 "Ajay Pandey")
Prime minister Narendra Modi’s pet project since his days as the chief minister of Gujarat, Gujarat International Finance Tec-City or Gift City at Gandhinagar, has attracted admirers and detractors both. Gift City managing director and group chief executive Ajay Pandey tells Vinay Umarji that recent moves by the Centre and state governments will boost the project. Edited excerpts:
What has been the progress of infrastructure development within and outside the SEZ (special economic zone) area?
By September, roughly 100,000 square feet of area will be operational, where people will set up their offices for IFSC (international financial services centre) or any other SEZ activity. The shift to towers will happen later. A lot of hardware (infrastructure) is already operational, including amenities like restaurants and medical shops. On the software (regulations/enablers) side, there are some enabling factors that are being set in place.
For any IFSC to be successful, first, you need a competitive tax regime announced recently in the Union Budget. The second enabler is the ease of doing business. In this case, apart from simplifying our own processes, we have been able to work with the government of India to ensure that over 50 clauses which are mandatory under the companies law, have been relaxed for companies coming into the facility. For a credible dispute resolution mechanism, we have been able to sign up with Singapore International Arbitration Centre (SIAC).
All these have helped in an uptick in business environment at the Gift City. Currently, we have 22-23 occupants in the SEZ area. Out of this, seven to eight are banks that have started operations with over half a billion dollar worth of transactions. We expect some of the bigger Indian banking names to come up soon, too, apart from insurance companies and capital market players.
What are the regulatory approvals Gift IFSC has received so far from regulators?
The umbrella approvals were released in April in a booklet. It has sections by all three major regulators defining activities and regulations. We also worked with CBDT (Central Board of Direct Taxes) on details announced in the Union Budget. RBI (Reserve Bank of India) also started giving licences to banks to operate from here. As mentioned before, we have tied up with SIAC for dispute resolution.
Income tax in the profit stage will be zero in the first five years. For the next five years, 50 per cent of profits will be exempted. For companies where MAT (minimum alternate tax) is applicable, the same has been brought down from 18 per cent to nine per cent. There is no withholding tax, no dividend distribution tax, long-term capital gains have been waived, and commodity transaction tax as well as security transaction tax have been made zero, apart from regular SEZ benefits.
It is being argued that such benefits will not be enough to attract much business from FIIs (foreign institutional investors)?
Six months ago, even these benefits were not there. So, we have made progress. There are multiple issues that sectors are looking at. For instance, can an Indian resident invest in foreign share and what are the regulations around it? There is a long list of things that can be done. Are we in discussions with the regulator? The answer is yes. Is this a comprehensive list? The answer is no. As I said, let the whole situation settle down and let it evolve before we can talk about other issues.
Are you on track for completing the projects on time?
We had said the first phase of our infrastructure development would be done by 2017 — a feat which has been achieved. This includes roads and power, which are on track. This year will primarily be spent on augmentation of capacities as people are moving into the city and growth of infrastructure is taking place. Overall, the final project completion is going right up to 2024.
While the infrastructure development is on schedule, promulgation of some of the rules and regulations has happened in the past four to six months only. The Union Budget, too, got passed in May. The Gujarat government's IT (information technology) policy was announced in February. Hence, it is important for people to understand that while creation of hardware is in place and on time, the enablers have come in only recently. Exactly a year ago, 400 to 500 people were working here — there are 3,000 now. Clients have been signed up but they take time to bring in their people; however, these things are on track.
What kind of activities are taking place within the IFSC and the domestic area in Gift City?
On the domestic side, we are seeing normal banking operations. Oracle has set up offices where software development is happening. There are other companies operating in KPOs (knowledge process outsourcing) or chip design domain. Then, there are other administrative offices. All services-related activities are happening from the domestic area right now. In the IFSC, only the banking sector, which is organising buyer's credit and external commercial borrowings, is operational. Now Indian banks can organise foreign funding from here. Also, wholly- owned subsidiaries or joint-venture companies that used to go to Dubai or Singapore for raising funds, can do the same here.
What has been the fund infusion by GIFTCL (Gujarat International Finance Tec-City Company Limited)? How much more is likely to be infused?
In the first phase, Rs 2,000 crore is being envisaged, of which Rs 1,200 crore is debt and rest internal accruals. Assuming we reach the 2024 stage, the overall project infusion will be close to Rs 78,000 crore, including that from developers. GIFTCL itself is looking at Rs 8,000-10,000 crore worth of infusion across all our phases put together.
What has been the progress of infrastructure development within and outside the SEZ (special economic zone) area?
By September, roughly 100,000 square feet of area will be operational, where people will set up their offices for IFSC (international financial services centre) or any other SEZ activity. The shift to towers will happen later. A lot of hardware (infrastructure) is already operational, including amenities like restaurants and medical shops. On the software (regulations/enablers) side, there are some enabling factors that are being set in place.
For any IFSC to be successful, first, you need a competitive tax regime announced recently in the Union Budget. The second enabler is the ease of doing business. In this case, apart from simplifying our own processes, we have been able to work with the government of India to ensure that over 50 clauses which are mandatory under the companies law, have been relaxed for companies coming into the facility. For a credible dispute resolution mechanism, we have been able to sign up with Singapore International Arbitration Centre (SIAC).
All these have helped in an uptick in business environment at the Gift City. Currently, we have 22-23 occupants in the SEZ area. Out of this, seven to eight are banks that have started operations with over half a billion dollar worth of transactions. We expect some of the bigger Indian banking names to come up soon, too, apart from insurance companies and capital market players.
What are the regulatory approvals Gift IFSC has received so far from regulators?
The umbrella approvals were released in April in a booklet. It has sections by all three major regulators defining activities and regulations. We also worked with CBDT (Central Board of Direct Taxes) on details announced in the Union Budget. RBI (Reserve Bank of India) also started giving licences to banks to operate from here. As mentioned before, we have tied up with SIAC for dispute resolution.
Income tax in the profit stage will be zero in the first five years. For the next five years, 50 per cent of profits will be exempted. For companies where MAT (minimum alternate tax) is applicable, the same has been brought down from 18 per cent to nine per cent. There is no withholding tax, no dividend distribution tax, long-term capital gains have been waived, and commodity transaction tax as well as security transaction tax have been made zero, apart from regular SEZ benefits.
It is being argued that such benefits will not be enough to attract much business from FIIs (foreign institutional investors)?
Six months ago, even these benefits were not there. So, we have made progress. There are multiple issues that sectors are looking at. For instance, can an Indian resident invest in foreign share and what are the regulations around it? There is a long list of things that can be done. Are we in discussions with the regulator? The answer is yes. Is this a comprehensive list? The answer is no. As I said, let the whole situation settle down and let it evolve before we can talk about other issues.
Are you on track for completing the projects on time?
We had said the first phase of our infrastructure development would be done by 2017 — a feat which has been achieved. This includes roads and power, which are on track. This year will primarily be spent on augmentation of capacities as people are moving into the city and growth of infrastructure is taking place. Overall, the final project completion is going right up to 2024.
While the infrastructure development is on schedule, promulgation of some of the rules and regulations has happened in the past four to six months only. The Union Budget, too, got passed in May. The Gujarat government's IT (information technology) policy was announced in February. Hence, it is important for people to understand that while creation of hardware is in place and on time, the enablers have come in only recently. Exactly a year ago, 400 to 500 people were working here — there are 3,000 now. Clients have been signed up but they take time to bring in their people; however, these things are on track.
What kind of activities are taking place within the IFSC and the domestic area in Gift City?
On the domestic side, we are seeing normal banking operations. Oracle has set up offices where software development is happening. There are other companies operating in KPOs (knowledge process outsourcing) or chip design domain. Then, there are other administrative offices. All services-related activities are happening from the domestic area right now. In the IFSC, only the banking sector, which is organising buyer's credit and external commercial borrowings, is operational. Now Indian banks can organise foreign funding from here. Also, wholly- owned subsidiaries or joint-venture companies that used to go to Dubai or Singapore for raising funds, can do the same here.
What has been the fund infusion by GIFTCL (Gujarat International Finance Tec-City Company Limited)? How much more is likely to be infused?
In the first phase, Rs 2,000 crore is being envisaged, of which Rs 1,200 crore is debt and rest internal accruals. Assuming we reach the 2024 stage, the overall project infusion will be close to Rs 78,000 crore, including that from developers. GIFTCL itself is looking at Rs 8,000-10,000 crore worth of infusion across all our phases put together.
