National Capital Region (NCR)

NCR: Still a paper tiger?

Budgetary constraints have caused the supply of infrastructure to fall short of demand and this is true of every state in the country, including the National Capital Region (NCR), comprising Delhi, Gurgaon and Noida. Yet Gaurav Patra & Rahul Neel Mani are hopeful that with the number of infrastructure projects being launched the future holds promise

Kiran Karnik points out that inefficient infrastructure increase overall cost and thus prevents further investments

Delhi being the capital of India, both the Centre and the Delhi state government are taking various measures to boost infrastructure facilities to attract fresh foreign and Indian investment in the IT sector. The Delhi state government has taken concrete steps to attract more IT companies to open shop here.

IT in the National Capital Region (NCR) includes three cities located in three different states—Delhi, Gurgaon (Haryana) and Noida (UP). According to Software Technology Parks of India (STPI), the three states in the NCR region together generate software revenues of approximately Rs 5,900 crore. (Revenue-wise the STPI in Bangalore ranks number one).

A recent study commissioned by the Confederation of Indian Industry (CII) and conducted by the Rajiv Gandhi Institute for Contemporary Studies to measure the impact of the economic reform process in different states, says that Delhi ranks first in terms of investment attractiveness among Indian states. CII’s findings add that Delhi, with an overall composite value of 1.4, is ahead of Gujarat, Maharashtra and Goa whose composite values are 1.2, 1.0 and 1.0 respectively.

According to CII’s senior director Ajay Khanna, the next level of reforms will be based on the preparedness of these states vis-à-vis economic parameters highlighted by the study. “By topping the overall composite ranking and being the most attractive city for investments, Delhi has proved its mettle,’’ Khanna adds.

IT policies

Each of the states in the NCR region follow different IT policies. The Delhi government launched a policy to promote ITES under which all ITES companies—including services and training institutions—are entitled for industry status. This makes them eligible for all concessions and incentives applicable to industries. This sector, however, has been exempted from Acts like the Factories Act, Employment Exchanges Act, Payment of Wages Act and Workmen’s Compensation Act. The Delhi government has also promised speedy clearance of ‘right of way’ and the use of utilities like the Delhi Vidyut Board.

The state government of Haryana introduced its IT policy in 2000 to promote establishments that provide ITES or remote services, mainly because these industries boast of a large number of employment opportunities.

State government organisations have also been promised technical know-how, marketing support and financial support for setting up such units. Apart from this, the state government also promises preferential allotment of land, uninterrupted power supply, captive power generation, single desk clearance, rebates on registration and stamp duty and sales tax exemption.

The UP state government launched its IT policy in 1999. The policy is aimed at developing a strong partnership between the government and the private sector for rapid development of IT and ITES in the state. The state government offers IT firms incentives that include preferential allotment of land, uninterrupted power supply, venture capital funding and high quality social infrastructure.

Ground realities

Although NCR has emerged as a favourite destination for IT companies, especially ITES companies, it is not only the policies that have played a vital role in achieving this but also the rapid development of infrastructure. “Facilities like telecom, broadband connectivity and power are indeed critical for the IT industry. In Delhi, we have these facilities in adequate quantity,” claims S Regunathan, principal secretary of IT, Government of Delhi. He adds that with the active involvement of the government, its proactive polices and readiness, Delhi will soon be at par with the other world-class facilities as far as infrastructure for IT is concerned.

Adds Nasscom’s president Kiran Karnik, “Appropriate infrastructure is key to the success of the IT industry. Currently the Indian IT industry is reaching a point where cost and efficiency is important. Inefficient infrastructure increases costs and thus deters further investments.”

“As margins come down it becomes critical in terms of cost. Also, time of delivery is also very critical. For this we need a good infrastructure set-up,” he adds.

As far as infrastructure facilities are concerned, especially telecom, roads and education, NCR is ahead of many Indian states. Major telecom players like MTNL, BSNL and Bharti are headquartered in Delhi. With a teledensity of 15 percent, today Delhi has more than one million cellular subscribers and well over two million fixed line subscribers.

Private players including Reliance Infocomm, Tata Teleservices, Bharti Telesonic offer state-of-the-art enterprise level communication services to companies operating out of Delhi. After the opening up of ILD (International Long Distance) and NLD (National Long Distance) sectors, almost all these service providers have their services floated for key customers in Delhi.

Bharti, through its undersea cable aims to bring the maximum amount of bandwidth to this region. The state carrier, MTNL, has a bunch of services for its customers in Delhi region like basic telephony, I-Net, ISDN services, intelligent network services, Internet services, leased circuits and trunk and mobile services.

Other private players have started offering a similar bouquet of services under an integrated service umbrella and are cashing in on their group companies’ services too. Tata Teleservices, for example, has started offering services, which includes services from Tata Teleservices, Tata Internet Services and VSNL.

Says Prakash Kumar, special secretary for IT, Government of Delhi, “Delhi will soon have broadband on demand, which will further enhance the capacity and will provide better connectivity for those who want to establish their business here.”

Delhi has four universities and there are a number of management institutions, engineering colleges, medical colleges and other professional institutions across the NCR region. And every year, these institutions provide a large pool of professionals to the IT industry.

Private players in collaboration with the state governments can prepare a roadmap for the improvement of infrastructure, says Sameer Kochhar

STPI’s role

STPI’s contribution to the growth of the IT industry in the NCR region has been tremendous, especially in the case of start-ups and small- and medium-sized companies. STPI, as a support organisation, provides technological and infrastructural support to these companies.

But, like any other government organisation, it has also its own limitations. Almost in all STPIs, barring a few, real estate (land acquisition and distribution) is handled by different authorities or by state governments.

Another problem is getting uninterrupted power supply. Considering that software companies and ITES companies work round-the-clock, power supply becomes a major area of concern if one looks at the demand-supply situation in the NCR region.

Water scarcity also adds to the woes at some of the STPIs in this region. At these places the STPI units have banned the digging of tube-wells and so companies have to depend on the municipal water supply.

Challenges

“As far as the Delhi and NCR region is concerned, power and transport infrastructure is very poor. Nasscom has been constantly asking the government to improve the infrastructure provided to the IT industry in India,” comments Karnik.

Adds Dr Sunil K Agarwal, director, STPI-Noida, “Power continues be a major problem for STP units in the NCR region. The concerned authorities should take specific steps to improve the situation.” (Dr Agarwal is also in-charge of all the STPIs of Northern/Upper India).

The power problem gets more acute during the summer season in the NCR region, when the demand is too high and supply is limited. In October 2001, the total shortfall, both industrial and residential, stood at 40.895 million units, translating into a daily average of 1.3 million units.

Says Regunathan, “After privatisation of power distribution in Delhi, there has been an improvement in the availability of power, which is much better compared to the All India Index.”

Apart from the privatisation of power distribution in Delhi, the Power Grid Corporation of India (PGCI) is also planning to link the northern grid with the eastern grid. As per PGCI, the eastern region has surplus power and will continue to do in the future too.

So, by linking these regions one can have the optimal utilisation of existing generating resources, improved availability of power as well as its reliability in the power deficit region. Delhi will clearly be a beneficiary in the Northern Region Grid and power availability in the city might improve with this inter-linking.

In fact, transmission capacity addition under the second phase has already begun with the first pole of Talcher-Kolar HVDC link commissioned recently. The second phase is ready and achieved full 2,000 MW power transfer capacity in March 2003.

In addition, the 1,000 MW Raipur-Rourkela 400 KV direct current line is also expected to be functional soon. Thus, the inter-regional power transfer capacity of 5,000 MW achieved at the end of the first phase of the National Grid has now grown to 8,000 MW by March 2003.

And so it seems that in future power will not be much of a problem in the NCR region, but presently this region suffers from frequent power cuts and the sales of UPS systems and power back-up systems is highest in this region.

While communication infrastructure is very critical for the IT industry, physical infrastructure like power and transport also plays an important role.

Apart from power, another major infrastructural hurdle in the NCR region is transport, especially public transport. (One evident effect of deficiencies in public transportation is that over 90 percent of the on-road vehicles are cars and two wheelers)

Delhi has more private vehicles than Mumbai, Chennai and Kolkata put together. But as far as connectivity with places outside the capital is concerned, Delhi is one of the best-connected cities in the country, for both domestic and international traffic.

The transport infrastructure is likely to improve in the coming years with the Delhi Metro Rail Corporation’s (DMRC) ‘Metro Rail’ initiative. Three lines of DMRC will be fully operational by the end of 2005 covering many parts of Delhi. The Metro will cover a distance of 62 km both underground and overground in three phases between December 24, 2002 and September 2005.

When complete, the Metro is expected to ferry 2.5 million commuters daily, resulting in saving 2.6 million manhours every day and cutting travel time by as much as 50 percent.

In terms of transport, NCR should logically have connectivity between Delhi, Noida and Gurgaon through Metro rail so that there is a smooth movement and companies do not face issues like transport and traffic problems, which are a common occurence at present.

Although, Delhi’s real estate prices are lower compared to Mumbai, prices are still considered to be on the higher side and have steadily increased over the past few years.

“The cost of land and built-up property in Delhi is very high and this has been one of the major reasons IT companies shifted operations to nearby areas,” comments Prakash Kumar, secretary, land building & administrative reforms and special secretary IT, Government of Delhi.

The Uttar Pradesh government has already decided to allot land in Noida and Greater Noida for the IT industry at a preferential rate and with topmost priority. Various pockets in Noida and Greater Noida have been fully converted into electronic cities and will house prominent IT players. Noida, in fact, has also been termed as ‘Smart City.’

Conclusion

Each region within NCR has its own shortcomings. While Noida is better in terms of power back up, Delhi is better in terms IT infrastructure and communication, but has high real estate prices. Gurgaon has good real estate infrastructure, but its transport facilities are poor.

Private participation in infrastructure will hopefully speed up the growth process. “In terms of private participation, what is needed is common goal setting with the government in collaboration with the IT secretaries of different states. By doing this, they can prepare a roadmap for the improvement of infrastructure,” suggests Sameer Kochhar, CEO, Skoch Consultancy.

In the days to come, the Government of Delhi is planning to set up IT Parks in collaboration with the DMRC. The government will use the space acquired by DMRC for developing IT parks and hubs along with the metro stations.

Apart from this, a number of private business parks like DLF Hi-tech Park in Gurgaon and Logics Park in Noida are coming up. STPI is also in the process of tying up with some ILD carriers to provide voice connectivity to STP units.

Both the state governments and private players are investing a lot in terms of effort and money and one hopes that the near future will see a much better infrastructure facilities in the NCR region.

 — With inputs from Shipra Arora and Punita Jasrotia