Burgeoning Data Centre Industry and Punjab Opportunity

The fast-expanding e-commerce sector, use of social media and government’s focus on digital economy in India has led to rapid growth in usage and storage of data. Global cloud service providers are adding to space take-up as more and more businesses are adapting cloud computing. Currently, the data storage needs are being met by data centres across the globe, but upcoming legislation on data privacy laws will be the tipping point in the growth of the data centre industry.

Growth in Data Centre Market

The Personal Data Protection Bill, introduced in Parliament in December 2019 is the first major step of Indian government towards establishing a data privacy regime in the country. Joint Parliamentary Committee in its report submitted in December 2021 has expanded the ambit of the Data Protection Bill 2021 legislation to include limited non-personal data, apart from personal data. One of the key features of the provision is related to the localization of data whereby the bill mandates that the sensitive and critical personal data of Indians should be stored/ processed in the country and can be transferred outside the country only with explicit consent and permission.  The localization requirements would mean that these companies would have to build, rent or co-locate servers in huge data centres in India to meet their storage and processing requirements.

The size of the digital economy in India is estimated to grow to $ 1 trillion by 2025. With over a billion mobile phones and more than 700 million internet subscribers, India has also witnessed an exponential growth in digital economy. India’s large scale data usage is currently served by data centres across the globe. With the increasing usage of internet driven by lowered costs and improved access, data storage requirements continue to rise. India has around 375 MW installed power capacity for Data Centre and as per estimates, this may grow to three times by 2025.

Data centre market in India has been largely focussed on smaller edge data centres and captive data centres for local companies. Major challenges to setting up large scale data centres in India are costly real estate, high power consumption, heavy expenses on improving wide area connectivity, infrastructure and regulatory bottlenecks. With India’s large data consumption and upcoming localization costs, India could become a global data centre hub but only with a supportive policy and infrastructure framework.

Policy Interventions

Around November 2020, MeitY had drafted a Data Centre policy to benefit the Data Centre Park developers/Data Centre operators as well as the allied ecosystem. The document laid out the policy framework including various structural / regulatory interventions, investment promotion in the sector, possible incentivization mechanisms along with the institutional mechanism required to ensure sustainable and trusted Data Centre capacity. The policy framework also seeks to identify possible opportunities of manufacturing of Data Centre equipment (IT as well as non-IT) in the country, towards the “Atmanirbhar Bharat” vision. Government of India in its Budget 2022 has also announced infrastructure status to data centres.

Opportunity Punjab

With excellent infrastructure, connectivity advantage, logistics ease and availability of skilled and peaceful workforce, Punjab is fast emerging as a preferred destination for investment in innovation and technology driven enterprises. With a strong support base of world class institutions, industrial ecosystem and world-class infrastructure, the city of Mohali in Punjab is becoming North India’s hub for IT and IT enabled services. Mohali offers excellent quality of life with quality healthcare and education while offering higher cost saving compared to Tier 1 cities. This has led to the development of a strong IT and ITeS ecosystem in Mohali, with 150+ registered units, STPI service exports amounting to Rs. 5000 Cr. and presence of approx. 35,000 IT professionals in the region.

With high internet penetration and strong base of IT and ITeS companies, Punjab not only offers huge market potential for the data centre industry but also has very competitive factors of production/ operations. Key strengths of the State for the data centre industry are that Punjab is a power surplus state with lowest power tariff (@ Rs. 5 per unit variable) and low transmission & distribution losses.  Punjab is among the top 5 states in the country in terms of connectivity to optical fibre net and has 4G Connectivity across the State with higher-than-average 4G internet download speeds. Punjab allows round-the-clock operations with 24X7 shifts across genders in both manufacturing and services. Punjab can offer land in Industrial Parks including Ready-to-Move Plug-&-Play infrastructure for data centres and data centre parks.

Costs of building and maintaining data centre services are very high and the fiscal incentives offered by the State Government could lower the cost of operations, making it economically viable. Punjab government’s fiscal incentives such as Net GST reimbursement for up to 200% of FCI for 15 years, 100% exemption from electricity duty and property tax for up to 10 years, 100% exemption from stamp duty and CLU/EDC charges and employment generation subsidy up to INR 48,000/employee for 5 years irrespective of domicile and others would subsidize the setup and operational costs.

Invest Punjab’s one-stop-office model and single window system in form of Invest Punjab – Business First Portal eases the process of obtaining clearances and approvals required to set up data centres. The State Government has also worked extensively to reduce the compliance burden, streamline approval processes and enhance ease of doing business in the State. Hence Punjab’s supportive policy and infrastructure framework is conducive for investments in the data centre industry in the State.

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