Infosys, the country’s second largest information technology (IT) service provider said on Thursday that in maximum a week’s time they will have to apply for special economic zone (SEZ) status due to the sunset clause on the policy.
“We are in a hurry. Within a week maximum we need to know apply for SEZ because if by March 31, 2012, we are not registered we will lose out,” said Binod Hampapur, senior vice-president and global head of commercial and corporate relations at Infosys.
The reason for this deadline is that according to the sunset clause of the central government’s SEZ policy, only the projects cleared before the end of this fiscal will get SEZ benefits.
Realistically, for the clearance to materialise, companies have to put in their applications before the end of February. While the direct tax code (DTC) become applicable from 2014, 20% minimum alternative tax will be imposed on units getting clearances from next fiscal.
More importantly, companies need to apply within the week because the next meeting of the board of approval (BoA) of the central government is scheduled for the second week of March.
This in effect is tantamount to a deadline for the West Bengal government which has, so far refused to send the recommendation of SEZ status for the Rajarhat campus to the central government.
“If we do not get SEZ status, we will have to review options because then the project will no longer be financially viable,” said Hampapur, who is responsible for all land and new project development related issues at Infosys.
More From This Section
Infosys has 50 acres in Rajarhat, which was slated to be the company’s first foray into Bengal. The land bought at Rs 1.5 crore an acre, at a total of Rs 75 crore has been with Infosys with November 2010.
Significant among the “options” that Hampapur refers to, is that the company might return the land and exit the Bengal plan completely.
While Infosys refused to comment on these options, a senior official of the West Bengal IT department confirmed to Business Standard, that the company has, in a letter earlier this week, said that it will return the land if the campus is not given SEZ status.
“Infosys sent a letter earlier this week to Hidco [West Bengal Housing Infrastructure Development Corporation] Infosys cited the clause saying that the government will support it in SEZ status and said that if that did not happen they would be forced to return the land,” the official said.
Infosys had earlier told Business Standard as part of their contract with Hidco, the government was to support their bid for SEZ status for the campus.
When contacted, state IT minister, Partha Chatterjee said that the clause was part of the contract that Infosys had entered into with the earlier government which did not apply to the Trinamool Congress government under Mamata Banerjee.
“Yes it is possible that the SEZ clause was part of the original contract. But it is a fact that we are against SEZ status as part of our policy”, he said, while reiterating that the state government was prepared to go the extra mile to ensure that Infosys got the relevant tax benefits.
“We will approach the central government to give them all tax benefits without the SEZ tag. But we cannot give them this SEZ recommendation,” Chatterjee further said.
That, however, appears in no way sufficient for Infosys, which said that a complicated structure where state will give the benefit of a central policy made no sense.
“SEZ is an important thing for us. We need it, or it will be a disadvantageous situation for the Kolkata campus vis-à-vis other facilities. How will the state give the benefits of a central government policy,” Hampapur said.
Further, the situation has been made worse by the fact that there is no formal communication from the government’s side to Infosys. “Everything we have heard we have heard through the media. They haven’t responded to our letter,” Hampapur further said.
Even as the Mamata Banerjee administration appears to be in no mood to bend on the SEZ status issue, the result might well be another bend in the road for Infosys in Bengal-a project which has been in the works for almost a decade.
It has been marred by issues like cost of land, because Infosys was unwilling to pay the asking price set by the earlier Left Front government. Then the Vedic Village controversy in 2009 had soured matters.
After getting land in 2010, Infosys has been waiting for relevant infrastructure like the approach road to be put in place. In December, when executive chairman, S Gopalakrishnan visited Kolkata he had said that Infosys would start work on the campus in 6 months.
When completed, the campus was slated to provide direct employment to at least 15,000 IT professionals, at an estimated investment of Rs 700 crore from Infosys.
Besides this, given the nature of the IT sector, for every direct job created five indirect jobs would also have been created.
If Bengal were to lose the project, besides the direct loss in terms of jobs created, it would mean an added insult to injury for a state still smarting with the Singur Nano withdrawal since 2008.