by August 23, 2013 0 comments

With the rupee sliding below 64 mark against US dollar, Manufacturers’ Association for Information Technology (MAIT), the apex body actively representing ICT Manufacturing, Training, IT, Design, R&D and associated services sector, expressed deepest concern over difficulties faced by the Industry as well as the Consumers and appeals to the Government to include ERV clause for the purchase of Goods.

Emphasizing on the implementation of ERV, Mr. J V Ramamurthy, President, MAIT said, “We strongly recommend the Government to implement Exchange Rate Variation (ERV) clause, as mentioned in the Manual of Policies and Procedures for the purchase of Goods. ERV should be incorporated for all government contracts under the circumstances, including DGS&D, NIC contracts as it provides a win-win solution for both the parties in these circumstances.”

ERV implementation would bring in necessary relief to many small & large System Integrators and vendors supplying to the Government. The business of IT hardware industry which includes necessary products like computers, tablets, laptop, printers, are predominantly import dependent and amongst the badly affected due to the abrupt fall of Indian Rupee. This has led to an unexpected rise in the import cost of these products which results in financial instability of companies and it would be now difficult to adhere the pricing of already committed contracts which include government deals as well.

Further elaborating on this situation Mr. Amar Babu, Vice-President, MAIT said, “This falling rupee has made things worse as companies would be forced to increase the prices of important products and consumers would have to dig more from their pockets. This has been recorded as one of the steepest declines and the current proportion of imports utilized by Indian IT manufacturers to deliver products and services (approximately 85% at this time), has also been rising with time. Heavily import-dependent, coupled with the phenomenon of rupee depreciation witnessed by the country, has been adversely affecting the financial viability of the IT hardware industry.”

Stressing on the magnitude of this crisis, Mr. Amar Babu, Vice-President, MAIT said that, since May, 2013 we have been observing the substantial price increase to the extent of about 10%. Losses are accumulating, causing cash flow challenges and blocking investments. Weak rupee can impact Government projects and programs like those of Education, e-Governance, Healthcare, Financial Inclusion, etc. as they use IT products extensively.

In the ERV clause, the tenderer’s have to indicate import content and the currencies used for calculating the value of import content in their total quoted price, which will be in Indian Rupees. The tenderer’s may be asked to indicate the Base Exchange Rate for each such foreign currency used for converting the FE content into Indian Rupees and the extent of foreign exchange rate variation risk they are willing to bear.

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