Karnataka Government Approves New IT Policy, Aims to Strengthen the IT Ecosystem

With a plan of enhancing and developing the Information Technology (IT) ecosystem beyond the regular reach, the Karnataka government has approved a new IT Policy 2020-25, which will help the state to increase its contribution towards the goal of a trillion dollar digital and create six million jobs during the policy period. The intention is to enhance the state’s IT industry’s contribution to at least 30 percent of India’s trillion-dollar digital economy vision. Much like in the Industrial Policy, incentives have been linked to districts, categorized as zones and industries investing outside Bengaluru receiving more subsidies.

“We aim to also strengthen the ecosystem and boost growth in Tier-II and Tier-III cities of the state. We project that over 60 lakh plus new jobs will be created in this sector,” stated C.N. Ashwath Narayan, IT & BT Minister, Karnataka. The government also approved a Special Incentives Scheme for Electronics System Design and Manufacturing (ESDM) sector to attract industries moving out from China.

“In the IT sector, we have achieved a level of maturity in Bengaluru and it is now time to take it to Tier-II and Tier-III cities. We are calling it ‘Beyond Bengaluru’. The goal of this policy is to boost IT penetration and innovation in the state holistically. The focus will be on employment generation, which is currently at 30-32 lakh, and we want to catapult it to 60 lakh,” says Meena Nagaraj. C.N, Director, IT & BT and Science and Technology.

Under the new IT policy, a host of subsidies and incentives are being offered to industries outside Zone-3

We aim to also strengthen the ecosystem and boost growth in Tier-II and Tier-III cities of the state. We project that over 60 lakh plus new jobs will be created in this sector

(Bengaluru Rural and Urban) including financial assistance up to Rs. 3 crore for IT hubs and clusters, assistance of Rs. 2 crore for co-working spaces or plug-and-play infrastructure, reimbursement on lease/rental up to Rs. 3 lakh (at the rate of Rs. 10 per sqft) or Rs. 6 lakh (at the rate of Rs. 1,000 per seat), quality certification cost reimbursement up to Rs. 6 lakh, marketing cost reimbursement of up to Rs. 5 lakh per entity, reimbursement of PF/ESI up to Rs. 10 lakh per company, patents cost reimbursement of Rs. 2 lakh for domestic and Rs. 10 lakh for international patent.

“We are expecting the IT industry to grow from $52 billion to $300 billion by 2025. We will spend around Rs. 5000 crore in the ESDM sector. We will directly be spending about Rs. 102 crore on the IT policy, excluding stamp duty and power tariff concession,” stated C.N. Ashwath Narayan. Exemption on stamp duty up to 75 percent will be given for industries which will be set up in Mysuru, Hubballi, Dharwad and Mangaluru. For all other zones outside Bengaluru Urban and Rural, stamp duty will be exempted completely.

The state has announced 25 percent capital investment subsidy on land for industries outside Bengaluru Urban and Bengaluru Rural districts for land area up to 50 acres on procurement costs. “This is exclusively to attract investments in ESDM sector. To compete with other states, we had to additionally incentivize it over and above incentives offered by the Centre. We are bringing in solar modules too because we are looking at clean tech since it has a similar ESDM ecosystem. We can add value to reduce carbon footprint,” said Meena Nagaraj. C.N.