Several states in India have been working to incentivise data centre construction in their regions to grab a share of this ever-growing market. The states of Gujarat and Tamil Nadu have been actively exploring opportunities in this regard. Gujarat’s IT/information technology-enabled services (ITeS) Policy lays out various fiscal and other incentives. Further, Tamil Nadu’s Data Centre Policy 2021 offers incentives for power, land subsidy, training etc. Owing to these incentives, data centre operators are lining up to set up shop in both these regions.

Gujarat

The state of Gujarat has the Gujarat IT/ITeS Policy, which specifies the incentives being offered to IT/ITeS companies as well as data centre players setting up their units in the state. The capex components of the policy include gross fixed capital investment (GFCI), stamp duty and green energy. It states that any IT/ITeS unit having a GFCI of less than Rs 2.5 billion will be provided a capex support of 25 per cent, that is, up to Rs 0.5 billion.

The opex components of the policy include cloud rental, patent support, lease rental, bandwidth and power tariff. In terms of opex, any IT/ITeS unit with a GFCI of less than Rs 2.5 billion will be provided support of 15 per cent, that is, Rs 0.2 billion per year for five years.

Further, the policy lays out incentives for projects with a GFCI of over Rs 2.5 billion, termed as mega projects. The first three companies with GFCI greater than Rs 1 billion will be given a first-mover advantage and will be considered mega units. Tailor-made and enhanced incentives are also offered in the form of capex support at 25 per cent (up to Rs 2 billion) and opex support at 15 per cent (up to Rs 0.4 billion) per year for five years. It also offers facilitation of land identification and allotment.

Moreover, the policy aims to upskill industry-ready talent. In this regard, a direct benefit transfer of up to Rs 50,000 is provided for successful certification. Technical courses on emerging technologies are also provided for target groups comprising IT professionals and graduate students of Gujarat. The government encourages collaborations with IT giants for fulfiling course requirements.

For the data centre domain, the policy offers incentives to only Tier III and above data centres with more than 150 racks. In terms of fiscal support, the government offers capex support of 25 per cent, or up to Rs 1.50 billion. The policy also enables the facilitation of land identification and allotment. Opex support of Rs 1 per unit power tariff subsidy is also being provided.

The Gujarat government is also undertaking measures to strengthen network infrastructure in the state. It is encouraging the setting up of cable landing stations (CLSs). To this end, a capex support of 25 per cent up to Rs 0.2 billion for civil works of the CLS building is mandated. Further, it is facilitating land identification and allotment, and opex support of Rs 1 per unit power tariff subsidy is offered.

Tamil Nadu

The state of Tamil Nadu has emerged as the software-as-a-service capital of India. It has an 11 per cent share in the country’s IT investments, and Chennai has been adjudged as the cheapest foreign direct investment location for electronics research and development in India. Owing to the state’s robust IT sector, it has emerged as a preferred destination for global data centre players.

Tamil Nadu is among the top 10 global data centre destinations with a market valued of 135.6 MW currently. The market is expected to grow at a compound annual growth rate of 22.18 per cent over the next five years and reach 500 MW. The state has adequate fibre connectivity, with 30 per cent of the country’s subsea cables passing through two locations, Chennai and Tuticorin. Chennai alone hosts six submarine cables offering 15.8 Tbps, the highest bandwidth among Indian cities.

Furthermore, the state has a surplus of power and offers some of the cheapest power globally; has a well-established IT and startup ecosystem; and has actively supported centres of excellence in collaboration with the private sector to promote deep tech and advanced tech initiatives. This makes it a favoured destination for data centre players.

Tamil Nadu’s IT sector stretches beyond Chennai, creating potential data centre locations in Tier II cities. The state’s IT roadmap has expanded further from Chennai. Seven dedicated IT special economic zones were created across Tier II locations such as Coimbatore, Madurai (two sites), Tiruchirappalli, Salem, Tirunelveli and Hosur, spread over approximately 1,300 acres of land. Further, mini IT parks called Tidel NEO have been established in six Tier II and III locations. These have led to substantial IT investments beyond Chennai, thereby creating potential data centre locations.

Due to these advantages, marquee players such as Equinix, NTT India, Digital Connexion, STT GDC India, AdaniConneX, Colt Data Centre Services, CtrlS Datacenters, CapitaLand, Nxtra by Airtel, Web Werks-Iron Mountain Data Centres and Princeton Digital Group have a presence in the state. Siruseri and Ambattur are also data centre hubs.

The upcoming data centre parks at Mambakkam and Nemili are designed to cater to infrastructure needs. They have augmented power infrastructure to meet the future power needs of data centres at companies’ doorsteps; convenient land parcels with competitive prices that can accommodate further scaling for data centre campuses based on future business needs; climate-resilient locations based on historical and tested evidence of non-impact from extreme weather and seismic events; well-developed urban centres with connected business and social infrastructure, with further scope for expansion; and optic fibre connectivity, which the government is evaluating to provide to locations based on capacity needs.

The state has a dedicated policy to encourage companies to establish data centre facilities. The Tamil Nadu Data Centre Policy, 2021, offers various incentives, including offering electricity at industrial tariffs, stamp duty concessions, land cost subsidies, training subsidies and subsidies to micro, small and medium enterprises (MSME) for providing services to data centres, as well as incentivising projects utilising renewable energy.

The key components of the power subsidies include electricity at industrial tariffs, a 100 per cent waiver on electricity duty (on power purchased from Tamil Nadu Generation and Distribution Corporation Limited or from captive units in green sources), concessional open access charges, cross subsidy, access to a dual power grid (for sanctioned load over 50 MW) and augmentation of power (on best effort basis). In terms of stamp duties, for “A” districts, there is a 50 per cent stamp duty concession for State Industries Promotion Corporation of Tamil Nadu Limited (SIPCOT)/Electronics Corporation of Tamil Nadu Limited (ELCOT)/Small Industries Development Corporation Limited (SIDCO) lands (purchase/lease); in the case of private lands, there is a 50 per cent back-ended subsidy (disbursed after full investment of Rs 5 billion) for up to 10 acres. For “B” and “C” districts, there is a 100 per cent stamp duty concession for SIPCOT/ELCOT/SIDCO lands (purchase/lease); in the case of private lands, there is a 100 per cent back-ended subsidy (disbursed after full investment of Rs 5 billion) for up to 10 acres.

For land cost subsidy in Category C districts, data centres/parks can avail a 50 per cent subsidy on land cost from SIPCOT/ELCOT/SIDCO lands (purchase/lease). There is also a 50 per cent subsidy on private land for land values up to 10 acres, not exceeding 20 per cent of the ecological focus area and a cap of Rs 20 million, with at least 70 per cent of land being used for data centre operations. Further, data centres that use the services of Tamil Nadu-based MSMEs for on-site services as subcontractors to the facility manager will be reimbursed 10 per cent of the remuneration paid to them, subject to a maximum of Rs 1 million per data centre. This is applicable only for the first two years of operation. Moreover, a training subsidy of Rs 10,000 per person per month (up to six months) per data centre will be provided. The policy also offers a structured package of assistance for investments higher than Rs 20 billion and for those deploying edge servers on a case-by-case basis.

Based on presentations by Abu Alex Mathew, Associate Vice President, Guidance Tamil Nadu; and Manish Nayak, Assistant Director (IT), Directorate of ICT and e-governance, Department of Science and Technology, Government of Gujarat