Unease of doing business makes $26-billion US giant Flex look out of India

Last year, India jumped 30 places ahead in World Bank’s Ease of Doing Business rankings, powered by numerous reforms introduced by the government. Even though the government is *focused on making India an attractive destination for foreign companies* the situation on the ground may not be as ‘easy’ as it seems. Caught in red tape, an American manufacturing giant has threatened to leave India for Malaysia. The $26-billion Flex, one of the world’s top contract manufacturers for electronics, has threatened to move its production from Sriperumbudur in Tamil Nadu to Malaysia if promised concessions are not granted, reported. Flex 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, says the report. According to the report, Flex 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, claims the company. 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. Flex said that it urgently needed the relaxation and sourcing from the SEZ in view of a large order for 96 million phone handsets that needed to be supplied annually to an Indian company. The company said that its Chennai factory did not have the capacity to meet the order, and thus it needed 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 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). Flex 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. Manufacturing is a large agenda under ‘Make in India’, whether it is done in SEZ or DTA. It will help fulfil the mission of ‘net zero import’, which is one of the pillars of Digital India, it said.

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