MAIT rec­om­mends in­clu­sion of Ex­change Rate Variation clause to pro­tect in­dus­try from fall­ing ru­pee

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In the wake of rapid de­pre­ci­a­tion of the In­dian ru­pee over the past cou­ple of months, 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 con­sumers and ap­pealed to the govern­ment to in­clude ERV clause for the pur­chase of goods.

Em­pha­siz­ing on the im­ple­men­ta­tion of ERV, 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 gov­ern- ment 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 and large sys­tem in­te­gra­tors and ven­dors sup­ply­ing to the govern­ment. The busi­ness of IT hard­ware in­dus­try, which in­cludes nec­es­sary prod­ucts like com­put­ers, tablets, lap­top, print­ers, is 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 also in­clude govern­ment deals.

Stress­ing on the mag­ni­tude of this cri­sis, Amar Babu, VP, MAIT said, “Since May 2013, we have been ob­serv­ing the sub­stan­tial price in­crease to the ex­tent of about 10 per­cent. Losses are ac­cu­mu­lat­ing, caus­ing cash flow chal­lenges and block­ing in­vest­ments.”

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 ru­pee and the ex­tent of for­eign ex­change rate variation risk they are will­ing to bear.

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