Data centres – the new infrastructure of India

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Mumbai: Finance Minister Nirmala Sitharaman during the Union Budget 2022 on Tuesday announced that data centres and energy storage systems will be given infrastructure status. This will provide easy financing to the data centre sector, according to Finance Minister Sitharaman. Certainly, the new status of data centres as infrastructure means more than a policy change.

Data centres as the new infrastructure

It is likely to trigger financial and commercial activities that will lead to a positive impact on other sectors like banking, construction, power, technology hardware, employment and more. And not just the Indian data centre sector alone.

Further, this policy shift will present a big window of opportunities for the data centre sector that remains largely under the shadow of the booming IT and tech industry in India.

Industry executives and experts believe that the government’s decision to consider data centres as infrastructure will help to boost the economy.

“The infrastructure status allows data centres to play a key role in enabling the digital economy. Must thank the government for granting infrastructure status to the Indian data centres,” said B.S.Rao, VP – Marketing, CtrlS Datacenters.

“It will help data centres in the country gain easier access to institutional credit perhaps at lower rates, attract foreign investments and private capital. Besides accelerating data centre deployments in tier-II, tier- III cities aligned with the roll-out of digital banks, digital universities, digital payments, Bharatnet (OFC) across all villages thus paving the way for a vibrant Digital India,” added Rao.

According to ESDS Software MD and Chairman Piyush Somani, the Union Budget FY 22 gives a massive boost for the data centre sector with the granting of infrastructure status. “We believe this will help data centre operators get long-term debt at a much lower cost. Ambiguity around data centre operations would also ease-out,” said Somani.

“Further this allows the data centre operators to buy power from multiple power discoms eventually helping in avoiding monopolies, high tariffs and dependencies. We believe that these decisions will amplify the growth of data localisation and the data center industry in overall,” added Somani.

“We are very pleased with the declaration of data centres as part of a harmonized list of infrastructure. This listing gives us the benefit of working with bank centred facilities,” said Ritesh Khandelwal, CFO – NxtGen Datacenter and Cloud Technologies.

“Earlier data centres were under IT/ ITES (IT Enabled Services), but by having them listed as infrastructure providers, we now have access to low-rate loans which is a straightforward benefit to the industry,” commented Khandelwal.

Now with the granted infrastructure status, there’s a growing expectation that it should also get essential services status.

“With a growing dependence of businesses on digital infrastructure I am delighted that data centres are finally being given the status of infrastructure. Optimistically, I hope that soon they will also get the official status of essential services,” said Sharad Sanghi, MD – NTT Ltd in India.

“The budget also accords infrastructure status to energy storage systems, and provides additional incentives of 19500 crores for setting up integrated solar module units to meet ambitious target 280 GW of solar power. This highlights the government’s commitment towards green energy, sustainable development and climate change initiatives,” added Sanghi.

Interestingly, the government’s decision to consider data centres as infrastructure comes at a time when India is gearing up for its data protection laws. And certainly, that move will further increase the significance of data centres and data in the country.

“With data centres having been moved to a harmonized list for infrastructure sectors. This only will incentivise players as the need for data localization and storage requirements increase, with the existing norms, and the pending data protection legislation,” commented Abhishek Malhotra, Managing Partner, TMT Law Practice.

“An infrastructure status for the data centre industry means that data localization and affordability of high-end data centres will be more accessible now,” said Sanjay Motwani, VP – APAC, Legrand Data Center Solutions.

The status of data centres as infrastructure, according to Motwani offers a lot of encouragement to the continuous efforts of the data centre industry in India.

“For Indian businesses, it offers a chance to avail long term data centre services at lower investment rates. It will also empower the sector to hire more skilled talent and make our country a global hub for data centres,” opined Motwani.

“This initiative is what we had been hoping for, and we are absolutely elated that it’s coming to fruition through the efforts of the central government and the data centre sector collectively,” added Motwani.

However, the FM Sitharaman also announced other initiatives in the digital connectivity, 5G spectrum, digital currency along with considering data centres as infrastructure. And this is likely to expand the number of data centres and their capacity in India.

“The data centre industry capacity is expected to double from 499 MW in H1 2021 to 1008 MW in 2023. Increasing optic fiber network and 5G spectrum allocation would mean higher digital push which will increase real estate demand,” commented Radha Dhir, CEO & Country Head, India, JLL.

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