Foxconn to Shut Chennai Factory on February 10; Floats Severance Package for Workers

Foxconn- the largest contractor of electronics- is closing its Chennai facility on February 10.

Hon Hai Precision- better known as Foxconn- had announced late last year that it is shutting down its handset manufacturing plant in India due to reduction in orders. Foxconn has now said that February, 10 will be the last working day of its Chennai factory.

Work has been suspended at the facility since December, 2014; with workers currently being in paid leave.

Foxconn says that workers will get an average of 326,000 INR; two months’ salary for every year of service with a cap of 12 months, INR 50,000 in lump sum, INR 8,300 as the bonus of 2014 and a service awarded component of INR 2,000 for every 5 years of service. Workers have time till February 9, 2014 to decide whether they accept the severance package. Employees will be given state-prescribed severance amount if they fail to comply with company policy, reports the Times of India.

“This severance was floated of February 3. We have not paid them the January salary yet, which will be clubbed with the severance,” said a top executive in the company who wished to remain unnamed, according to TOI.

Foxconn currently employs about 1,300 technical workers at its Chennai plant, with each worker being paid INR 14,500 a month. Apart from the 190 million INR in salaries, the company also spends on electricity, water and on other mandatory licenses to run the factory in the Nokia SEZ. Foxconn had recently said that it is finding it difficult to run the plant.

The closure is seen as a direct fallout of Nokia’s factory shutdown in November.

Tax Issues at Nokia Factory

Nokia had announced last year that it is selling its handset business, including the Chennai plant, to Microsoft for $7.2 billion. However, the company wasn’t able to offload the plant to Microsoft due to tax dispute.

The Income Tax Department froze the sale of the company over a 210 billion INR charge over royalty payment to parent Nokia’s Finland company. Nokia is now fighting the case at the Supreme Court. The company has closed the factory, but has kept it under working condition.

Tamil Nadu chief minister O Panneerselvam has reportedly urged centre to lift the asset freeze on the plant. “Retrospective amendments to the Income Tax Act in 2012 with effect from 1976 and levy of a huge penalty on the world’s largest mobile handset manufacturing plant located in Tamil Nadu resulted in the closure of the unit,” he said, without mentioning Nokia, according to Indo Asian News Service.

Pannerselvam was speaking at the governing council meeting of the NITI Aayog in New Delhi,