at some 100Kms from that place. But in India we can not work this way,” Pillai said.
Coming on to the SEZ issue, Pillai said that it was approved by everyone in the Parliament but now people are having problem with it. “When I spoke to few member of Parliament who voted for it, they said that they did not read about the policy at the time of voting. We have to spent more than half of our time in convincing others in the Government about the importance of manufacturing and SEZ,” jibed Pillai.
Pillai admitted that progress had been at a much faster rate compared to infrastructure, and despite all the adversaries, the Government is making every possible effort to push it as fast it can.
-- Prasoon Srivastava
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| I fully agree with NOKIA. We can feel the pain of NOKIA. These govt. servants should wake up and do something very fast. The time is running out. |
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| - Alok Gupta, , 3/25/2008 12:45:16 PM |
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| Its indeed true and I would like to thank Mr.Prasoon Srivastava for bringing to the notice of the common public this raw fact. |
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| - Roly Arora, Chandigarh, 3/24/2008 5:49:04 PM |
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