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US Senate clears modified Immigration Bill

IT sector lukewarm to the move.

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The US Senate Judiciary Committee on Wednesday provided some cheer to Indian information technology companies by passing the Immigration Reform Bill with a few amendments.

The two key reforms include providing an opportunity for about 11 million illegal low-skilled immigrants, including 260,000 Indians, to get US citizenship through a new visa programme being created.

The other amendment has made provisions for software companies who rely more on offshore talent to be given relief from the compulsory 50% local hiring, their cause being championed by Republican senator Orrin Hatch of Utah, home to several software firms.

However, firms where foreign labour accounts for at least 15% of the skilled work force would be subjected to tighter conditions than companies less dependent on H-IB visa holders. This is being done in order to crack down on companies that use H-1B visas to train workers in the US only to ship them back overseas.

The other provision of increasing the H1-B visa limit from 65,000 annually to 110,000, with the possibility of a further rise to 180,000, also still stands. These provisions were passed by 13-5 votes in the House.

Apart from these, a start-up visa for entrepreneurs wanting to set up businesses in the US, and a merit visa with 250,000 applications allowed in a year for highly talented immigrants are also likely to be introduced.

President Obama welcomed the passing of the Bill and urged its full passing at the earliest. The bill is now slated to be taken up for debate in the full Senate next month, where it would require 60 votes to pass the 100-seat Senate.

The Indian IT industry, which accrues maximum outsourcing revenue from the US has been crying itself hoarse over the huge negative impact the passing of this Bill will have on already strained operations. In its modified avatar, experts are still not convinced of the tide turning in favour of the beleaguered industry.

Dhananjay Sinha of Emkay Global said, “Some dilution was expected, but since the main body of the Bill remains, we see a definite hit of around 300-350 basis points on margins, on account of increasing wage cost involved in hiring more locals, with lesser skills.

Capex costs will also increase to set up more local offices to train and employ more onsite workers. This may force companies to shift their focus to other locations like Mexico, Europe and Asia.”

However, most IT companies today have already started reporting higher growth from Europe and emerging markets and have been steadily opening more local delivery centres and hiring more onsite workers – both skilled and freshers.

“Companies with a higher proportion of fixed price revenues (such as TCS and HCL Technologies) may feel the impact to a lesser degree due to flexibility in managing headcount. Further, a combination of L-1 non-immigrant and fixed price contract may circumvent the outplacement clause. MNCs, due to higher onsite proportion of workforce, and BPOs, due to low requirement of onsite people, are also better placed to face the reforms,” remarked Rishi Junjunwala and Girish Ramkumar of Goldman Sachs, in a note on Tuesday.

Samiron Ghoshal, leader - IT advisory practice, India, Ernst & Young concludes, “The tightening on visas will keep happening time and again, but we believe India IT firms are less dependent on visas today, being not just outsourcing firms – but global organisations equipped to offer diverse services. Besides, the latest provisions may make local talent cheaper.”

Phaneesh Murthy could lose $15 m
Phaneesh Murthy, who was sacked as iGate CEO, may lose as much as $15.09 million (`84 crore) in severance benefits, the company said. “Mr Murthy was terminated for cause, for a violation of iGate’s policy. He is not entitled to severance under the terms of his employment agreement. The parties are in discussions regarding potential compensation for transition-related services,” iGate said in a statement.

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