IT sector worried; India to take up visa fee with U.S.

India will soon schedule discussions with the U.S. to raise its concerns over the Obama administration’s recent decision to hike visa fees, official sources told The Hindu. India will also consider retaliatory measures and even explore the possibility of dragging the U.S. to the World Trade Organisation’s dispute settlement body, but only if talks fail to amicably resolve the issue.

Issues related to the tightening of the visa and immigration regime and the fear-mongering about a large number of American jobs allegedly going to foreigners have been part of the rhetoric before elections in the U.S. This time too, it is no different.

Industry bodies FICCI and Nasscom had termed America’s decision — to double the fees for certain categories of H1B and L1 visas to $4,000 and $4,500 respectively — as “discriminatory” because it will mainly impact Indian IT firms. Nasscom said the decision’s financial implications for the Indian technology sector would be around $400 million a year.

H1B and L1 visas are temporary work visas for skilled professionals. India is the largest user of H1B visas (67.4 per cent of the total 161,369 H1B visas issued in FY14 went to Indians) and is also among the largest users of L1 visas (Indians received 28.2 per cent of the 71,513 L1 visas issued in FY14).

President Barack Obama had recently signed into law a $1.8-trillion tax and spending Bill. Among other things, it authorised the visa fee hike applicable to companies employing 50 or more, and with over 50 per cent of their employees in the U.S. on H1B and L1 visas (or the 50/50 rule).

The fee thus collected, likely to be over $1 billion every year, will be utilised to finance a biometric tracking system and healthcare requirements of the 9/11 terror attack victims. The firms mostly affected by the 50/50 rule are those from the IT/ITeS sector, the largest users of the H1B and L1 visas. However, trade experts, speaking on condition of anonymity, said that to successfully challenge the fee increase before the WTO panel, India will have to first establish how Indian companies are more affected than those from other countries.

But before any action at the WTO, discussions on the issue will be held shortly over digital videoconference between both governments. These discussions will be part of the high-level India-US Services Working Group meetings, the sources said.

Commerce Minister Nirmala Sitharaman is likely soon to write to U.S. Commerce Secretary Penny Pritzker. The sources said the Indian Ambassador to the U.S. and industry bodies such as Nasscom are in touch with the U.S. administration to put across India’s view — the “huge” contribution of the Indian IT firms to the U.S. economy, as well as the adverse impact of the visa fee increase on these firms and on the temporary movement of highly-skilled professionals, mainly from the IT sector, from India to the U.S.

Pointing out that U.S. visa fee increases hurt India-US services trade, the Indian Commerce Ministry has been insisting that all visa-related issues should be part of discussions on bilateral services trade, the India-US Trade Policy Forum (or TPF, the premier bilateral platform to discuss and resolve bilateral trade and investment issues) and the India-US Strategic and Commercial Dialogue (S&CD, the primary forum to discuss issues of mutual interest on regional security, trade, economic cooperation, defence and climate challenges).

During 2014-15, India’s export of computer services and ITES/BPO services (excluding commercial presence) was around $82 billion, of which exports to the U.S. and Canada accounted for nearly 60 per cent.

The sources said the U.S. Commerce Department and the U.S. Trade Representative have informed that visa-related matters should be kept out of the TPF, S&CD and services discussions as, according to the U.S., they are security-related issues dealt by the Department of State and Department of Homeland Security.

Meanwhile, the Commerce Ministry, along with the External Affairs Ministry, are in discussions to ensure that the digital videoconference on visa-related issues happens some time soon, especially since the TPF and S&CD, both annual events, will now be held only in September-October 2016. With the presidential elections scheduled for November 2016, India is looking to resolve the issue before the term of the Obama administration ends, the sources said.

India had earlier protested the delay “on the part of the U.S.” in signing a localisation agreement to eliminate dual social security taxation. The Indian IT/ITeS sector is already burdened because in the absence of an India-U.S. Totalisation Agreement, it has to shell out over $1 billion annually to the U.S. government towards social security, with no benefit (as the Indian employees do not stay on in America) or prospects of refund.