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Government pushes for data centres in India, announces 12,000 crore incentive scheme: Report

The proposed scheme would provide incentives on purchase of domestically manufactured servers, and is said to be in line with the Draft Data Policy currently awaiting cabinet approval. 

An incentive scheme of Rs 12,000 crore is being proposed by the Indian government to encourage companies to set up data centres across the country, as per an Economic Times report

According to the report, the government is expecting an investment of ₹3 lakh crore, from domestic and international companies, in the next five years as a part of the hyper-scale data centre scheme and is planning to provide other incentives such as three per cent to four per cent of capital investment, along with real estate support and faster clearances. 

The government’s move to provide incentives for setting up data centres in India might be in tandem with the government’s recent push for data localisation like the Reserve Bank of India’s data localisation guidelines for payment companies. As per the RBI guidelines, payment companies are mandated to store all user data in India and data that is processed overseas needs to be localised in under 24 hours.

Key details about the incentive scheme

The ET report shared the following details regarding the incentive scheme: 

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  • The scheme is being proposed by the Ministry of Electronics and Information Technology (MeitY) to promote the domestic manufacturing of high-end servers.  
  • There will be an incentive of a specific percentage on the purchase of servers from domestic manufactured sources which can be deployed in the data centres. 
  • The incentive scheme is reportedly in tandem with the Draft Data Policy, 2020 introduced by MeitY. 
  • Since most of the data centres have been centred around Delhi, Noida, Gurugram, Mumbai, Chennai, Bengaluru and Hyderabad because of forward policies by the respective state governments, SOPs will be available to companies for setting up data centres in any part of the country to address the regional imbalance.

A senior government official told ET that the ease of doing business needs to be improved and other bottlenecks need to be addressed for the purpose of the scheme to be successful. 

Brief summary of Draft Data Centre Policy, 2020 

MeitY had introduced the Draft Data Centre Policy in 2020 which is currently awaiting cabinet approval. Here are a few key features of the policy: 

  • The policy sought to create a new industry body, Data Centre Industry Council (DCIC) to collaborate with the data centre industry and the government. MeitY would have jurisdiction over this industry body. 
  • An Inter-Ministerial Empowered Committee (IMEC) would be formed and chaired by the MeitY secretary.
  • The policy claimed that it would promote indigenous manufacturing, by reducing the overall import burden of the country, and local involvement in data centre businesses, while also courting foreign investment. 
  • Provision of Infrastructure status: The policy would designate data centres as “infrastructure” instead of “industry” in order to make credit easily accessible. Data Centres would also be designated as an essential service under the law, like telecom networks. 
  • Data Centre Incentivisation Scheme (DCIS): A scheme to provide “fiscal and non-fiscal” incentives to data centres would be formulated, indicating tax breaks for the sector. 
  • Land Parcels: States and Union Territories would be encouraged to provide land parcels for Data Centre Parks, along with municipal supplies such as water, electricity, etc. 
  • Data Centre Economic Zone Scheme (DCEZ): The policy also proposed to set up four data centre economic zones, akin to Special Economic Zones, with a non-IT and IT infrastructure, connectivity, power and regulatory environment. 

MediaNama had filed an RTI with MeitY to request a copy of the responses to the Draft Data Centre Policy, 2020. However, the Ministry refused to provide a copy citing that the matter is under process.

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