Gujarat GIFT City: 16 years on, all glass and no girth

The structures are part of the much-talked-about Gujarat International Finance Tech(GIFT) City that was designed to be the country’s first business district. It houses the International Finance Service Centre (IFSC) and a Special Economic Zone (SEZ) for domestic and international financial services.

Built on the banks of River Sabarmati, GIFT City was initially planned across 886 acres of land in 2007 by the then Modi-led BJP state government with an aim to capture business from financial services hubs like Singapore, Dubai and London. This was to be done by offering investors various incentives to conduct their foreign financial transactions in the much-touted hub.

Work in progress

Sixteen years later, GIFT City is still a work in progress and is yet to create the promised 5 lakh direct jobs. Since the project was inaugurated, it has been promoted as an ultimate financial hub, a self-reliant city with state-of-the-art infrastructure ranging from office spaces and residential apartments to schools, hospitals, hotels, clubs, retail, and recreational facilities.

However, experts hold that it is still a far cry from the global finance centres of the world.

“While many companies have shown interest in GIFT City, a lot of them only have shell offices with a small set up. The reason is that majority of offices still have their headquarters and workforce in Mumbai or Delhi,” said Ramakant Jha, former Managing Director and Group CEO of GIFT City.

The project was planned to be spread across 62 million sq ft of built-up area. More than 22 million sq ft was to be allocated to various companies with a total committed investment exceeding ₹240 million.

However, the project has managed to home just about 20,000 employees working for 400 companies such as Oracle, Bank of America, law firm Cyril Amarchand Mangaldas, Citibank, State Bank of India, Bombay Stock Exchange, and National Stock Exchange.

Construction delays, incomplete facilities

The construction work of the prized project began in the year 2012, with an aim to make it a viable option for even foreign nationals to settle down. To fulfil the aim, high-end infrastructure like an underground utility tunnel for electricity, garbage chutes, a district cooling system, and potable water through all taps were planned.

Sixteen years since the foundation stone was laid, the campus is still under construction with incomplete facilities and buildings. There are still several empty plots allotted for malls, petrol pumps, office complexes and apartment buildings that are yet to come up. So far, only one residential project is complete – Janaadhar Mangala – which has houses for lower-income groups. A few residential buildings are currently under construction, causing a lot of noise throughout the day.

The only five-star hotel – The Grand Murcure – lacks footfall through the year.

Noticeably, Fairwood Consultants Pvt Ltd, the company that had designed the project’s layout, found its contract unceremoniously terminated in the year 2011. As a result, MoUs (memoranda of understanding) signed at the Vibrant Gujarat Summit in 2007 failed to materialise. The company’s substantial dues also remained unclaimed, which led to a dispute that was to be settled through legal arbitration.

However, for over a decade, IL&FS, the company that had the contract for construction of the project, as well as GIFT City authorities kept delaying a court hearing until the first hearing happened in September 2022. This meant that a massive project was lying incomplete and could only be salvaged by scaling it down substantially.

One more setback

In 2018, the project saw another setback when a PIL (public interest litigation) was filed by DC Anjaria, GIFT City’s first independent director and former audit committee chairman. The petition alleged that the ₹70,000-crore project has virtually been gifted away to Infrastructure Leasing & Financial Services (IL&FS), the private sector partner in the project, leading to massive losses to the government and the people.

“While the project had already been lagging, some management contracts signed with IL&FS allowed it to rake in high fees and give it complete management control over the huge project without any significant investment or transparency in decision-making or accountability to the government,” shared Anjaria, who originally designed the concept of GIFT city.

“When GIFT City was conceptualised, the land was to remain with the state government and be made available to the project only on lease. However, GIFT City Company Ltd was structured as a 50-50 joint venture between the Gujarat government and IL&FS, with the latter having full management rights. Thus, operating the project as a private venture with the state as a funding but a non-controlling partner. Around 880 acres of land was given to this project on a 99-year lease at a nominal price of Re 1 per acre. Although the land was to remain in the government’s name, it has been fully transferred to the project company,” he explained.

Dream project at Vibrant Gujarat

The GIFT City project was first showcased at the Vibrant Gujarat Global Investors’ Summit (VGGS) in 2007, when the Modi-led Gujarat government’s prized project signed MoUs for its first phase.

It was once again showcased as ‘India’s first smart city’ at VGGS 2015. Although the first phase of the ambitious project was then underway, the management of the project decided to launch Phase-II. The same year, GIFT City got an exclusive domestic area and a multi-service SEZ.

Since then the project has taken centre stage at every VGGS, a biennial investors summit flagged off by Modi in 2003, when he was the chief minister of Gujarat.

In 2018, PM Modi inaugurated BSE’s International Stock Exchange at GIFT IFSC on January 9 as India’s first International Financial Services Center (IFSC) at GIFT City, and this was showcased in VGGS the same month.

Since its inception, GIFT City has come to offer a number of benefits to woo companies. For instance, there is total tax exemption for 10 years for office units in the IFSC area, there's no minimum alternate tax for companies opting for the new tax regime, there's Goods and Services Tax (GST) exemption on services received by units in the IFSC, and for investors, and no GST on transactions carried out in IFSC exchanges. There are also a range of state subsidies.

GIFT City also offers incentives for non-IFSC SEZ units such as exemption of customs duty for all goods imported into the SEZ, GST on services, and a single-window clearance for all approvals from the Union or state government.

Sixteen years later...

However, 16 years after its inauguration, the government is still attempting to woo companies. There are just a handful of takers so far. Adding to the array of benefits for the project, ahead of the 20th edition of VGGS to be held in January 2024, the BJP-ruled state government announced that selling and consumption of liquor will be allowed within GIFT City.

Noticeably, Gujarat had been a dry state since its formation in 1969. There is a ban on both sale and consumption of alcohol. However, a notification from the Narcotics and Excise Department on December 23, 2023, said the prohibition restrictions have been changed to “wine and dine” keeping in line with the government's vision for the GIFT City project.

“An important decision has been taken to change the prohibition rules to allow wine and dine facilities in the GIFT City area to provide a global business ecosystem to global investors, technical experts and national and international companies established there,” read the notification. Will this make an impact to get the project going? Perhaps the nation will know by Vibrant Gujarat 2026.