The finance minister granted infrastructure status to the data center industry while announcing the Budget 2022-23 on Tuesday — a decision which has been welcomed by the industry.
“Data centers and energy storage systems including dense charging infrastructure and grid-scale battery systems will be included in the harmonized list of infrastructure. This will facilitate credit availability for digital infrastructure and clean energy storage,” said finance minister Nirmala Sitharaman.
Being a capital-intensive industry, this would be critical for the industry to be able to grow rapidly and in sync with the needs of data localization and digital India, said Devroop Dhar, co-founder, Primus Partners. “This would also help Indian companies in this space to compete with its global peers and thus provide more choice and better service to end clients. We expect to see tremendous growth in this segment, which would bring in more high-end technical jobs. This can also be a scope for states to attract data center industry, as presently most of it is concentrated in 2-3 regions only,” added Dhar.
Ind-Ra estimates that total investment in the Data-center industry in India to touch Rs 70,000 -72,000 crore over the next five to ten years. Going by the historical trend, between 40-50% of the total investment was funded by debt with average tenure between 3-7 years, it said.
“Given that data center investment has a long gestation period (payback period of 3-6 years), access to cheap and long-duration funding was required. Granting infrastructure status to data centers would certainly pave the way for the same,” said Prashant Tarwadi, Director, India Ratings and Research (Ind-Ra).
Discover the stories of your interest
According to Piyush Somani, chief executive of ESDS Software Solution, a cloud service and data center firm, the current power consumption of data centers in India is about 500 MW and is expected to touch 100GW over the next decade.
India is fast emerging as a location of choice for data center majors and recent data from Cushman & Wakefield showed that a total $11.4 billion investment has been planned and committed for data centers development in the country and global firms’ contribution out of this is more than 65%.
“The demand from upcoming data centers in the Mumbai region alone is around 4GW, which will be a difficult task. The infrastructure status for data centers, infrastructure status for power storage and curbing the monopoly of power discoms have been welcome announcements in the budget. Data centers in India need to maintain twice their capacity as backup due to the issues in power sourcing. This also provides us more flexibility on how we source power,” said Somani.
ET had reported last year that government has
drawn up an ambitious scheme to give incentives to the tune of Rs. 12,000 crore to Rs. 10,000 crore to companies to set up data centers in the country. Under the hyperscale data center scheme, the government is targeting investment of Rs. 3 lakh crore in the next five years and is planning to dole out anywhere between 3-4% of capital investment as incentive to companies along with other benefits such as real estate support and faster clearances. Officials said that the government’s vision is to “make India a global data center hub”.
