Reliance Infocomm has shelved its plan of setting up a code data multiple access handset manufacturing plant at Gandhidham, near Kandla.

Parimal Nathwani, executive, corporate affairs, Reliance Industries, said, "We have scrapped the handset manufacturing project because of the availability of cheaper ones in the market. But the project can be restarted if the need arises."

The development comes at a time when many multinational handset makers such as LG, Samsung and Nokia have expressed their interest in setting up handset manufacturing units in India. The indigenous production may lead to a reduction in prices of both GSM and CDMA handsets.

Sources close to the Gujarat industries department said that Reliance Infocomm has conveyed its intention of scrapping the project to the state government. The state had earlier agreed to extend tax sops to the plant in the earthquake-ravaged Kutch district.

Pushpadhan Gadhvi, a MP from Kutch, said, "They have recently decided to scrap the project without giving any satisfactory reason. However, we are planning to initiate a fresh round of talks with the Reliance top brass to find out the reason behind the decision."

Sources close to Reliance Infocomm said the company has already invested around Rs 66 crore (Rs 660 million) in the project.

Reliance had announced to its plan of setting up the plant, a year after the earthquake affected industries in Kutch.

"The company officials informed us that with an initial investment of Rs 100 crore (Rs 1 billion), the unit would be operating commercially from early 2003 and construction work was initiated. But since few months back, activities stopped and, later, we were informally told about the decision to shelve the project. We are awaiting a formal communique from the company, which now has started operating a petroleum outlet from the premises of the proposed unit," said a source close to Industrial Extension Bureau, the industrial activities promotion agency run by the state government.

Anil Patel, minister of state for industries, currently in the US for seeking investments in the state, was not available for comments.

Interestingly, an industries department official said that Reliance had earlier planned to set up the unit at Hazira near Surat, but later with the tax sops offered by both the Centre and the state, it decided to take the project to Gandhidham, which also enjoys a close proximity to Kandla and Mundra ports.