Visa woes continue to haunt IT firms

As if global macro-economic headwinds were not enough, local information technology services firms are grappling with a serious shortage of business and work related visas from the US, their mainstay market.

In fact, this is emerging as a much bigger problem than most companies had factored in.

For instance, Infosys, the second-largest IT firm, has projected a 200 basis points (bps) drop in margin in the current quarter mainly on account of the visa costs that get bunched in during this period.

Som Mittal, president of industry lobby National Association of Software and Services Companies, or Nasscom, also believes the rising rejection rates of B1 and L1 visas by the US consulate is adding to the costs of IT companies, who rely heavily on these visas to send Indian professionals to the US for onsite execution of projects.

B1 visa is a short-stay permit issued to those looking to visit the US for business related reasons, while L1, also a non-immigrant visa, allows an official of an international company with operations in the US to work in the country for a few years.

Rejection rates in B1 & L1 visas have risen to 30-40%, said the Nasscom chief. “These visas are integral part the delivery model adopted by local IT firms and rising rejections are piling on huge costs on the companies.”

“The visa fee hike, which happened two years back, did not have significant impact (on IT companies), but increasing rejections (where application fee gets forfeited) are affecting the companies.

We are trying to address it. And since it is not due to legislative action but on account of administrative action, we are trying to find a solution at that level,” said Mittal, adding that more than 70 affected companies, most of them multinationals, have written to the US President to tackle the issue.

Just last week, the US Citizenship and Immigration Services received 17,400 H-1B applications (in the general category) compared with 5,900 H-1B petitions received last year since it began accepting them on April 1.

The applications have risen due to higher rejection rates. Companies are trying to offset the higher rejections by applying for more visas so that they are not left in a lurch.

A commerce ministry source, who did not want to be identified, said the rising rate of visa rejection for Indian professionals was one of the main issues discussed by commerce minister Anand Sharma during his recent meeting with his US counterpart.

“The minister was very forceful in expressing his concerns over the increase in the number of (visa) rejections, which will restrict movement of skilled workers and impact businesses of Indian outsourcing companies,” he said.

According to the source, India is seriously considering taking up the issue at the World Trade Organisation as well.

However, not many expect a resolution of the issue anytime soon due to election compulsions of American politicians. On the contrary, it could well be used as election rhetoric to whip up patriotic sentiment, which could see Jack Palmer’s case against Infosys being played up.

“Given this is an election year in the US, the visa case against Infosys may attract more attention than deserved. The news flow may continue to dog Indian IT services companies in the short term,” an HSBC analyst said in a note to investors on Monday.