ON WEST BENGAL > Government
Incentives for IT >
West Bengal’s New Policy on IT-Enabled
Services
IT VISION
Fiscal Incentives
IT VISION
THE STATE HAS SET aggressive targets in IT
West Bengal has registered steady growth in the IT sector with
a CAGR of 115% in the five years between 1996 – 2001.
It presently has a share of three per cent of total national
exports. The State recognizes that the potential is far higher,
given its intrinsic capabilities. It has, therefore, set significantly
higher targets in both IT Services and ITES, going forward.
A study by McKinsey & Company has helped create the State’s
IT vision and draw up a roadmap for success in the sector. The
aspiration set for West Bengal is to rank among the top-3 IT
States in India by 2010 and contribute 15-20 per cent of the
country’s total IT revenues. The focus in the long term
will be on high value-added IT work, developed through intellectual
leadership and supported by Government initiatives. In the short
term, as explained above, the focus is on ITES.
In ITES, the State is targeting 15 per
cent of BPO[4] revenues (transaction processing and customer
interaction services, including call centres) and 10 per cent
of other revenues (including a leadership position in knowledge
services and animation). In IT services, it is targeting 10-15
per cent of software services exports, 25 per cent of all product
development/R&D outsourcing and 5-10 per cent of domestic
software services and products.
The State realises that government initiatives to increase IT
usage will play an important role in creating internal demand
and spurring growth in the industry during the formative years.
The Government is, therefore, committed to making this happen.
Today, WBSWAN (West Bengal State-wide WAN), developed by WEBEL
and Tata Infotech, connects Kolkata to over 18 district headquarters.
Nine other important townships are in the process of being connected
while 340 blocks and 3,600 panchayats will be covered shortly.
The other initiatives taking shape include usage of the ASP[5]
model and government portals in collaboration with TCS to provide
public interface to government information, GIS (geographical
information system) for municipalities, computerisation of government
departments (including land records), and an aggressive IT literacy
programme in schools and colleges in collaboration with IBM,
Wipro, NIIT and others. The State has already introduced significant
computerisation in several government departments, including
the Departments of Finance, Labour, Transport, Land and Land
Reforms, Higher Education and School Education.
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The state is well-positioned
on the key enablers REQUIRED FOR SUCCESS
A detailed study of the ITES industry has led to the identification
of five key enablers for success. These are: availability of
good quality talent, low cost of operations, availability of
high quality infrastructure, operational support and investor
facilitation. A detailed analysis shows Kolkata to be very competitive
on all these dimensions.
1. West Bengal possesses a sizeable talent pool of
good quality
West Bengal has a huge pool of quality talent and has historically
enjoyed very low attrition rates:
1.1 Highest per-capita spending on education:
West Bengal has the highest per capita spending on education
among large Indian states. This is reflected in the huge annual
intake of undergraduate students (360,000 students for graduate
courses and 8,000 for engineering courses). Moreover, over 30,000
students pass out every year from English medium schools in
Kolkata alone.
1.2 Good quality talent pool: The talent available
in this region is of high quality. This is demonstrated by the
fact that over 20 per cent of IIT students belong to this region.
A significant section of the NRI entrepreneurship at Silicon
Valley too belongs to this region. In addition, premium educational
institutes like the Indian Institute of Technology, Kharagpur
(IIT-KGP), Indian Institute of Management, Calcutta (IIMC) and
the Indian Statistical Institute (ISI) are located in the State.
1.3 Number of graduate colleges: West Bengal
has over 350 degree and 40 engineering colleges, with two of
its colleges, Presidency and St. Xavier’s, ranked among
the top-10 degree colleges in India.
1.4 Domain knowledge in financial services, travel/
logistics: The local talent has domain knowledge in
verticals such as financial services and travel/logistics:
- Financial services: West Bengal has a strong presence in
financial services. Three banks are headquartered in Kolkata
, while over 15 foreign/ private banks are present in the
city and over 4,400 bank branches are present in the state.
- Travel and logistics: West Bengal has one of India’s
largest port complexes (Kolkata and Haldia) and acts as the
logistics hub for 11 states in eastern India. A few software
units in Salt Lake dedicated to airlines and the shipping
business have managed to successfully tap this talent pool
for people with domain knowledge experience.
1.5 State-level initiatives to ensure availability
of quality talent: The State plans to launch a series
of initiatives to further develop the existing talent pool and
to ensure availability and high quality of talent for ITS and
ITES companies in future. To ensure successful execution of
this strategy, the State will draw up a public-private funding
model that will ensure that the necessary investments are made
in this sector.
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2. Cost of operations
is significantly lower than in other metros
Kolkata offers ITES players one of the lowest operation costs
in the country. This is reflected in the low CMIE consumer price
indices, compared to other key ITES destinations in the country
(355 for Kolkata compared to 454 for Chennai, 413 for Bangalore,
410 for Hyderabad and 401 for Delhi).
Salaries for fresh graduates are about 10-15 per cent lower
in Kolkata as compared to the other metros. Also, the low attrition
levels in Kolkata (10 per cent as compared to industry benchmarks
of about 20 per cent in the IT industry) work in its favour
by reducing the training costs incurred by employers.
In addition, the State offers best-in-class fiscal incentives
to IT companies. The financially attractive one-time and recurring
incentives further strengthen the value proposition of Kolkata
as a low-cost operations centre.
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3. High quality infrastructure
available in the State
The State has strengths in all areas of physical infrastructure.
This includes international telecom connectivity, physical and
social infrastructure and power supply. Kolkata is also well
connected to international destinations in Asia, Europe and
the US.
3.1 Telecom Connectivity: Kolkata offers about
580 Mbps of international satellite connectivity through VSNL
and STPI. About 70 per cent of this bandwidth is available to
new players. The State is now planning to set up two more earth
stations at Kharagpur (near IIT) and Durgapur. Cable connectivity
is provided through leased BSNL lines of 92 Mbps to Mumbai and
onward connectivity through submarine cables landing at Mumbai.
Besides BSNL, private players like Reliance Infocom and Bharti
Telesonic plan to connect Kolkata through their own NLD backbone
to Chennai and Mumbai. While the Reliance connectivity will
be completed by end-2002, Bharti has initiated the work on its
cable connectivity projects. Additional cable connectivity will
also be provided by Railtel, which will provide bandwidth to
the telecom carriers. In addition, highly reliable local loop
options are available from BSNL, STPI WLL/OFC.
3.2 Availability of built-up space and land:
Kolkata offers excellent walk-in physical infrastructure. These
include the STP2 in the Salt Lake IT hub and privately-constructed
parks like BIP and Infinity. These house over 160 IT/ITES companies,
employing some 13,000 IT professionals. Several educational/-training
institutions too are present here. In addition, the Government
makes plots available for new ITES projects at the highly-subsidised
rate of about Rs. 40 lakh per acre, which is 15-20 per cent
of the prevailing market price. The Government also plans to
create a 40-acre ITES park at Nonadanga, near Salt Lake in Kolkata.
3.3 Continuous supply of high-quality power at a low
cost: Its high investments in power generation over
the last 10 years have made West Bengal one of the few power-surplus
states in India. The high percentage of thermal power ensures
that the supply is not adversely affected during dry season.
In addition, the Government will ensure that the existing low-cost
power plants in West Bengal feed all new ITS/ITES units on priority
basis.
3.4 Availability of social infrastructure:
The Government recognises the importance of social infrastructure
in attracting senior/middle management talent to Kolkata. The
city has excellent social infrastructure in place. These include
social, sports, rowing, swimming and golf clubs of international
repute (e.g. Tollygunge club, Calcutta Cricket and Football
Club, Calcutta Club, Royal Calcutta Golf Club, Calcutta Swimming
Club, Saturday Club, Turf Club, Conclave, Bengal Club and Circle);
cultural centres (Nandan), recreational centres (Science City,
Aquatica and Bowling alleys near Salt Lake); excellent hotels
(Oberoi Grand, Taj Bengal, Hyatt and ITC Sonarbangla); some
of the best schools in India (La Martiniere, St. Xavier’s,
Modern High, Don Bosco, St. James); privately-managed hospitals
(AMRI, Woodlands, West Bank, Bellevue, Birla Medical Research
Institute, Peerless and Duncan Gleneagles) and a range of tourist
destinations nearby (Shantiniketan, Digha, Sunderbans, Darjeeling,
sub-Himalayas and Southeast Asia). To further improve facilities
in and around Salt Lake, a dedicated team has been drawn up
from the IT companies that have a presence in the area.
3.5 Good connectivity to international locations:
Kolkata is well connected to prime locations overseas and in
India. These include the prime Asian hubs of Bangkok (10 flights
per week) and Singapore (7 flights per week) as well as key
Western locations such as London (direct flights twice a week),
Amsterdam (1 direct flight per week) San Francisco (three flights
per week via Singapore) and New York (three flights a week via
Europe). The city is also well connected to important domestic
locations such as Mumbai (9 flights daily) and Delhi (7 flights
daily).
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4. Operational issues have
been addressed by the Government
The Government has addressed most issues related to ITES operations.
These include ‘Public Utility Service’ provider
status for ITES companies, permission for women to work at night,
permission to run three shifts irrespective of national holidays,
relaxation in building and zoning laws (e.g., ability to construct
centre in residential areas), exemption from zoning laws for
purposes of regulations, exemption from statutory power cuts
and exemption from purview of West Bengal Pollution Control
Act (except for diesel generator sets). These are discussed
in more detail in the ‘Regulatory support’ section.
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5. WEBEL acts
as a single-window agency for all IT investors
At the operational level, the Government has ensured ease of
setting up operations in Kolkata through Webel, which acts as
a single-window support centre for all IT investors in the State.
Webel helps companies in obtaining building space on rent/lease
and in purchase of land. It also interacts with Government bodies
such as BSNL (last-mile connectivity), WBSEB (power connections)
and the local municipality (building clearances) to reduce the
company’s exposure to bureaucratic problems. Further,
the STPI has authorised it to grant registrations on its behalf.
Going forward, the Government intends to set up a Cabinet Committee
on Information Technology to monitor and implement the outlined
policies at the apex level. The Chief Minister will chair this
committee. In addition, a high-powered committee of secretaries
will be set up under the Chief Secretary to monitor the implementation
of the projects and to examine applications from companies requiring
grant of special incentives.
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