While Bangalore and Hyderabad often hog the headlines as contenders for India’s IT capital crown, facts and figures say that it’s Mumbai that actually comes up trumps on the IT front.
Big cities all over the world have carved for themselves a unique identity, usually based on the attributes naturally associated with the people residing in them. Cities in India are no exception, and so we have Delhi as the political capital, with all its Machiavellian machinations, and Kolkata as the cultural capital with its propensity for artistic and intellectual pursuits. In a similar vein, Mumbai has come to be known as the business capital and over the years it has flexed enough financial muscle to reiterate this point. However, of late there has been a growing perception that Mumbai has been slipping from its top slot, with other cities like Bangalore, Hyderabad, Delhi and Chennai doing a fast catch up on the business front.
This is especially true for a sunrise industry like IT, which at first glance seems to have completely bypassed Mumbai for the cooler southern climes of Bangalore and Hyderabad. Does this mean that Mumbai’s premier position as a preferred business location is a thing of the past, especially in the context of the IT industry? Many business mandarins, even from the IT fraternity, don’t buy this premise, despite the emergence of Bangalore as the much-hyped Silicon Valley of India in the last decade. Manoj Kunkalienkar, joint president, ICICI Infotech, believes that in terms of infrastructure, Mumbai rates far higher than the other cities, and both Satish Joshi, senior vice president, Patni, and Yogesh Mathuria, chief, partner relationships, Mastek, readily agree.
Superior infrastructureBut what are the salient features of this superior infrastructure that Mumbai boasts of? Mumbai offers the most reliable power supply of all the cities in India. It also offers the most reliable Internet and voice connectivity in India. Mumbai accounts for over 60 percent of all international voice and data traffic from India, and has the largest voice and data gateways. Moreover, the transatlantic optical fibre cable (SeMeWe3) lands in Mumbai. The city has 3.9 million telephone lines the highest among all cities in the country with another million expected to be added over the next three years with private involvement. Private players like Reliance Infocom, BPL Innovision and Hughes Tele.com have set up an excellent OFC network in and around Mumbai.
Reliance Infocom has its national hub for controlling and managing its OFC network throughout India located near the Millennium Business Park in Navi Mumbai. The public and ground transportation systems in Mumbai are also better than in other Indian cities. In addition, Mumbai’s financial clout remains undisputed. The city accounts for two-thirds of the country’s stock turnover, 90 percent of merchant banking business, over 67 percent of investor responses to public issues (up from 27 percent in 95-96), and is the largest contributor of corporate and income taxes. These strengths provide a readymade infrastructure and markets for IT and ITES services. Mumbai has also been identified as the most suitable city for an offshore financial centre since it is home to the Indian headquarters of most of the major Indian and foreign banks.
Government incentives The Maharashtra government’s efforts to complement the availability of infrastructure with sound policies have borne good results. According to S T Dabhade, joint director of industries with the Government of Maharashtra, the State offers good infrastructure to companies desirous of setting up operations in Mumbai through MIDC and CIDCO, two Government of Maharashtra initiatives. A large number of IT parks have been set up in the city. In fact out of a total of 26 public sector parks that have been set up in the State, eight are in Mumbai. This, feels Dabhade, shows the special efforts that the state government has devoted to the city. Other than this, the state government is also encouraging the setting up of private IT parks. There are three private IT parks in the city already up and running. Many other players are also in the process of setting up private parks. The ones which have been already been set up in the city include Ivory Tower and Fourth Dimension at Malad, and the Technopolis Knowledge Park at Andheri.
The government of Maharashtra gives incentives to those who set up operations in any of the software technology parks (STPIs) or industrial zones (MIDCs) in and around Mumbai. The government announced a comprehensive IT policy in August 1998. Under this Act, several benefits have been extended to IT units. A system has been set in place to identify the units, that are eligible for IT registration. The system has been divided based on the company’s main activity, i.e. hardware, software, ITES, services and composite IT units. These incentives include sales tax up to 4 percent on hardware, software as well as other IT products. This is the minimum floor rate that can be charged. The income the government derives out of this is negligible. These rates are applicable till 2006. Also, there are no additional taxes like turnover tax and sales tax surcharge.
New IT units, whose investment in plant and machinery is less than Rs 1 crore are entitled to special capital incentive. Existing IT units as well as new units are eligible for refund of octroi duty and entry tax. The registered units are also exempt from stamp duty under the Bombay Stamp Duty Act, 1958. IT units are exempted from stamp duty chargeable under the act pledge, conveyance and lease deed. This includes equipment lease executed by an IT company for starting a unit in any of the public sector parks in the city. From April 2001, the government also reduced the stamp duty on the merger of IT companies to 10 percent. The companies set up in private parks also receive many sops. They get a 50 percent stamp duty exemption. They also have to pay only 50 percent of the registration charges, compared to what other sectors have to pay. In fact the government has also laid down separate norms and procedures for the approval of private IT parks in which concessions will apply.
All the IT companies which are registered are exempted from electricity duty for five years from the date of setup. Industries set up in special economic zones (SEZ) are exempt from that duty for a period of 10 years. The software units do not have to obtain No Objection Certificates (NOCs) from the pollution control board. Setting up of software companies is also permitted in areas that the government has designated as no-development zones as well as in residential areas. Any company which sets up in public technology parks receives an additional 100 percent FSI (Floor Space Index).
Advantageous factorsOther than these incentives which are offered by the government, there are various other factors, which work to the city’s advantage. This city has the largest number of Net service providers as well as 40 percent of the country’s Internet users. Software exports, at Rs 5,600 crore in 2001-02, is second to none in India. TCS, the country’s largest software exporter, is headquartered in Mumbai. Mumbai also has premier educational institutions like the Indian Institute of Technology, VJTI, and several top-notch management institutes. It may also be noted that two of the country’s most prestigious IT-related institutions, namely Media Lab Asia and the Indian Institute of Software Engineering (affiliated to Carnegie Mellon University), are located in Mumbai.
Mumbai has been the natural first choice for several IT companies including TCS, Mastek, Rolta, Datamatics, Geometric, Patni, Mahindra British Telecom, Silverline, MphasiS and ICICI Infotech among others. Says Mathuria, “In the early 80s when Mastek was set up, Mumbai was the default choice as most of the founding members were based here. At that time, there was no software exports market and software companies were dependent on the domestic market for business. Mumbai being the business capital, approximately 50 percent of the domestic software market was in Mumbai. But even at a later stage, when long term planning was done, Mumbai was still the preferred choice for a large part of our operations.”
Adds Joshi, “In the 1980s, when Patni entered the software arena, Mumbai’s export processing zone SEEPZ was the only facility existing in India that was conducive for an IT business like ours, offering infrastructure, telecom facilities, etc. We were in fact the first software company to set up office in SEEPZ.” For companies like TCS and Tata Infotech, Mumbai was a default choice as the entire Tata empire is based out of this megapolis. Even today Kunkalienkar feels that Mumbai would be a preferred destination for IT companies like ICICI Infotech, which have a strong focus on the finance vertical.
ITES base Apart from the software industry, Mumbai also seems to be the preferred location for IT-enabled services (ITES) companies. Almost all the majors in this segment are based in Mumbai. These include World Network Services, eFunds, Spectramind, Eserve (Citigroup), Stream TracMail, TransWorks, Epicenter Technologies, Infowavz, Global, Hughes, Intelsat and ICICI OneSource. In addition, other bigwigs like GE Capital, Daksh and Hero Corporate Services, currently located in other parts of the country, are finalising plans to set up shop in Mumbai too. Mumbai is also the first choice for large conglomerates planning a foray into IT and ITES, such as the Aditya Birla Group.
Apart from good telecom and general infrastructure, manpower availability seems to be the third key factor for the ITES industry. Says Sunil Kakodker of Tracmail, “The quality of manpower in Mumbai is very impressive. The abundant availability of an educated and cosmopolitan labour force is an important advantage that Mumbai offers. In our experience, in Mumbai, our employees have a typically higher level of exposure to Western cultural influences and they possess a strong willingness to learn.”
Adds Raju Bhatnagar of eFunds, “It needs to be borne in mind that the skill and profile parameters for each process vary [in ITES projects] and therefore different profiles need to be drawn up to match the requirements. Mumbai has plenty of personnel available in whatever way one slices or dices the requirements.”
Another vital issue for the ITES industry has been the working hours for women, restrictions on which have been relaxed by the Maharashtra government. According to a law which has been passed by the Industries, Energy and Labour Department, there can now be no restrictions on the working hours of any company, and women employees should be allowed to work in any shift they want. The new law has made it mandatory to provide women workers with restrooms and lockers. Female employees should be provided work jointly or in groups. The law also asks for special security arrangements for women working before 6 am and after 8:30 pm, including transport. These new provisions would definitely benefit the ITES sector, which employs a good percentage of women in Mumbai and other parts of the State.
This article first appeared in Express Computer.
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