The government has finally complied with Nokia India Ltd's request for a wholesale trading licence to import and sell mobile phones in the country.

The company would, however, be required to fulfil certain capitalisation norms, finance ministry sources said.

The Indian subsidiary of the Finland-based mobile manufacturer had in April this year sought a licence from the Foreign Investment Promotion Board to undertake wholesale trading on a cash-and-carry basis.

While the FIPB had then deferred the decision, it agreed to the proposal in its last meeting on Friday.

However, the finance minister is yet to clear the proposal. As per the cash-and-carry basis, Nokia India can import handsets from its overseas manufacturing units but cannot sell them directly to the end-user. It will be required to sell the handsets through dealers.

Nokia was originally given permission to test-market mobile handsets in India for two years in 1997, during which period the government had asked it to start making arrangements for setting up manufacturing facilities.

The approval was extended twice, each time for two years. The third such extension, granted in 2001, expired on June 15 this year.

The firm informed the government that after undertaking a thorough assessment of the Indian mobile market's demand-supply position, it had concluded that manufacturing facilities in the country would not be economically viable.

While the estimated local demand to sustain domestic manufacturing was about 20 million handsets a year, Nokia India was able to sell only about a million in 2002.

Ministry sources said Finance Minister Jaswant Singh had given clear directions that the FIPB should discourage deferments and rejections of foreign investment proposals.

In the specific case of Nokia, while the earlier policy linked test-marketing to setting up manufacturing facilities, the policy itself was later changed. Now, companies can undertake wholesale trading without having to set up manufacturing units.