US imposes extra charges of $2,000 per annum for skilled workers from India

The Indian IT outsourcing firms have been saddled with combined costs of around $200 million (Rs930 crore) a year, after the US increased skilled-work-visa charges by nearly $2,000 (Rs93,000) per  person per year. There are an estimated 70,000-1,00,000 Indians in the US, nearly all of them IT professionals, working on 3-7 year visas in the US who will be impacted by the change.

The move, part of the election-fuelled anti-foreigner frenzy, is targeted at bridging the cost difference between employing an Indian technology worker and a local worker. According to opponents of outsourcing.Indian workers have traditionally been preferred over locals by both Indian and international IT firms as they are paid in the range of $60,000 to $80,000 a year, allegedly making them around 20% cheaper than Americans.

Killing two birds with one stone, Emergency Border Security Supplemental Appropriations Act -- the bill passed by the Senate on Thursday, seeks to channel the extra visa revenues into sealing of the US' border with Mexico. With just three months remaining for the US Senate and House of Representatives election, feelings have been running high about the influx of illegal immigrants from Mexico through the porous border between the two countries.

Late April, the US border state of Arizona had enacted a stringent anti-trafficking law that gave wide ranging powers to the local police to detain foreign looking people unless they carried immigration papers. The law, compared by critics to Nazi regulations, also made a crime not to carry such papers. Many US citizens accuse illegal immigrants from Mexico -- many of whom are trafficked across the border by gangs of outlaws -- of lowering their standards of living by working for peanuts after crossing over.

The Indian industry vehemently criticised the linking of issuing perfectly legal, temporary work visas to highly skilled engineers to the emotive issue of illegal trafficking of labour. "While the need to secure greater funding for strengthened security along the US-Mexico border is well understandable, illegal immigration issues are not linked to the temporary movement of skilled professionals,” protested Chandrajit Banerjee, director general of the Confederation of Indian Industry, India's biggest industry representative body.

The IT industry, which will be the hardest hit by the new provisions, called it discriminatory and misguided. "We have been made a scapegoat," said Som Mittal, president of Nasscom, the industry body that represents the interests of Indian IT and outsourcing firms. "Instead of catching illegal immigrants who break the law, you are trying to tax people who have followed the law," he pointed out.

He said that Indian engineers are not to be blamed for the record unemployment rates in the US today. According to the US government, around 15 million Americans (10% of the workforce) is currently looking for work. "The unemployment is largely in sectors like manufacturing, construction, and retail. We fail to see how they are related to skilled worker visas," Mittal added.

Interestingly, the new visa charges will not hit all Indian IT professionals, but only those that are sent by India-based companies such as Infosys, TCS, Cognizant etc. According to the bill, to be signed into law by US president Barack Obama, all firms that have more than 50% of their employees hired from the US will be exempt from the new charge. As a result, international outsourcing giants such as IBM and Accenture, which compete with Indian firms for most contracts, can continue to send their Indian workers to the US under the old charges as they also have a large number of local workers in the US.

However, for biggies like Infosys and TCS, who are expected to have around 25,000 Indian workers in the US between them, the 50% mark is a long way off. It is estimated that local residents make up only around 15% of their US deployed staff, though both have plans to add hundreds of US-based workers to their rolls.

"Yes, it is discriminatory," said Kris Gopalakrishnan, chief executive officer (CEO) of Infosys, "It is targeted at one sector, one industry and one country,” he said.

While the Indian government has already written to its US counterpart protesting the move, some feel that Indian firms must do more to counter the 'election propaganda' including a recent comment by a US Senator that Indian companies were 'chop shops' or illegal tear-down yards for stolen vehicles. "Senator Schumer’s comment shows that in an election year, he is “standing up” for American jobs," warned John McCarthy, principal analyst for Forrester Research based in Massachusetts, USA, as the bill was being debated.

"But that said, as we head into the midterm elections with 9.5% unemployment and very little job growth, there will be more comments like this unfortunately, and the Indian firms and Nasscom need to be prepared with their own PR counterattack and story," he added.

For now, no one expects the extra expense to dent the India advantage of outsourcing giants like Infosys, which is expected to see its visa costs to double from around $15 million (Rs72 crore) to around $30 million (Rs145 crore) on an annual revenue of around Rs25,000 crore. The industry, however, is definitely worried that the rhetoric, which started with 'Buffalo, not Bangalore' election slogan by Obama two years ago, has started impacting law making. "Our objection is not so much on the costs, but on the principle," says Mittal of Nasscom.

He pointed out that many American companies derive large amounts of profit from the Indian market. "There are tens of thousands of Americans working in India.. If protectionism continues, the government of India would also be obligated to respond," he said.