In early 1998, Quark officials, having already scouted major locations across India for their software operations, decided to give the little-hyped Punjab a try.

Now, six years later, the company is on its way to setting up the country's largest business park in Mohali, on the outskirts of Chandigarh.

With 46 acres planned in the first phase and, eventually, a possible 5,000 acres in the future, the Rs 1,000 crore (Rs 10 billion) Quark City promises to take some of the gloss away from more established IT hubs like Hyderabad and Bangalore.

Even as companies like Quark and Infosys head northwards, the Punjab government has been quick to see a good opportunity. With a total investment of around Rs 250 crore (Rs 2.5 billion) from around three dozen companies already in, the state government expects an investment of around Rs 600 crore (Rs 6 billion) to pour into the region in the next three years.

It was with the aim of setting up an investor-friendly policy that the Industrial Policy of 2003 was implemented by Punjab Infotech. A venture capital fund of Rs 20 crore (Rs 200 million) was set up for new ventures in information technology.

"We wanted to spread awareness of the potential in this region," says N S Kalsi, managing director, Punjab Infotech and director-cum-secretary, Department of IT, Government of Punjab.

So why is the state government flaunting Mohali as India's hottest emerging IT hub? For starters, there's the availability of high-quality manpower in the region, something that has a lot to do with the high propensity of engineering colleges and management institutes in Punjab.

There are 30 engineering colleges, 58 management and IT institutes, 50 polytechnics and more than 100 industrial training institutes. Further, Chandigarh has a literacy rate of 70 per cent against the Indian average of 56 per cent.

Consequently, business process outsourcing units like Daksh and Dell have done a lot of the recruiting for their call centres from this area. Now, says Kalsi, they are exploring the possibility of actually setting up operations here.

A major attraction for companies is that salary levels in the region are expected to be lower than in Delhi or Mumbai.

"The cost of living in Chandigarh is 30 per cent to 40 per cent lower than that in Gurgaon, and 50 per cent lower than Mumbai," says Rakesh Nangia, executive director, Punjab Information and Communication Technology Corporation, pointing out that a two-room apartment here can be rented for as little as Rs 2,000.

Also, he adds, since distances are much smaller, "commuting time is greatly reduced and the productivity of employees increases, as there is less fatigue". Any IT/call centre employee who lives in Delhi, works in Gurgaon and has to take a "shuttle" service back and forth in heavy traffic every day would agree.

There has also been much development on the technological front in the past three to four years. Reliance Infocomm and Bharti have already set up fibre optic cables and other big players like Hutch and Tata have also just begun operations.

"The major Internet service providers are setting up international gateways in all the major cities in Punjab," says Kalsi.

As power supply is, of course, a key concern for companies looking to operate from Mohali, Punjab has covered all bases.

"Our per head power consumption is around 2.5 times the national average," says Kalsi. Numerous reforms in the power sector have facilitated captive power generation and power purchase agreements.

With these measures in place, slowly but surely, development is getting underway. The Colorado-based Quark has 46 acres of land in Mohali, on which it is developing Quark City.

"Quark came to India a few years ago and started looking for potential locations," says a Mohali-based Quark spokesman. "We felt Gurgaon and Bangalore were saturated, and Chandigarh was a better option. Also, the costs work out well for us here."

Quark has already built a sprawling Media House, where around 850 software professionals work. Now, round-the-clock construction is on at the site -- located a mere 12 km from the centre of Chandigarh.

Of the 40-lakh sq ft under construction, 60 per cent will be an office complex with infrastructure for IT, ITES (IT-enabled services), biotechnology and other knowledge-based industries.

A Quark monopoly? Not at all. Others like Dell will operate here too. Thirty per cent of the area will be a residential complex for the employees, while the remaining 10 per cent will be a commercial zone with shopping plazas, medical and educational centres and a multiplex.

Then there's Infosys, which is investing Rs 40 crore (Rs 400 million) in phase 1 of its Chandigarh Technology Park. Construction will begin soon and the project is expected to complete in nine months. Around 2,400 software professionals will be recruited over the next five years.

The campus, sprawled over 20 acres, will be the Bangalore-headquartered Infosys' fourth outpost. "Like all our development centres, this will be a world-class campus with excellent work environment as well as recreation facilities for the employees," says a company spokesperson.

"Our employees in the Chandigarh facility will find it an exciting place to work in." For now, though, Infosys is retaining its existing facility in Mohali, where around 300 professionals are employed.

There are also companies like IDS Infotech -- an IT and ITES company with a wide range of service activities -- which employs around 1,200 people in Chandigarh.

IDS Infotech contributed around Rs 17 crore (Rs 170 million) to the total exports registered by STPI (Software Technology Park of India), Mohali in 2003-04.

The total exports were Rs 180 crore (Rs 1.8 billion), with Infosys {Rs 76 crore (Rs 760 million)} and Quark {Rs 46 crore (Rs 460 million)} being the chief contributors. This year's target is in excess of Rs 200 crore (Rs 2 billion), with Rs 50 crore (Rs 500 million) of exports already registered in the first quarter.

Sanjay Tyagi, additional director and centre head, STPI Mohali, says that exports from Mohali are expected to touch Rs 1,000 crore (Rs 10 billion) within the next three years.

"We are here to replicate the Delhi-Noida-Gurgaon model and take advantage of the excellent infrastructure here," says Tyagi.

But the region does face infrastructural problems too. Like Chandigarh does not have an international airport; the nearest one at Delhi is more than a three-hour train journey away.

"As more multinationals come into the region, this will increasingly become a drawback," says Kalsi. "We have approached the Indian government, stressing the importance of this issue."

From a technical standpoint, there's another hindrance. In Punjab, gateways or earth stations can be established only in the public domain.

Private individuals are not permitted to set them up. "STPI has set up one earth station but we would ideally require around five to seven," says Kalsi. Inadequate bandwidth will continue to be an issue until this problem is resolved.

There's another, more intangible factor that sometimes works against Mohali: the perception quotient.

"We don't yet have the reputation that, say, Gurgaon does," says Nangia, adding, "Some companies are unsure about the potential of the region."

Efforts are being made to counter this. Exclusive courses have been introduced by the Chandigarh administration in various government colleges to train students for BPOs.

In a French language exchange group, participants are encouraged to have group discussions in French. In the CTOSS (Chandigarh Training of Soft Skills) course, the accent is on call centre preparation, like body language and accent neutralisation.

Kalsi says the government is working towards making a "tri-city" area out of Chandigarh, Mohali and Panchkula.

"Together, they cover an area with a radius of only 10 to 12 km, which makes for a compact, integrated township," he says. "The authorities in each region will work closely with each other and share technology and resources."