The proposed scheme would incentivize the purchase of domestically manufactured servers and is expected to be in line with the draft Data Policy currently awaiting Cabinet approval.

The Indian government is proposing an incentive program worth Rs.12,000 billion to encourage companies to set up data centers across the country, according to Economic Times report.

According to the report, the government expects domestic and international companies to invest 3 lakh crore over the next five years as part of the hyperscaled data center plan, and is planning additional incentives such as three percent to four percent of the capital investment, as well as real estate servicing and faster settlements.

The government’s move to incentivize the establishment of data centers in India could coincide with the recent government push for data localization, such as the Reserve Bank of India’s data localization guidelines for payment companies. According to RBI guidelines, payment companies are required to store all user data in India and data processed abroad must be located in less than 24 hours.

Important details about the incentive system

The ET report shared the following details about the incentive system:

  • The scheme will suggested from the Ministry of Electronics and Information Technology (MeitY) to promote the domestic manufacturing of high-end servers.
  • A percentage incentive is granted when purchasing domestically produced servers that can be used in the data centers.
  • The incentive system is reportedly being merged with MeitY’s draft Data Directive 2020.
  • Since most of the data centers are centered around Delhi, Noida, Gurugram, Mumbai, Chennai, Bengaluru and Hyderabad, Forward Guidelines of the respective state governments are provided to the companies SOPs for the establishment of data centers in each part of the country in order to remedy the regional imbalance.

A senior government official told ET that business simplicity must be improved and other bottlenecks addressed in order for the program to be successful.

Brief summary of the draft Data Center Policy, 2020

MeitY presented the draft data center policy in 2020, which is currently awaiting approval from the cabinet. Here are some of the key features of the policy:

  • The policy aimed to create a new industry body, the Data Center Industry Council (DCIC), to work with the data center industry and government. MeitY would have responsibility for this industry body.
  • An Interministerial Empowered Committee (IMEC) would be formed and chaired by the MeitY secretary.
  • Politicians claimed it would boost domestic production by reducing the country’s overall import load and local participation in data center businesses, while attracting foreign investment.
  • Provision of the infrastructure status: The directive would refer to data centers as “infrastructure” rather than “industry” to make credit easily accessible. Data centers would also be identified as essential services within the meaning of the law, such as telecommunications networks.
  • Incentive system for data centers (DCIS): A scheme would be formulated to provide data centers with “tax and non-tax” incentives and to show tax breaks for the sector.
  • Land: States and Union Territories would be encouraged to provide land parcels for data center parks, along with community supplies such as water, electricity, etc.
  • Data center economic zone scheme (DCEZ): The guideline also proposed the establishment of four economic zones for data centers, similar to the special economic zones, with a non-IT and IT infrastructure, connectivity, power supply and a regulatory environment.

MediaNama had submitted an RTI to MeitY to request a copy of the responses to the draft Data Center Policy 2020. However, the ministry refused to provide a copy as the matter was being processed.

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