Infosys to go ahead with Kolkata project worth Rs 1 bn without SEZ status

The Bengaluru-based IT major announced the commencement of work for building a software development centre with an initial investment of Rs 1 billion without any kind of tax sops from the government

Infosys has finally decided to go ahead with its plan to set up operations in Kolkata without the proposed centre getting the SEZ status, a key demand which has made the IT services major delay the project for quite some time.

The Bengaluru-based IT major on Monday announced the commencement of work for building a software development centre with an initial investment of Rs 1 billion without any kind of tax sops from the state government.

The West Bengal government had allotted 50 acres of land in Rajarhat township near Kolkata to Infosys in 2010. Despite paying Rs 750 million to acquire the land, Infosys didn't start construction for the project due to differences over taxation issues.

After Mamata Banerjee charge as the Chief Minister in 2011, the project was put on the backburner, as her party, the Trinamool Congress, was opposed to the idea of turning the centre into a Special Economic Zone (SEZ).

“Infosys has decided to set up the new software development center without SEZ status,” Infosys said in a statement in response to a query by Business Standard. “The centre is being developed to address the growing business requirements. The ease of doing business, availability of highly skilled manpower and best-in-class infrastructure superseded the tax benefits extended to Special Economic Zones,” the company added.

The centre, the company said in a separate press release, will house 1,000 engineers to begin with. The first phase of construction for the proposed centre will come up on 525,000 square feet and is likely to be completed within 15 months from the date of obtaining all regulatory clearances. 

“I congratulate the West Bengal government on laying the foundation stone for the Bengal Silicon Valley Hub, here in Kolkata. On this special occasion, I would like to thank the Chief Minister, Mamata Banerjee, for giving Infosys a unique opportunity to be a part of this prestigious project, and further strengthen our presence across the country,” said Salil Parekh, CEO and MD at Infosys.

“There are three factors which drove our decision to build up this centre. Firstly, human resource availability is pretty good and as a people's firm, we see that as a definite advantage. Second, the attrition level in these centres is low. And thirdly, the government is very supportive with very friendly bureaucracy," Ramdas Kamath, Senior Executive Vice-President who heads Infrastructure and Administration at Infosys, told Business Standard.  

“All these factors are far more important than any tax incentives,” he said, adding that Infosys has never sought any tax concessions from the state government.

The Bengaluru-headquartered firm has seen a rise in its attrition level in the first quarter of the current financial year at 20.60 per cent, up 400 basis points on a sequential basis. With more centres in such cities, the company now aims to tame attrition as the stickiness of employees in smaller cities is usually high.

“We already have a good all-India presence. With this new centre, it will be further enhanced," Kamath said.

The company has centres in Mysore, Mangaluru, Hubli, Bhubaneswar and Jaipur, among others, apart from its presence in metro cities.

Last month, the company had announced the setting up of a software development centre in Lucknow at an investment of Rs 7.5 billion that would house 5,000 software engineers.