With growing digitalisation and cloud-connected enterprises, building data centres has become imperative. In a bid to leverage opportunities in this space, a number of state governments are offering incentives for setting up data centres in their states. Uttar Pradesh is one such state that has been attracting investments through a conducive policy environment. At tele.net’s recent conference on “Data Centres in India”, Akshay Tripathi, IAS, special secretary, IT and electronics, and managing director, Uttar Pradesh Electronics Corporation Limited, Government of Uttar Pradesh, spoke about policy reforms in the data centre space, the key incentives being offered and future plans. Edited excerpts…
Uttar Pradesh – A snapshot
Uttar Pradesh, with a population of over 230 million, is the largest consumer market as well as the largest labour market in the country. When we talk about the labour market, the share of skilled manpower is quite high. It is a gateway to the northern states. We have been ranked second in terms of ease of doing business. Further, the first waterway is being set up in Uttar Pradesh.
The education scenario in the state is bright too. There are five central universities, 31 state universities, and a number of private universities. Besides, there are two Indian Institutes of Technology (IITs) and two Indian Institutes of Information Technology (IIITs). So, in terms of scale, the availability of skilled manpower is quite high. Connectivity-wise, we are now operating the maximum number of expressways in the country. There are three international airports in the state and plans are to launch two more, with a major one expected to come up in Jewar.
Noida has emerged as a major IT hub, especially in terms of data centres. Following the launch of the State Data Centre Policy, all the major players have started showing interest in setting up data centres in Uttar Pradesh.
The government of Uttar Pradesh is endeavouring to provide an enabling environment to the data centre segment. Under the current policy revision, the government has provisioned for setting up a centre of excellence for data centres, data storage and related fields. Of late, the state government, in its various investment promotion policies, has provisioned for the setting up of centres of excellence. Some of them have already been set up while others are in the pipeline. Moreover, the state government would be willing to set up a centre of excellence with any industry association or entity engaged in this field.
The data centre policy was launched in Uttar Pradesh last year and within a year of its operation, we have received proposals for setting up data centres with a capacity of close to 650 MW. Meanwhile, work is in progress for multiple industries. Recently, Yotta Infrastructure inaugurated its hyperscale data centre in the state. Seeing the potential of this sector in Uttar Pradesh, we have revised our policy and have increased the scope of incentivising the investments in response.
When it comes to investing in any state, investors primarily consider sector specific non-financial incentives and assurance from the government to resolve issues as and when they come up.
The first major incentive is capital subsidy, which is provided at a rate of 7 per cent with a cap of Rs 200 million. For data centre parks, there is a 60 per cent annual interest for seven years or up to Rs 500 million per park. In terms of land subsidy, we are providing 25 per cent on prevailing sector rates limited to 7.5 per cent of the total project cost or Rs 750 million, whichever is less. Meanwhile, in terms of stamp duty, the state provides 100 per cent exemption on first transaction while 50 per cent on second. Further, the electricity duty has been exempted for 10 years post commencement of commercial production. New provisions have been provided to facilitate power supply to the data centre industry. Dual grids are being provided to eight data centre parks as against the earlier provision of three data centre parks.
With regard to transmission and wheeling charges, there is an exemption of 50 per cent on intrastate sale of power and 100 per cent exemption on interstate sale.
The data centre policy of Uttar Pradesh classifies data centres as essential services. In terms of water supply, the government will ensure 24×7 supply. It also plans to set up water treatment plants alongside data centre parks.
The revised policy allows sub-leasing of data centre parks to data centre units/ SPVs without any sublease or transfer charges. The floor area ratio (FAR) has been provisioned as 3.0+1.0 (purchasable). There is no restriction levied on the floor to ceiling height. In addition, provisions for chillers, parking and boundary walls have been provided.
Further, provisions have been made with regard to multi-level DG stacking. These kinds of FARs were previously not included in the service FARs and main FARs. Although provisions were provided in the earlier policy, some limitations had emerged due to which the service FARs had to be limited at 15 per cent. However, under the revised policy, the limitation has been set at 40 per cent in order to cater to the demand of the industry. In addition, the government has given an option to get it counted in the main FAR so that the completion norms are achieved.
The government has also allowed ground coverage up to 60 per cent of the data centre park/data centre unit. Besides, it will ensure that the required infrastructure (electricity, water, sewer, road, etc.) is provided by the development authority.
Power supply is provided through open access. So, electricity is allowed to be sourced from outside the state if provided at better rates. As per the revised policy, the distribution licence would be provided to a data centre park power operator for distribution of electricity within that park. In that case, deemed franchisee status would be bestowed upon the operator. Other incentives under the revised policy include self-certifications, allowance of three shift operations and preference of public procurement from the government.
We have implemented these provisions very well, and there is intent from the government to facilitate the industry and there is a huge political willpower as well. This is also reflected in the kind of requests we have received from investors. As I mentioned, we have received investment proposals for around 600 MW of capacity in the initial calls. And after the revision of the policy, we have already received the intent for setting up about 170 MW capacity, which is under various phases of development.
In sum, the government is keen on setting up centres of excellence for data centres. The revision of the data centre policy and the provisions therein are based on the implementation experience and aim to facilitate investors and various stakeholders. This move indicates the willingness of the government to adjust its stand and extend its support to cater to the needs of investors.