Information Technology
Policy of Govt. of Tamil Nadu

Government Of TAMIL NADU
Industries Department
- Abstract -

 

INFORMATION TECHNOLOGY INDUSTRY POLICY OF
Tamil Nadu 1997 – Issued

G.O.MS.No.300, IND (MIE.2) DATED 3rd NOVEMBER 1997

ORDER

 
The Information Technology (IT) Industry in India is among the fastest growing segments of the Indian Industry, compounded with annual growth rate exceeding 50%. Tamil Nadu’s contribution to IT industry is significant. The key elements which have made Tamil Nadu an important place in this area are availability of skilled and educated manpower, comparatively higher standard of Educational Institutions, sound infrastructure and lower costs of operation. Apart from these, the presence of an International Airport and major seaport in Chennai have also helped the growth of IT industry in Tamil Nadu. The potential for further growth of IT industry in Tamil Nadu is enormous with IT penetrating all spheres, including Government Departments, Educational Institutions, Banking, Shopping, Entertainment and a whole gamut of other consumer applications. With the aim of achieving the goals spelt out in the IX Five Year Plan and to focus attention on the IT industry as an engine of growth in the State, it has been decided to formulate in Industry specific policy for the IT industry.

Accordingly after detailed discussions with the representatives of manufacturers Association for Information Technology (MAIT) and various Governments Departments/ Agencies, the Government are pleased to formulate and adopt an exclusive IT policy as appended to this order.

The IT policy is issued with the concurrence of CT&RE, and Finance Departments – vide their U.O. No. 26413 / B2 / 97-1, dated 21.8.97 and U.O.No.489/FS/97, dated 1.9.97 respectively.

(BY ORDER OF THE GOVERNOR)

M S SRINIVASAN
Secretary to Government

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To
The Works Manager, Government Central Press, Chennai-79. (for publication in the next issue of T.N. Government Gazette. He is also requested to print and supply 1000 copies of the IT policy to the Industries Department in book form)

The Chairman and Managing Director, Electronics Corporation of Tamil Nadu Ltd.,
Chennai – 35.

The Chairman and Managing Director, Tamil Nadu Industrial Development Ltd., Chennai-8

The Managing Director, State Industries Promotion Corporation of Tamil Nadu (SIPCOT), Chennai-8

The Managing Director, Tamil Nadu Corporation for Industrial Infrastructure Development, Chennai-6

The Director, Industrial Guidance and Export Promotion Bureau, Chennai-8

The Secretary to Government, Finance Department

The Secretary to Government, Commercial Taxes and Religious Endowment Department.

The Secretary to Government, Energy Department

The Secretary to Government, Environment and Forest Department.

The Secretary to Government, Information and Tourism Department

The Secretary to Government, Higher Education Department

The Secretary to Government, Small Industries Department.

The Secretary to Government, Municipal Administration and Water Supply Department.

Copy to all Departments of Secretariat.

The Industries Commissioner and Director of Industries and Commerce, Chennai-5.

The Commissioner of Commercial Taxes,, Chennai-5

The Chairman , Tamil Nadu Pollution Control Board, Chennai-32

The Chairman, Tamil Nadu Electricity Board, Chennai-2

The Officer on Special Duty, TANITEC, Chennai-35

The Chairman, Southern Region, Manufacturers’ Association for Information Technology, No.4-L, Block. I Floor, J.C. Road, Bangalore-560 002.

Industries (O.P.II) Department.

Forwarded : By Order

Section Officer.

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Information Technology
Policy of Govt. of Tamil Nadu

 
Introduction Existing Incentives Special Assistance
Objectives of IT Policy HRD Incentives for Industries
     
INTRODUCTION

The Information Technology Industry in India is a fast growing segment of the Indian economy, with growth rates exceeding 50% per annum. In 1995-96, the Indian Information Technology Industry comprising hardware, software, peripherals and training had a turn over of Rs. 9037.85 crores. The Hardware Industry in India has mainly catered to the needs of domestic consumers, with only marginal exports. On the other hand, 60% of Software revenues are from exports, and the main growth is in this sector.

Tamil Nadu’s contribution to the I.T. industry has been significant . The key elements which have made Tamil Nadu an important player in this area are availability of skilled and educated manpower, comparatively higher standard of educational institutions, reasonably good infrastructure, and lower costs of operation. Apart from these, the presence of an International Airport and a major Seaport in Chennai have also helped the growth of I.T. industry in Tamil Nadu. After the liberalisation process in 1991, and especially after reduction of import duties on hardware in July 1996, Multinational Companies were able to export large volumes to India, thereby boosting the domestic market for both hardware and software. Despite all these advantages, Tamil Nadu accounts for only 7% of the total revenue from hardware and software in the country. The turnover of the industry in Tamil Nadu in 1995-96 was Rs. 289 crores of which Rs. 139 crores was in hardware and Rs. 150 crores in software. The potential for growth of Information Technology in Tamil Nadu is enormous with I.T. penetrating all spheres, including Government Departments, educational institutions, Banking, shopping entertainment and a whole gamut of other consumer applications. The Industry while drawing up the programme for the IX Five Year Plan has projected that by the year 2001-2002, I.T.revenue in Tamil Nadu will be of the order of Rs. 13,000 crores (Rs. 5000 crores in Hardware and Rs. 8000 crores in Software). The industry has predicted that this level of achievement can be obtained provided the State Government announces and implements an industry-friendly I.T. policy. With the aim of achieving the goals spelt out in the IX Plan and to focus attention on the I.T. Industry as an engine of growth in the State, it has been decided to formulate an industry – specific policy for the I.T. Industry.

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OBJECTIVES OF THE I.T. POLICY

The main objectives of the policy are :

  1. To encourage and accelerate the growth of hardware and software industries and associated services in the State and to remove the bottlenecks for starting and running of such Units in Tamil Nadu.
  2. To increase both domestic and export earnings of software and hardware sectors in the State.
  3. To upgrade and develop manpower skills required for the I.T. industry by facilitating training, to accelerate the use of I.T. in schools, colleges and educational institutions with a view of providing skills and knowledge to the youth to make them fit for employment in this sector.
  4. To upgrade the quality of life the citizens of the State by facilitating access to consumer application of Information Technology.

As part of the above objectives, the Government will also encourage use of I.T. in Government institutions and Departments with a view to improving productivity and efficiency of Government services, revenues and tax collections, and assist in the process of decision –  making by Government, and monitoring of Government programmes. A high Power Committee headed by the State Finance Secretary has been constituted to draw up a plan for phased use of I.T. in Government Departments. A separate policy paper will be prepared on this for speedy implementation.

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EXISTING INCENTIVES AVAILABLE TO THE INDUSTRY
  1. There is no system of Entry Tax or Purchase Tax in Tamil Nadu. I.T. Industry will continue to enjoy facilities of unrestricted movement of capital equipment including hardware, peripherals, captive power gensets, UPS sets and Telephone Exchanges, subject only to Sales Tax payments as per orders in force.
  2. Due to self sufficiency in power, Tamil Nadu does not have power cuts for industry. The facility of uninterrupted power will continue to be offered to I.T. industry.
  3. Tamil Nadu has already announced fiscal and tax concessions for investments of various slabs starting from an investment of Rs. 50.00 crores (mega projects) upto investments exceeding Rs.1500.00 crores (super mega projects). The orders issued in G.O.Ms.No. 43, Industries, dated 13.12.1992 (for ‘mega’ projects) and in G.O.Ms.No.1, industries dated 2.1.1996 (for ‘super mega’ projects) will be applicable for I.T. industries also in addition to other incentives.
  4. Capital subsidy as applicable to electronics industries @ 20% of fixed assets subject to a maximum of Rs. 20.00 lakhs will be available for all I.T. industries, irrespective of their location in the State. Where the unit is also eligible for capital subsidy for backward / most backward areas, this special subsidy will become part of such subsidy. The existing incentives available for industries employing at least 30% of women workers will also be available to I.T. industries.
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NEW INITIATIVES
  1. The State Government will set up Information Technology Parks (ITPs) at Chennai, Coimbatore, Tiruchirapalli and Madurai in a phased manner through ELCOT during the IX Plan period in association with the private sector. The ITPs will have full-fledged facilities with adequate modules for software development as well as sites for non-polluting hardware units, commercial and residential areas, schools, Convention and Business Centres as well as the connectivity required for communication and information exchange globally.
  2. Apart from ITPs in the Government and joint sectors, Government will facilitate setting up of ITPs by the private sector in potential locations for the development of I.T. industries. Private ITP developers will be given assistance in land acquisition and re-zoning, wherever required, by State Government. State Government will also facilitate provision of water, power connection and roads. State Government will also help the ITP promoters in obtaining necessary cable and satellite links through VSNL/ DOT for the necessary connectivity. An ITP will be treated as an "industry" and be eligible for backward area capital subsidy and ST benefits.
  3. The Government will provide assistance to VSNL and Department of Telecommunications to expand communication links in the State and also provide the land and power wherever required by such agencies. State Government will liaise with Govt. of India to ensure dedicated VSNL connectivity / Earth Stations as well as Electronic Telecom facility for each ITP.
  4. All ITPs set up by private promoters will have the same status as ITPs promoted by Govt. agencies for the purpose of eligibility for the concessions / incentives granted by Government from time to time to SIPCOT, ELCOT, TIDCO and TACID industrial estates, subject to conformity to certain quality standards, and subject to location (whether backward / most backward area). Units in private ITPs will be entitled for exemption from stamp duty and registration charges at the time of allotment of sites / built up space as in the case of units in ELCOT / SIPCOT industrial estates. Private ITP promoters will be granted exemption of tax for works contracts within the complex as in the case of SIPCOT / ELCOT, etc. Software / hardware units set up in private ITPs established in accordance with the standards prescribed by the Government will enjoy the same facilities and incentives on par with units in Government industrial estates.
  5. In all the Technology Parks set up by Government & Joint Ventures, there will be an Executive Authority of the Park which will function as the Single Window for all statutory clearances required for the units, within the Parks. In the case of private sector Technology Parks, ELCOT will assist in getting all clearances fast.
  6. Apart from development of software and hardware Industry through ITPs / STPs the Government will also encourage software development outside the Parks by giving such stand-alone units the same incentives as the Units in the ITPs / STPs. There will be no locational restrictions for setting up units exclusively engaged in software development / training.
  7. All software industries including Services and Training Institutions in I.T. will be entitled to "Industry" status. Such units shall be eligible for all concessions and incentives applicable to Industries. For the purpose of this clause, accredited Training Institutions will also be eligible to claim industry status, subject to certain norms which will enable them to obtain Term Loans and Bank Finance at industry rates.
  8. Government will provide continuous power supply in industry rates to all I.T. units, whether set up in ITPs, or in stand-alone locations, and also ensure quality of power as required by the industry. Software Training units will also be eligible for these facilities.
  9. For the purpose of power tariff, maintenance and servicing units and hardware units will be treated as Industrial and not Commercial consumers and electricity staff as applicable to Industry consumers will be charged.
  10. All software industries will be exempted from the purview of Tamilnadu Pollution Control Act. Hardware units will require clearance from Pollution Control Board as applicable to other industries.
  11. Government of Tamil Nadu will also facilitate setting up of a T-Net with an "Information Back bone" connecting all District Head Quarters, using the Cable T.V. network all over the State whose penetrating at present is 4 times that of Telephone lines.
  12. Government of Tamilnadu will encourage setting up of Venture Capital Fund for development of I.T. Industry through TIDCO in association with private sector partners.
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HUMAN RESOURCES DEVELOPMENT

A subgroup set up to discuss the prospects of the Information Technology Industries in the IX Plan period has assessed the man power requirements for the industry. The subgroup has estimated that Tamil Nadu could account for 20% of the total manpower in the Information Technology Industry by the end of the Plan period. The following are the policy initiatives planned for Human Resources Development in Information Technology :

  1. Government of Tamil Nadu will set up an Information Technology Institute of Tamil Nadu (TANITEC) to take care of the training and technology upgradation aspects of I.T. in the State. The Institute will also co-ordinate in preparation of syllabus for I.T. courses in Colleges and Technical institutions, create Centres of Excellence in Universities, and also support funded research programme and specific technology applications.
  2. Training Institutes for hardware, software, servicing and maintenance will be deemed to be "Industries" and will be eligible for all facilities offered to Industries including Bank Finance and SSI or IEM registration. Certification for Software training will be governed by existing standards prescribed by the Department of Electronics, Government of India. For quality certification of training in hardware, servicing and maintenance ELCOT will be the Nodal Agency to prescribe minimum standards for eligibility.
  3. Basic training in computers will be introduced in all schools from the high school level. The endeavour will be to cover all schools within a 5-year period. Training of teachers will also be done in a phased manner over the 5-year period. In addition to Government sponsored training programmes, State Government will facilitate and co-ordinate with other sponsors like INTEL, IBM, APPLE, etc., for training of teachers.
  4. Government of Tamil Nadu will encourage I.T. industries to obtain ISO 9000 process certification. Small Scale Industries (SSIs) will be eligible to claim the incentives offered by TIIC for obtaining such certification.
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SPECIAL ASSISTANCE FOR INFORMATION TECHNOLOGY INDUSTRIES
  1. Government of Tamil Nadu will offer relaxation of FSI (Floor Space Index) in metropolitan areas to the extent of 50% for IT. Parks.
  2. Government of Tamil Nadu will co-ordinate with Government of India facilitate setting up of ‘Internal Container Depot’ to take care of exports of specified industrial products through Chennai Port, including products of electronic and hardware units.
  3. Government of Tamil Nadu will facilitate setting up an Air Freight City near Chennai Airport, for improving the cargo movement for imports and exports from Chennai Airport. The Air Freight Centre will have sufficient space for handling equipment and necessary facilities for customs clearances, with staff posted round the clock. Such a centre will be formed as a Joint Venture between TIDCO, TACID, and FIEO. With these facilities, Government of Tamil Nadu will facilitate a 72-hour cycle for import of components and export of finished products by the hardware units.
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APPENDIX

CONCESSIONS / INCENTIVES AVAILABLE FOR INDUSTRIES

SPECIAL SUBSIDY FOR MEGA PROJECTS

  1. An industry set up anywhere in Tamilnadu having an investment of Rs.50 crores and above and below Rs. 100 crores is eligible for a Capital subsidy of Rs. 25 lakhs.
  2. An industry set up anywhere in Tamilnadu with an investment of Rs. 100 crores and above and below Rs. 200 crores is eligible for a subsidy of Rs. 50 lakhs
  3. An industry set up anywhere in Tamilnadu having an investment of Rs. 200 crores and above is eligible for a Subsidy of Rs. 100 lakhs.
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SPECIAL CONCESSIONS FOR SUPER MEGA PROJECTS
  1. They will be eligible for Sales Tax deferral / waiver for 14 years. The Company can exercise its option either to avail deferral / waiver.
  2. The limit of only one revision of the Eligibility Certificate as stipulated in Government Letter Ms. No. 1414, Industries (MIG-2) Department dated 14-12-1990, will not be applicable to Super Mega Projects. They are permitted a maximum of Five number of revisions of the Eligibility Certificate. The Eligibility Certificate indicates the investment made in fixed assets upto the date of its issue and represents the Eligibility Limit for availing Sales Tax Deferral / Waiver at any point of time. Once the "Investment Limit" and "Time Limit" for making the investment as specified for ‘Super Mega Project’ are reached, the Company will be eligible for the concessions indicated in subparas (iii) and (iv) below.
  3. These companies can continue to avail sales tax deferral / waiver upto the specified period of 14 years, even if the quantum of Sales Tax Deferral / Waiver availed reaches the limit of 100% of the value of installments in fixed assets the Super Mega Project before 14 years.
  4. If the quantum of Sales Tax Deferral / Waiver availed by these companies does not reach the limit of 100% of the investment in fixed assets for the Super Mega Projects by the end of the 14th year, they can continue to avail Sales Tax Deferral / Waiver for a further period not exceeding 7 years or till the limit of 100% of the value of the investment in fixed assets for the Super Mega Project is reached, whichever is earlier.
  5. The deferred sales tax will be repayable in 5 equal annual investments as follows :

Sales Tax deferred in Year 1 will be repayable in 5 equal annual installments from Year 15 to Year 19 ; Sales Tax deferred in Year 2 will be repayable in 5 equal annual installments from Year 16 to Year 20 and so on. The deferred amount repayable in any particular year will be paid in 4 equal quarterly installments before the last day of each quarter.

Existing Industries taking up expansion / diversification, at their existing plant location / sites or at new sites, for which investment in fixed assets exceeds Rs.1500 crores (excluding the investment already made) within a time frame of 5 years (relaxable upto 7 years in special cases), will also be eligible for the concessions referred to in sub-paras (i) to (v) in para 2 above, provided they satisfy the additional turnover norms for expansion / diversification.

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ADDITIONAL SUBSIDY FOR EMPLOYING WOMEN WORKERS

New industrial units (small, medium or major) where more than 30% of the total workers employed are women shall be eligible for an additional Capital Subsidy of 5% of investment in fixed assets subject to a ceiling of Rs. 5 lakhs.

SPECIAL SUBSIDY FOR ELECTRONICS INDUSTRY

Electronics – 20% of fixed assets subject to maximum of Rs. 20 lakhs.

 

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