Like many sensational news stories, the one centered on Bangalore's overtaxed infrastructure has legs. These sorts of headlines have been greeting business travelers and tourists for years. In this case, though, the doomsday headlines have it right: "Bangalore is a national calamity in terms of infrastructure," said Azim Premi, CEO of Wipro Ltd. And he ought to know. Wipro is synonymous with Indian offshore outsourcing, and is a $1.7 billion giant with more than 100 acres of property in this city alone.
"Some years back it was just bad roads, but now it's irregular power, blocked drains and mismanaged transport," said T. Kurien, CEO of Wipro's BPO unit. "The distance that took us just 10 minutes to go over a few years back, now takes at least an hour. It is putting pressure on costs," he said.
As the city's infrastructure goes from bad to worse, the allure of doing business in Bangalore is fading. The complaints about potholes have given way to "a much larger issue of clearing garbage -- making sure untreated sewage does not mingle with drinking water -- and that naked electrical wires don't kill school children," said the COO of a local IT services company, who requested anonymity on such a hot-button political topic.
Infosys CIO: Tax system broken
"The city is growing at the speed of globalization -- and
Mohandas Pai, CFO at Infosys, a chief Wipro competitor, pointed to a city population that has grown from about 800,000 in 1951 to 7 million today. "Bangalore's challenge is that it has grown at 12% a year over the last decade in terms of gross domestic product [GDP], which makes it the fastest growing city in the country, but the infrastructure has obviously not kept pace." Judging by $17 billion in investment proposals in the last 16 months, the pace doesn't appear to be slowing. "The government is loosing its ability to respond," Pai said.
In response, many IT pros agree, the administration seems unfazed. "We are aware of the growth of Bangalore and we are responding," said Finance and Industry Minister PGR Sindhia, adding that in the last year the government has sanctioned a $1.7 billion infrastructure improvement budget that not only includes road repairs but also improving drinking water supply, power (utility) supply and the sewage system.
Critics say the amount is not near enough. "The administration is not spending enough for the city, Pai said, "considering the city's infrastructural needs, and its contribution to the country's economy. Bangalore accounts for 36% of the country's total software exports, which are predicted to surpass $23 billion by March next year. In 1998, there were 680 IT companies in Bangalore. Today there are about 1,600, out of which over 600 are multinational corporations -- U.S. companies paying taxes that Pai believes should be pumped back into the system.
"The civic administration collects $3 billion as taxes from the residents and corporate sector -- but has sanctioned just over $200 million out of it for improvement of the city," Pai added. "The administration should pump in at least 50% of that tax for the city's improvement."
But Sindhia said he wants companies to start searching for new properties outside Bangalore.
In the last 12 months, nearly all the top 20 Indian IT companies have announced future expansion plans outside Bangalore. A recent study by the local consulting firm TeamLease read, in part: "Though many companies are flourishing in Bangalore, there is a distant change in perception. All the talk around the city's poor infrastructure is beginning to play on the minds of decision makers.
State elections in May 2004 in Karnataka saw the rejection of the "IT-friendly Congress government." That election brought about a power a coalition between the Congress Party and the Janata Dal-Secular (JD-S), a pro-farmer party determined to portray the government as one with "a common touch."
The city soon felt the consequences of a "pro-farmer party." According to Pai, there is now just one elected representative for 3,400 citizens in the urban areas of Karnataka. In contrast, rural regions have one for 380. "This is not democratic," Pai lamented. "Citizens have no voice in Bangalore."
Government critics said the ruling party spends much of Bangalore's tax monies to cover costs for projects in other parts of the state. "We have a coalition government in the state and like every coalition government, Bangalore's political bosses too have to appease the polity that elect them," said T. Ramappa, a member of the Bangalore Chamber of Industries and Commerce. The group is a powerful IT group that includes IBM, Intel and Infosys among its members.
The BCIC is willing to invest in infrastructure improvements, but is seeking guarantees that construction projects won't get lost in an overburdened system renowned for red tape. The BCIC wants "commitments from the government and the administration in terms of times deadline, progress report, etc.," said V. Ranganathan, an Indian Institute of Management professor who also holds the Chair on Infrastructure. "That we haven't managed to extract from them yet."