Rs 20,000 crore IT park scam

Oct 14, 2011, 10:03 IST | Team MiD DAY

Dotting many of the IT parks across the state are arbitrary establishments that have nothing to do with information or technology, but a lot with exploiting benefits provided under IT policy

Dotting many of the IT parks across the state are arbitrary establishments that have nothing to do with information or technology, but a lot with exploiting benefits provided under IT policy

While one could gasp at the amount of space -- on land and in news headlines -- that upcoming and existent info-tech enterprises have grabbed, it has emerged that not as much is actually being done for what is touted as the driving force in scripting India's success story. Many of the Information Technology parks across the city and on the outskirts are now housing a number of shops and other establishments that have nothing to do with IT, in contravention to the rules governing land meant for IT parks.

MiD DAY found that while establishments like ayurvedic outlets, watch and leather stores have opened shop in certain IT parks in Navi Mumbai, and other unrelated companies can also be found sharing the space reserved for IT. 

Sanjay Chaturvedi, executive editor, Accommodation Times, said, "According to NASCOM, we require to generate 5 million jobs by 2015 in the IT industry. If IT parks are used for purposes other than for which they were constructed, 5 million jobs may get wasted in the economy. Only big IT companies from abroad can generate such a massive scale of economic growth by investing in India." Many others have voiced their concerns (see 'Expertspeak').

Out of line
When the government gave the green light to develop IT parks it was understood that these would have IT establishments and allied services, which include outsourcing of processes that can be enabled with IT and covers diverse areas like finance, HR, administration, health care and telecommunicaions etc in conjunction with technology.

A few years later, after the IT park boom, the IT industry saw a slack period. It is believed that IT park owners then gave out the land to other establishments that have nothing to do with IT. These commercial businesses are subsequently reaping special benefits meant for IT parks.  

According to data available from the industry department (copy with MiD DAY) of the state government, approximately 100 IT parks located in Mumbai, Navi Mumbai, Thane and Pune have been registered with it since 2002 until March this year. And another 340 have been issued the Letter of Intent in the said areas.

"As per the norms, a developer has to first obtain the letter of intent for constructing an IT park to avail certain exemptions. On completion of the construction work, as per the prescribed norms under the IT policy, the developer may or may not register the IT park with the industry department. The local civic body is responsible to keep a check on the usage of the space," said an official from the industry department, Mantralaya.

Himadri Mayank, assistant vice-president, Research and Real Estate Intelligence Service at Jones Lang LaSalle India, said, "Mumbai and NCR-Delhi are the only two major cities in the country where non-IT space constitutes more than a third of city's total office stock. Bangalore, Chennai, Pune, Hyderabad and Kolkata have 55-65 per cent of office space devoted to IT. Special Economic Zones (SEZs) are gradually becoming operational and constitute 17 per cent of the total operational stock."

Big money, big space 
A city-based real estate broker, who also operates in Navi Mumbai and Pune, said IT park rates could vary between Rs 1-1.60 lakh per sq m in Mumbai. However, the same can be between Rs 35,000-60,000 per sq m in Navi Mumbai, and Rs 40,000-70,000 pr sq m in Pune. Hence, at the average of Rs 50,000 per sq m, the cost would cross Rs 20,000 crore for the nearly 4 crore sq m of IT Park in the three municipalities.

"Maharashtra accounts for more than 30 per cent of the country's software exports, with over 1,200 software units based in the state, thus providing a familiar and friendly environment to IT companies. The whole state has been connected through an optical fibre cable network; a statewide network of competent training institutions has been established for building a pool of world-class IT professionals in order to provide strength and support to the IT sector in the state. Besides, the state government has framed an IT policy to make Maharashtra the most-favoured destination for investments in the IT and ITES industry, which was amended thrice," said another Mantralaya official.

The Maharashtra IT/ITES policy was revised thrice since its inception in 1998. Initially only IT companies could avail of benefits under the policy or have offices in IT parks, but in 2003, an amendment provided wider scope and 80 per cent of IT companies and 20 per cent ITES services could avail of the facilities and have offices in IT parks. In 2009, the policy allowed 50 per cent IT companies, 30 per cent ITES and 20 per cent support services to avail of the benefits.

According to a senior Mantralaya official, at present, there is no governing body other than the local civic body, which as per the Development Control Regulations, allows the developer to carry out construction.

"We are not the authority to check if there is any misuse of IT park across the state. If at all anybody brings to our notice any such violation, we can ask the local civic body to look into the matter and take the necessary action. If even a single unit in the IT park is found doing non-IT related activity as mentioned in the IT policy, the project could even lose the IT park status, and penalty could be imposed on the developer. The civic body can take action for violation of FSI."

Attempts made to contact state Industry Minister Narayan Rane did not yield any result as he was in Kankavli in Konkan.

Findings from the field
MiD DAY visited some of the IT Parks and found they were housing services and firms that have nothing to do with information or technology. Some of the proprietors of these alternative producers/services either dodged our questions, or claimed ignorance of the law. Only a few had answers.

Infotech Park
Location: Belapur railway station, Navi Mumbai
Unit: Patanjali Chikitsalay (Baba Ramdev)
Response: Mukesh Upadhyay, a partner in Pantanjali Chikitsalay, said, "We were using the unit for selling automobile spare parts initially when we bought two outlets. However, we changed our business and decided
to have a franchise of Patanjali, and since last three years we have been running this Chikitsalaya as a social
service." Upadhayay even claimed of having intimated CIDCO of the usage of IT space for the mentioned purposes. However, he could not produce any documents for verification.

Technopolis Knowledge IT Park
Location: Chakala, Andheri
Unit: M/s Castrol India Pvt Limited
Response: MiD DAY sent an e-mail to the company on the issue, but did not get any response at the time of going to press

Real Tech Park
Location: Sector 30 A Vashi, Navi Mumbai
Unit: Watch World (wrist watch outlet)
Response: A manager at the outlet said they were on rent and refused to speak further.
However, adjacent to his shop was another watch outlet, Just in Time, whose owner, Jayesh Jadhod, said, "I started this retail outlet three months ago. The premises were rented after an appropriate lease agreement with the owner of the property, Real Tech Park. I do not know anything about IT policy."

MiD DAY approached M/s Real Tech park proprietor
Govind Gami of Real Trade Technologies said, "We got a floor-space index (FSI) of 3 for developing the IT park. Although it is basically meant for IT companies, we can give some of the shops in this building to non-IT firms as well. We have had agreements with CIDCO and District Industries Center (DIC) of Thane for the allocation of the shops to IT and non-IT companies. We have allotted them as per the agreement and DIC guidelines."

CIDCO official reacts
A CIDCO official expressed his inability in crosschecking the allocation of shops.
"The state IT policy has been amended from time to time and I am not very sure about the allocation of non-IT companies/units in IT parks under the amended policy. Also, CIDCO does not have any mechanism to keep a check on the developers/owners to find if the premises are actually being used by IT/ITES units."

International Infotech Park
Location: Vashi Railway station, Navi Mumbai
Unit: Jai Bhavani Communications (mobile recharge outlet) 
Response: An attendant at the shop who did not reveal his identity said, "We occupied this unit a few years ago on rental basis. I do not know about the IT park policy, nor did my employer inform me about it."

Sanjay Chaturvedi,
Executive Editor Accommodation Times
According to NASCOM, we require to generate 5 million jobs by 2015 in the IT industry. If IT parks are used for purposes other than for which they were constructed, 5 million jobs may get wasted in the economy. Only big IT companies from abroad can generate such a massive scale of economic growth by investing in India. This is a sheer waste of public resources and the mockery of the IT policy crafted by the government. Immediate action should be taken.

Anil Harish, Advocate
The IT parks policy was specifically designed to encourage the development of IT and everyone has to comply with its conditions. Every user must take care to ensure that their activity is within the scope of the policy. There could be consequences for violation, and everyone must carry out their due diligence (verification) before investing in an IT park.

Vinod Sampat, Stamp Duty Payers Association President, Advocate
It is a financial loss to the state at the expense of some influential persons associated with the builders lobby. It is a wide-in-the-open, 24x7 scam, with the knowledge and connivance of bureaucrats and local body officials. It also raises questions about why disciplinary action is not initiated against corrupt officials.

Paras Gundecha, President MCHI
I am unaware any such happenings. But if it is indeed happening, then it is wrong. Legal action should be taken against those found violating the norms.

Fiscal Benefits for IT/ITES 
* 100 per cent additional FSI shall be made available to all registered IT/ITES units (including telecom manufacturing units) in public and private IT-ITES parks approved by the Directorate of Industries with or without levy of premium.
* IT-ITES units covered under PSI will be exempted from payment of electricity duty. IT/ITES units will be supplied power at industrial rates applicable under MERC tariff orders.
* IT/ITES units (except hardware and telecom hardware manufacturing units) will be allowed in any zone (including residential, no development etc)
* 100 per cent stamp duty exemption to all the registered IT/ITES units in C, D, D+. No Industry District area and low HDI districts  as per the PSI 2007 and Public IT parks, in IT SEZs and in IT Hardware SEZs and Telecom Hardware Manufacturing SEZs in A and B area as classified in PSI 2007
* 75 per cent stamp duty exemption to all IT-ITES units in private IT parks (including IT hardware and telecom hardware manufacturing) in A and B areas
* 90 per cent stamp duty exemption on merger, de-merger and reconstruction of IT/ITES units
* 90 per cent stamp duty exemption to assignment leases of IT/ITES units under section 60 and leave and licence of IT/ITES under section 36 A of the Bombay Stamp Act, 1958.
* Works contract tax on annual maintenance agreements charged at the minimum rates recommended by the Empowered Committee.
* IT/ITES units shall be exempt from Octroi/entry tax or other cess or tax levied in lieu of these
* Property tax shall be levied on IT/ITES units at par with residential rates
* VAT on sale of IT products will be charged generally at the minimum floor rate recommended by the concerned empowered committee at the central government level, barring exceptions

Other benefits
For an industry-friendly and supportive environment, following benefits have been accorded IT/ITES ventures:
* Relaxation in the Shop and Establishment Act with regard to working hours, work shifts and employment of women
* Exemption from maintaining physical records for attendance and salary
* IT/ITES units not discharging process effluents and with less than 100 employees will be exempt from obtaining consent from MPCB
* Promotion of focus sectors- Special attention to the development of special fields such as AVGC (animation, visual effects, gaming and comics) in which the state has particular strengths; AVGC units will be eligible for all the benefits extended to IT units in this policy
* Promotion of Green IT - To ensure growth in the IT sector in an environmentally sustainable and responsible manner
* While procuring IT products, government will give preference to firms that have an expressed end of life products take back policy and e-waste recycling processes.
* Promotion of entrepreneurship and innovations: To promote the establishment of knowledge/resource centres and incubation centres across the state 
* 50 percent of the cost of filing patents will be reimbursed to micro, small and medium IT units covered under the PSI, subject to a maximum of Rs 5 lakh.
* Promotion of brand Maharashtra: To position Maharashtra as a lucrative destination for IT investment
* 50 per cent of the expenditure incurred for certification of CMM level 2 upwards, ISO 27001 for security and COPC and eSCM certification, limited to maximum of Rs 5 lakh, will be reimbursed to micro- and small-scale IT units under PSI scheme

Support services allowed to have office/unit in an IT park
* Banking services
* Medical stores
* Convenience Shopping outlets
* Communication Center
* Conference and Meeting halls
* Travel Agencies
* Food Services, cafeterias, food courts, coffee shops etc
* Dispensaries
* Recreational facilities, gyms, club house etc
* Vehicle service center for automobiles (in Nashik, Nagpur and Low HDI districts)
* Accommodation facilities including hotel/services apartments (in Nashik, Aurangabad, Nagpur and Low HDI districts)

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