IT SEZs continue to face delay in Gujarat

Three projects hang in balance due to lack of interest among firms to set up units

Despite an "investor friendly" Gujarat state Special Economic Zone (SEZ) Act, the Information Technology (IT) industry is still facing delay in opening up of new SEZs that have lined up since long. While recently Tata Consultancy Services (TCS) launched its IT SEZ in Gandhinagar, three more projects still hang in balance due to lack of interest among IT firms to set up units.

"We have already seen a delay of 3-4 years. Not only has the minimum alternate tax (MAT) been discouraging IT firms to set up shop in SEZs in Gujarat but also the recessionary trends in the industry. Add to that, the town planning also took time to finalise at our project location. Though construction for phase one has begun at our IT SEZ we had to apply for extension in our letter of approval (LOA) with the Board of Approval," said Bhavin Mehta, president - corporate affairs at Ganesh Housing Corporation Limited that is coming up with an IT SEZ in Tragad near Ahmedabad.

Recently, the Board of Approval (BoA) after deliberations extended the validity of the formal approval for the company's IT SEZ in Ahmedabad for six months up to 19 June, 2014.

What's more, Ganesh Housing Corporation Limited is not the only developer to seek extension. Two other developers including M/s. Myron Realtors Pvt. Ltd. as well as M/s. Calica Construction and Impex Pvt. Ltd. jointly sought extension of the validity period of formal approval for their sector specific SEZ for IT/ITeS. The companies could not be contacted for comments.

According to the state government and industry representatives, lack of large and other anchor IT companies like Wipro and Infosys coupled with MAT and recessionary trends in the industry has led to such a delay.

"About 3-4 years, there were 15-16 IT SEZs that had applied but gradually most of them denotified. Depleting demand of IT led to these SEZs facing turbulence. Thanks to an investor friendly state SEZ Act in Gujarat, those who had the option of extend have continued to do so in the hope of garnering enquiries from IT firms for setting up units," said Pankaj Kotak, head - business development (Gujarat) at K Raheja Corp., which also runs an IT SEZ in Gandhinagar 'Mindspace' and houses around 13 units at its premises.

On its part, the state government is hopeful that post certain incentivising by its department of science and technology, things may begin to look up.

"We are in active consideration and looking forward to see new IT units coming in the shortest span of time in Gujarat. Of late we have done rounds of consultation and intense interactions with various stakeholders and would suitably incentivise the industry to boost its growth in Gujarat," said a senior state government official.

For now, Mehta is hopeful since a few enquiries have begun pouring in since last 3-4 months.

"We will continue on our plans and look to finish the entire project in next 3-4 years. Thankfully, IT firms are now coming gradually with enquiries," added Mehta. Spread across an area of 30 hectares, the IT SEZ by Ganesh Housing will see a project cost of around Rs 180-200 crore.

Seconding Mehta is Kotak who added that the existing clients at Mindspace are also mulling expansion. "At least our existing clients at the IT SEZ have started enquiring about a possible expansion. Things should begin to look up for the IT industry in Gujarat, especially for SEZs in the next 6-10 months," Kotak added.

K Raheja Corp pegged software exports worth Rs 215 crore from its Mindspace Gandhinagar IT SEZ for the fiscal 2012-13.