Success has even more detractors than it has fathers. Accolades and brickbats have been the story of the Gujarat International Tech-Finance City or the GIFT City that has attracted eyeballs and envy in equal measures ever since its inception for it being the first-of-its-kind in India. Vision of a state (Gujarat) and business acumen of an infrastructure giant (IL&FS), took on the challenge when there was no one to pick the gauntlet. Sooner than expected, it rose to #6 in Asia and #10 amongst top 92 financial centres in the world. Praised by businesses in India and abroad, it has remained in headlines for the wow factor. Recently, there has been a concerted campaign making sensational claims against the project. Whether there is an element of truth or is it a case of jealousy, vendetta and detractors at work? Dr Gursharan Dhanjal, Editor, INCLUSION, speaks with Ajay Pandey, MD & Group CEO, GIFT City to find out:
Q. What is the genesis of the GIFT City?
A. The concept of the GIFT City was envisaged by Government of Gujarat (GoG) in 2005. Hon’ble Prime Minister of India wanted us to create a model city in terms of infrastructure that is in line with other global cities so that we could house India’s First International Financial Services Centre here. We are very proud to have created India’s first operational smart city that finds a mention as an example of Greenfield City in the Smart City guidelines of Ministry of Urban Development, Delhi.
The GoG approached several financial institutions including IDFC Ltd, Kotak Mahindra Capital Company Ltd and IL&FS to discuss and gauge the interest of such institutions in development of the GIFT City. The GoG after reviewing various proposals entered into JV agreement with IL&FS, based on which both GUDC and IL&FS contributed a sum of Rs 2.5 crore each as Share Capital in the JV Company, i.e., Gujarat International Finance Tec-City Company Ltd (GIFTCL) and Rs 19 crore each towards project development fund for financing initial project development activities. All contracts are awarded on a competitive basis.
Q. What is so unique about the GIFT City?
A. It is the next generation city, which is fully infrastructure serviced like all first world cities. For instance, utility-corridors is a new concept, all floors connected to an automated waste collection system, fibre optic connectivity, power distribution guaranteed at 99.999%, landscape and layout vis-à-vis density, etc. The correct way to look at the costs; is to compare, what it would have cost anywhere else in India, if you were to provide such level of services. We are at least 25-30% cheaper operationallly than anywhere else. The fact that nearly 200 top corporates, which have moved in already and created nearly 8,500 jobs, is a testimony to the demand that the GIFT City has generated.
Q. Why is the PIL filed and what are the allegations?
A. Mr D C Anjaria who was an independent Director in GIFTCL has filed PIL No 260 of 2015 in Gujarat High Court against GIFTCL, IL&FS and Government of Gujarat. He retired by rotation from the post of independent director of GIFTCL around June 2012. The PIL is sub-judice and is being listed in the High Court on a regular basis.
Mr Anjaria had proposed for setting up a financial training institute in the GIFT City and had approached IL&FS for assistance in setting up and financing the institute but did not get any help in this regard. He tried to persuade GIFTCL Board to provide fixed monthly remuneration for his consultancy service through his company, i.e., International Financial Solutions Private Limited (IFS). As his directorship could not be renewed and he could not be given consultancy for the GIFT City, anguished by all this, he filed the PIL against GIFTCL, IL&FS and GUDC.
Mr D C Anjaria’s allegations are false, malicious, factually incorrect and deliberately misleading. There are a number of statements made by him that have no basis, in fact are speculative and do not reflect that he was party to the decision-making. His frustration at not getting financial support from the GoG and IL&FS turned him bitter and vindictive.
Q. You had another PIL filed in the Gujarat High Court. What was that all about?
A. GoG has given land for development of the GIFT City project but ownership of the land remains with the State government. The GIFT City has right to give land on lease to the developer for a period of 99-years. The consideration received from the developer against grant of development rights is being used for development of infrastructure for the GIFT City project. The surplus generated from the project will go to the state government towards land cost in the ratio of 50:50 for Phase-I and in the ratio of 80:20 for subsequent phases. These issues have already been decided by Gujarat High Court in an earlier PIL in favour of the GIFT City and same was further endorsed by the Hon’ble Supreme Court.
Q. What is the management structure of the GIFT City?
A. GIFTCL is a 50:50 JV (SPV) of GUDC and IL&FS. The Board of GIFTCL comprises of upto 12 Directors, wherein four are GoG nominees, four are IL&FS nominees and four are Independent Directors. Both GUDC and IL&FS hold 50% equity shares each in GIFTCL. Thus, the management and controlling rights of both the JV partners in GIFTCL are equal with a casting vote with Chairman who is nominee of GoG.
Q. How was the GIFT City initially planned to be a next generation city?
A. The GIFT City being Green Field Project was to be implemented by GIFTCL. The GIFT City was planned to be the next generation city and needed project management expertise of highest order. Since, there were initially no employees in GIFTCL, GIFTCL had entered into contract with IIDC at a fee of Rs 20 lakh per month for providing the requisite experience manpower for implementation instead of recruiting the manpower on payroll of the company. It is worth noting that IL&FS has invested Rs 1,600 crore for developing the first two commercial towers in the GIFT City. The contract lasted for a period of 8 years and about Rs 19.2 crore was paid to IIDC, which is less than 1.5% of the money put in by IL&FS in the project.
Q. There has been news on the alleged inappropriate appointment of project consultants. Explain.
A. The statement that IL&FS appointed consultants who have been paid over Rs 400 crore as project consultancy fees over the years is incorrect. Since, the GIFT City was a greenfield project, there was a need for preparation of a master plan and concept design of buildings and infrastructure. The Consortium led by Fairwood comprised of Xian Dai and ECADI, which are globally well-known consultants for such jobs. The contract was awarded to Fairwood led consortium after considering experience and expertise of Xian Dai and ECADI and after consulting and seeking approval from GIFTCL Board, wherein Mr Anjaria was an Independent Director at that time.
Q. Payment of success fee and favoured associates etc are few issues beign debated. Are these part of the JV agreement?
A. The JV agreement has a provision for Success fee @1% of landed cost of the project, if the project is bidded out by GIFTCL for implementation to a third party. In the present scenario, GIFTCL itself is implementing the project, so this clause is not applicable. The success fee was to be equally shared between GUDC and IL&FS but is not applicable for the reason cited.
There was no favour to any of the Associates or Consultants. The contract was given to Fairwood led Consortium on merits after discussions and presentations before the GIFTCL Board. Mr D C Anjaria was a Director of GIFTCL and also member of Project Committee throughout the period from the award of contract, till making of payment to the Consultants and upto termination of contract. But, Mr Anjaria did not raise any objections in this regard, during any of the said meetings.
Q. You have sought arbitration against Noida-based architectural firm Fairwood Holdings, two years after terminating the contract of the firm. Where has it reached?
A. The Fairwood was selected after reviewing many other consortia as it had international firms that had been closely involved, for instance, in the building of Pudong Financial Center outside Shanghai. Mr D C Anjaria was party to the decision and signed off. The GIFT City is pursuing the arbitration to recover money paid for work not done by the consortium.
The Fairwood Arbitration has commenced in December 2014. The pleadings and affidavits of documents have been filed, issues have been framed and hearing on the matter is going on. It is worth mentioning that more than 25 hearings have already taken place and the next hearing is scheduled on 24 and 25 August 2018.
Nothing succeeds like success. Indian Smart City flagship programme that was launched in 2015 has been on to a fledgling start. It however, already had a fully functional role model to look up to since 2013. Cited as an example in Mission Statement and Guidelines for Smart Cities, June 2015 by Union Urban Development Ministry; it is the first of its kind to match world class standards and infrastructure designed to be at or above par with globally benchmarked financial centres such as Shinjuku Tokyo, Lujiazui Shanghai, La Defense Paris, London Dockyards, Singapore Marina Bay and so on. Started in 2007, more than vision, it took a lot of courage and entrepreneurial appetite to take Gandhinagar where no other Indian city had gone before.
A game-changer initiative, the GIFT City—country’s first financial centre—is spread over 886 acres with high-density urban development; 62 million sq ft built-up area catering to commercial and residential requirements along with social infrastructure, it is expected to provide over a million direct and indirect jobs once fully developed. It is designed to attract top talent back to the country offering high quality of life.
It was said at that time that the vision of Gujarat would be incomplete without capitalising on the in-house financial business acumen. To tie up with technology, to create a hub complete with infrastructure to meet the needs of modern Gujarat and modern India and to create a space in the global financial world. An opportunity first identified in the famous Percy Mistry report for Mumbai was taken to fruition in Gujarat by the GIFT City.
The project was put on the anvil at the time when India’s growth was held back due to lack of infrastructure or bottlenecks. Gujarat took the lead and ventured into creating a global financial and IT hub under a unique Public Private Partnership (PPP) model.
The GIFT City is developed by Gujarat International Finance Tec-City Company Limited (GIFTCL); a 50:50 Joint Venture Company of Government of Gujarat through its undertaking Gujarat Urban Development Company Limited (GUDCL) and Infrastructure Leasing & Financial Services Limited (IL&FS) under Public Private Partnership (PPP) model. It is a unique approach for development of a new town under PPP.
The GIFT City has been accorded the status of India’s first International Financial Services Centre (IFSC). It also featured at the tenth place, amongst 92 globally and sixth in Asia, in emerging Global Financial Centres Index 22 (GFCI) – London, in September 2017, ahead of Luxembourg, Seoul, Abu Dhabi, Toronto and Beijing. It is put in the same league as New York and Hong Kong.
In a short span of two years, the GIFT City has unleashed its potential. The recognition was a mutual win for all the stakeholders including government, its various agencies and regulators.
As on date, 13 Indian banks, including SBI, HDFC, Kotak Mahindra, Bank of Baroda and ICICI, have already setup their International Banking Units within the IFSC area and done transactions of more than $13 billion. A few foreign banks will set up shop soon. Fourteen large insurance companies based in IFSC have done sum-assurance of more than $20 billion. Retail banks and IT service industry has also started to create its base in the city.
International Stock Exchanges by BSE and NSE crossing average daily trading volume of $1.5 billion, cumulative turnover crossing $25 billion; Masala Bond of around $21 billion has been listed at International Exchanges in GIFT IFSC; a total of around 100 entities are licensed in GIFT IFSC for capital market business; SEZ exports growth of more than 500% YoY as on March 2018; presence of 200 units with more than 8,500 employees; IGBC certified 100% green and sustainable built-up space; HUDCO award winner 330 aspirational apartments and many more make the GIFT City truly a global destination. City has been recognised as Environmentally Sustainable City at various national and international platforms.
The contribution made by the GIFT City in the following areas is considered unique and path breaking:
Integrated Development: The urban planning of the GIFT City has also become a model for integrated development covering commercial, residential and social facilities.
Domestic & International Financial Services Centre (IFSC): Government of Gujarat, through the GIFT City, is attracting businesses and jobs in the services sector. Around 200 Financial/IT companies are licensed in the GIFT City already.
On Domestic side of the GIFT City, TCS employs around 1,000 people, Bank of Baroda around 1,800 people and Oracle houses around 250 employees. The exemplary leadership with support from state and central government has helped the GIFT City to emerge as a project of national importance.
The GIFT Urban Development Authority (GIFT UDA) constituted by Government of Gujarat is responsible for planning and development of the GIFT City area and regulates the development in the GIFT City. All the state-of-the-art smart infrastructure services like District Cooling System, Automatic Waste Collection System, Fibre Optic Network, Data Centre, biodiversity and landscape, uninterrupted power supply, intelligent transport system, quality drinking water and zero waste water discharge etc are provided by the subsidiary companies of GIFTCL.
The GIFT City has successfully taken off in its path of becoming a world-class city providing employment to large number of people in services sector.
Indeed, the GIFT City from “Vision to Reality” is a testimony to the innovative governance model in urban development leading to the emergence of a New Urban India. The GIFT City is making steady progress, witnessing a ‘hockey stick growth curve’, in investments, in job creation and in the progress of development.
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