Flex Threatens India Exit over Red Tape

Article By : Sufia Tippu

Relocation to Malaysia on the cards

NEW DELHI — $26 billion Flex, one of the world’s top contractmanufacturers for electronics, has alleged the government’s functioning is entangled in “red tape” and has threatened to move its production from Sriperumbudur in Tamil Nadu to Malaysia if promised concessions are not granted.

The US giant claims there has been no movement on its request, made in August, to allow its Chennai factory to source duty-free products from its second unit within a special economic zone (SEZ) at the same location, according to a report in The Times of India.

It also claims that its request for a duty relaxation for a period of six months — by when it will set up a second factory in Andhra Pradesh — had been supported by the IT and commerce ministries, which had written about the same to the finance ministry. However, there has been no further development, the report said.

“Our request is for your personal intervention so that the red tape surrounding this process is cut through,” Flex said in a letter sent to IT secretary Ajay Sawhney, commerce secretary Anup Wadhawan, and finance secretary Hasmukh Adhia.

The company said that it urgently needs the relaxation and sourcing from the SEZ in view of a large order for 96 million phone handsets that need to be supplied annually to an Indian company. The company said that its Chennai factory does not have the capacity to meet the order, and thus it needs to source from the SEZ to manage the “over-spill” part of the contract. It wants to “subcontract the job work of 15 million handsets… to its SEZ unit for a period of six months”.

The company said it has requested for a waiver of the mandated 20% customs duty. Citing an example of a similar relaxation previously, Flex claimed that the government had earlier given an exemption for power generation, transmission and distribution of power from an SEZ into a domestic tariff area (DTA). Additionally, the US company said that such a relaxation would be similar to the duty-free imports that India allows from the Asean group of countries as part of various FTAs.

In the intervening period, it will invest $200 million in a second factory in India at Andhra Pradesh, where 5,000 locals would be trained.

— Sufia Tippu is a freelance tech journalist based in India contributing to EE Times India

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