Maharashtra has decided to go ahead with its plans to develop an International Financial Services Centre (IFSC) in Mumbai despite a cold shoulder from the Centre. While the Centre has refused to notify an IFSC in the commercial capital, the state government has now said it would develop the facility on its own.
On December 22, Union Finance Minister Arun Jaitley, while replying to a question raised in the Lok Sabha, had said, “There is a limit on how many IFSCs one can have. Since the first IFSC (Gujarat International Financial Tech City) is being developed in Gandhinagar, one can think of another IFSC only after the one at the GIFT is optimally used. The Maharashtra government is lobbying hard for an IFSC at Mumbai’s Bandra Kurla Complex (BKC). However, if we make too many IFSCs, then they may not be used optimally, so we can think about the future only after the IFSC at GIFT is used optimally.”
With Maharashtra Chief Minister Devendra Fadnavis promoting the Mumbai IFSC as a pet project for a long time, the Centre’s snub put him in a tight spot. The state Congress even accused him of “compromising the state’s interests under the pressure from the Centre”.
The Mumbai unit of the BJP, which had made development of the facility an election issue in the Mumbai municipality polls, also feared a political backlash.
The counter offensive came Thursday. While Fadnavis chose not to comment on the issue, Mumbai BJP chief Ashish Shelar declared that the Mumbai IFSC plan was still on. “The chief minister met the Union finance minister yesterday. The latter made it clear during this meeting that the Centre wouldn’t have any objection to Mumbai’s IFSC if the state government were to develop it on its own,” he said. Incidentally, no press communication was issued by the CMO regarding the meeting.
However, while the Maharashtra government had earlier been pushing the Centre to notify the land identified for the Mumbai IFSC at the BKC as a Special Economic Zone (SEC), it seems to have given up on such a plan now. “The Centre’s permission would be needed for notification of the SEZ. But no such permission is necessary if the state government develops the facility on its own on a non-SEZ land. The state government is itself developing the facility, and has not sought the Centre’s assistance for it,” Shelar said.
Sources said the CM was now banking that Mumbai’s tag as the country’s foremost financial services destination would eventually see the Centre agree to make the necessary amendments to the taxation and corporate laws for Mumbai’s facility too. “Global rating agencies recognise Mumbai as the country’s top financial services centre. We have the best ecosystem to promote such activities. Once we build the infrastructure for developing the IFSC, we are confident that the Centre would come around,” said a high level source in the government.
The sources said Fadnavis had been insisting that both the Mumbai IFSC and GIFT could co-exist. “The Mumbai facility can act as the front end due to its geographical and logistical advantages, while GIFT can be the hub for all back-end activities for financial services,” said the source.
Keen to go ahead with the development, Fadnavis has also convened a meeting of the board of directors of the IFSC on January 15, where the master plan for building the facility is expected to be finalised. The state government is exploring the London’s “hub and spoke” model for the Mumbai IFSC, with the BKC being the main hub and mini-hubs being set up at other “suitable locations” for regional players.
Earlier in the day, Maharashtra Congress spokesperson Sachin Sawant targeted Fadnavis over Jaitley’s stance on the matter in Parliament. “This has exposed the chief minister’s farce of misleading the people of the state for the past two years. While he has been saying the second IFSC will be set up in Mumbai, the Union finance minister’s statement (in Parliament) has made it clear that there is no such plan,” he said.
Shelar launched a counter-offensive, accusing the Maharashtra Congress of back-pedalling the IFSC plan. “The Mumbai IFSC was conceived in 2005. Had the Congress prioritised it, Mumbai would have been the country’s first IFSC,” he said. Shelar also pointed out that the GIFT City was notified during the UPA-II reign.