MeiTY’s data center policy draft is a step in the right direction


By Manoj Paul – Managing Director, GPX India Pvt Ltd

Data localisation is a topic of discussion around the world, and has great significance for India too. The critical aspect of data localisation is not only about having control over the country’s data to reduce vulnerabilities around privacy and security but also to provide better user experience and flexibility for service providers to roll out newer services leveraging the digital infrastructure. Countries with a highly supportive data localisation policy have experienced the development of better infrastructure for data storage, access and management. All these factors go a long way in ensuring a better digital economy.

Data centers play a pivotal role in a digital economy. India has seen spectacular growth in data centers in the last five years.The Govt of India now wants to take measures to further promote FDI into the data center sector, for which MeiTY has floated a draft policy.

For data centers, the four critical aspects are Land, Power, Networks and Ease of Doing business.  For promoting FDI in data centers, ease of doing business is more important than incentives. So, reduction in the number of approvals and single window time-bound approvals, as stated in the draft policy, is the right step.

The policy rightly envisages a separate category for data centers under the National Building Code of India (NBC 2016).  Data center buildings are unique in many aspects: they require less parking space and have higher roof height of 5m and above (as they need to stack large generators and large diesel tanks). A standard data center building approval guideline across the country to all the municipal corporations would be helpful for data center companies to build their pan India plans without many variations and get the approvals of regional authorities within stipulated timelines.

The policy document envisages ‘Infrastructure’ status to be given to the data center sector, which is welcome. However, data centers should continue to be considered an IT/ITeS company due to the interlinkages with the IT sector and a shared resource pool.

The power requirement of data centers is very high. A mid-sized data center can generate as much revenue for a power company as 10,000 homes. The policy needs to spell out clear guidelines for the distribution companies to invest and build infrastructure to support the present and future requirements of data centers. Considering the economies of scale, data centers should be provided  industrial tariffs and exemption of electricity duties. The number of steps and time needed to get statutory approvals should also be reduced. For instance, the current process of getting an electricity duty exemption requires multiple permissions and committee approval, which takes nearly six months. If a committee’s approval is excluded, it will save at least 3-4 months.

Besides power, connectivity is the other critical input for data centers. In India, the state of intercity and intracity fiber networks are far from what’s required and exists in other developed countries. The development of a strong fiber backhaul backbone needs enormous investments. In the case of new undersea cable systems, OTTs and cloud service providers are the new dominant investors. Similarly, the Govt of India should incorporate in its data center policy, measures to encourage and facilitate new investors for laying data center connectivity grade intracity and intercity fiber and DWDM Networks in India.

Another primary task is for a liberal dark fiber policy. In India, a data center gets occupied within 2-3 years or earlier. The data center service provider typically sets up another nearby facility so that the customers can further expand their hosting setup in the available space in the second data center. For the success of this setup, the data center provider needs to offer seamless and scalable fiber connectivity between the infrastructure of enterprises between the two data center buildings. This demands a dark fiber policy for enterprises. Allowing dark fiber for enterprises can happen in two stages.

In the first stage, DoT can clarify that licensed service providers, including VNOs, can provide bandwidth as dark fiber to enterprises. The second stage could be allowing IP1 registered providers to provide dark fiber to enterprises. Data centers can then take IP1 registration and invest in creating a data center dark fiber network.

Having achieved the distinction of being the IT outsourcing hub for the world, India can now aspire to be the outsourcing hub for the data centers market. MeiTYs’ draft policy is a step in the right direction to achieve this objective. However, it needs detailing and implementation of new policy amendments across various Govt departments of states and center, within stipulated timelines. We do hope that the focus would soon shift on the implementation of policy amendments so that data center companies can start seeing the benefits, which in turn can result in faster investments.


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