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Infosys to get steep concessions to develop Kolkata centre

LiveMint logoLiveMint 05-09-2017 Arkamoy Dutta Majumdar

Kolkata: The West Bengal government has agreed to offer path-breaking concessions to Infosys Ltd to get the software services firm to develop its 50-acre plot in Rajarhat township near Kolkata.

West Bengal will allow Infosys to use up to 49% of the plot allotted in 2010 in any manner it likes, and has also agreed to the firm scaling down its investment and job creation commitments.

These concessions are to be granted to compensate Infosys for the tax breaks that the state had promised in 2010. After Mamata Banerjee took office as the chief minister in 2011, she declined to honour the state’s commitment to allow Infosys to develop a special economic zone (SEZ), citing her political reservations about special trade laws in such enclaves.

That hobbled the project, which hasn’t moved in the past seven years.

The Infosys management is of the view that a 50-acre development centre in Kolkata is no longer viable, said a key official in West Bengal, who asked not to be identified.

“The state had reneged on contractual commitments, so it had to make it up to Infosys in some manner,” this person added.

A spokesperson for Infosys declined to comment, saying that the firm had nothing to add to the statement made last week. On 29 August, after the chief minister announced the company’s renewed interest in Kolkata, Infosys said it had agreed to start construction of its development centre in Kolkata, which will have capacity to seat up to 1,000 people.

Back in 2010, the state had granted 50 acres each to Infosys and Wipro Ltd. The companies paid Rs75 crore each, much less than the prevailing market rate. The concession was given to get these companies to set up development centres and create jobs.

At that time, Infosys had committed to invest Rs500 crore and create up to 5,000 new jobs, said a former state government official who was closely involved in drafting the agreement. Banerjee said last week that Infosys will invest only Rs100 crore and create up to 1,000 new jobs.

In 2010, the state’s industrial policy allowed the government to offer “special concessions” based on the merit of a project, the retired official said, asking not to be named. In the case of Infosys, the aim was job creation.

At the same time, it was made clear that if Infosys failed to fulfil its commitments, it would have to pay the market price for the land, the former bureaucrat added. The plot allotted to Infosys is now worth at least Rs500 crore, according to this person.

Under the new terms to be ratified by the state cabinet, Infosys will be given the right of “mixed development”, said the serving official, cited above. It means Infosys’s proposed development centre has to occupy at least 51% of the 50-acre plot allotted to it at a concessional price. And once the precedent is created, the same concession is likely to be offered to other firms as well such as Wipro, this person added.

The revised deal has “political implications”, so it had to be cleared by the chief minister herself. “The pace at which she made up her mind shows how keen she is to get companies such as Infosys and Wipro to invest in West Bengal,” the official said.

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