India to lobby for drop in U.S. visa fees

A new U.S. law that increases visa fees to pay for border security is a national issue for India rather than one that only affects Indian outsourcing companies, according to India's National Association of Software and Service Companies (Nasscom).

Nasscom and the Indian government plan to lobby for dropping the fee hikes in bilateral negotiations with the U.S. and in multilateral trade groups such as the World Trade Organization, said Som Mittal, president of Nasscom, today. U.S. companies that are negotiating for access to Indian markets could also be negatively affected, he added.

However, the measure may not have a significant impact on India's outsourcing business, analysts said.

President Barack Obama signed into law on Friday a $600 million bill for increased surveillance of the U.S.-Mexican border to prevent illegal immigrants from entering. It will be funded by an increase in visa fees paid by tech workers brought into the country by companies with more than 50 staff and in which more than 50 percent of the staff are on visas. The visa fees on H-1B and L visas will be raised by about $2,000 per application.

While this measure will affect Indian and other outsourcers outside the U.S. that bring staff in large numbers to their U.S. operations, it will not affect U.S. tech companies that also use workers from abroad, Nasscom said. As these companies are based in the U.S., their staff from abroad are typically less than 50 percent of their total staff in the U.S., it added.

The total cost to Indian outsourcers from the new measure could be as much as $250 million per year including new visa applications, workers extending their visas and other categories, Mittal said.

Indian outsourcers will not be significantly affected by the increase as the total additional cost is a small percentage of the revenue of Indian outsourcers, said Sudin Apte, principal analyst at Forrester Research. Also, Indian outsourcers tend to hire more people locally and reduce their Indian staff at customer sites by moving the work offshore, he added.

Indian outsourcers obtained 5,000 H-1B visas last year, compared to about 11,000 in the previous year, Mittal said. Nasscom said last year that the recession had reduced the demand for visas.

Customers are convinced that offshoring to India delivers tremendous value to them, and they will continue to do business with Indian outsourcers, Apte said.

But Nasscom and some Indian outsourcers are particularly disturbed by the new legislation, as this is the first time that anti-protectionist rhetoric has actually translated into legislation. "The issue is 'Where will this stop?'" Mittal said.

U.S. Sen. Charles E. Schumer (D-N.Y), chairman of the Senate Immigration Subcommittee, annoyed the Indian side when he described outsourcers such as Infosys Technologies as "chop shops" during discussions on the Border Security Bill. Chop shops are essentially operations that dismantle stolen cars and sell the parts. He then changed his description to "body shops," a term that also riles Indian outsourcers because there was a time in the 1980s when the main business of Indian outsourcers was sending staff to work on contract at technology companies and other businesses in the U.S.

Since then Indian outsourcers have focused on offshore delivery of services from state-of-the art centers in India, and have also started expanding in the U.S. Indian outsourcers like Wipro and Tata Consultancy Services, for example, have announced acquisitions and set up new delivery centers in the U.S.

Indian outsourcers have hired staff by the thousands in the U.S. in the last few years, not because of U.S. legislation or fear of protectionism, but because the business model requires them to have highly skilled, permanent staff close to the customer, said Mittal. Indian staff are in the U.S. only on temporary work, he added.

Indian outsourcers are apprehensive that they could get caught in the mid-term election rhetoric about job losses in the U.S. There could be more comments like Schumer's as the U.S. heads into the mid-term elections with 9.5 percent unemployment and very little job growth, John McCarthy, vice president and principal analyst at Forrester said in statement last week. Indian firms and NASSCOM, and their customers, need to be prepared with their own public relations counterattack, he added.

Copyright © 2010 IDG Communications, Inc.

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