Endowed Entity

Ranked #9 in the Nasscom report on the ‘ITeS Supernine’, the Garden City has it all. Bangalore, the fifth most populous

city in India, is also the fourth global hub of technological innovation

according to the United Nation’s Human Development Report 2000. It is just

behind San Francisco and Austin in the US and the Taiwanese capital, Taipei.

This puts Bangalore ahead of many others in US, Europe, Japan, China and

South-East Asia.

The city’s greatest assets are its clement weather and cosmopolitan

outlook. Some other features that make the city an attractive business

destination are the availability of professional talent, a sizable expatriate

population and international airport.

The city also boasts of renowned hospitals, good hotels and restaurants, five

golf courses and a number of tourist spots.

Policy support



In 1997, Karnataka became the first state to come out with a specific policy

for promoting information technology (IT) industry. Now, the state has evolved

several policies aimed at benefiting IT &IT-enabled services (ITeS). It has

also extended exemptions under the Industrial Disputes Act, 1947 and the

Karnataka Shop and Commercial Establishments Act, 1996.

One of the latest initiatives is the Mahithi-Millennium policy, under which

the state has offered a variety of incentives to promote ITeS sector in the

state.

Sales tax exemption: ITeS companies, irrespective of the level of investment

and the location of the unit, are offered sales tax exemption for 10 years or

deferment for 12 years, subject to a ceiling of 200% of the value of the fixed

assets. Such exemptions are applicable to the turnover tax.

Entry tax exemption: ITeS firms don’t have to pay entry tax and purchase

tax on computer hardware, peripherals and other capital goods, including captive

power generation sets, during the implementation stage. This exemption can be

extended up to 5 years from the commencement of implementation.

Employment: The labor policy has been simplified by the state. For those who

create employment in ITeS, the policy offers incentives on the cost of land,

registration and zonal regulations. New companies employing more than 250

employees in Bangalore are eligible for these concessions.

Power tariffs: While ITeS firms are treated as industrial consumers for the

calculation of power tariffs, the upside is that ITeS units are exempt from

power cuts.

STPI: Companies registered under the Software Technology Park Scheme can

avail several of the benefits–from single-window government clearance to 100%

foreign equity, complete duty-free imports, corporate income tax holiday till

2010 and dedicated data communication links. Beside, there is a single point

facility for custom bonding and export certification.

Infrastructure



The city, dubbed the Silicon Valley of India, has emerged as one of the most

favored locations for ITeS mainly due to the proactive stance of the government

and the local industry’s recent successes.

STPI:

The Bangalore STPI has 746 approved ITES units. In fact, Bangalore

accounts for 13% of all the approved STPI units in the country.

Telecom infrastructure: With close to 900,000 fixed line subscribers, the

city has a tele-density of 15.5%.

Education: Karnataka has a strong educational infrastructure, with

thousands of schools and colleges adding to the talent pool every year. Of the

66 engineering colleges in the state, 26 are located in and around Bangalore.

The city houses the nation’s premier science school–the Indian Institute of

Science–and research-oriented public sector majors like Hindustan Aeronautics

(HAL), Bharat Heavy Electricals (BHEL), ITI and Indian Space Research

Organization (ISRO).

Physical infrastructure: With infrastructure bottlenecks abound, the

city needs much to be desired. Inadequate roads, power shortage and rising

pollution is among the topmost worries. The city’s public transport

infrastructure is too thinly spread. It’s 840-km road support 1.31 million

vehicles, compared to Delhi’s 26,000-km network that supports 3.61 million

vehicles. Though it has to be noted that in Bangalore, almost three out of every

four vehicles are two-wheelers.

Power: Industries have to cope with frequent power cuts. Cuts at

industrial installations average 4 hours a day, while those at residential areas

average about 2 hours.

Real estate: The real estate market in Bangalore, which has

traditionally been driven by the IT sector, has suffered a minor setback in

recent times, with corporates adopting a wait and watch approach to expansion.

However, the growth in ITeS units has added to the rates’ buoyancy. It is also

expected to account for a sizable part of the market in the next two quarters.

Transportation: Bangalore is connected well via rail and road to

Chennai, the nearest metro. It is also connected with all major Indian cities by

air transport. The Bangalore airport handles an estimated 45 flights a day,

though it is much smaller than those at Delhi and Mumbai.

TEAM DQ



Source: The ITeS Super Nine, a report by Nasscom