'RBI's move on EEFC is hasty; not in line with India's liberalisation policy'

The Reserve Bank of India's directive to exporters to pare the balance in their Exchange Earners' Foreign Currency account by 50 per cent has evoked protests from various quarters. The National Association of Software and Service Companies, too, has joined in the protests criticising the central bank's move.

NASSCOM president Dewang Mehta has joined other Indian exporters in terming the RBI's directive 'hasty' and 'arbitrary'. "It's not in line with the liberalisation policy adopted by India and will only encourage artificial price mechanism," he says.

The step has brought in around $850 million so far, still short of the expected $1 billion by August 23. Mehta airs his views in a frank tete-a-tete with Kanchana Suggu.

How and to what extent will Indian software exports be affected by the Reserve Bank's directive?

Software exporters retain dollars in their EEFC accounts to pay professionals abroad. These are not capital expenses, but revenue expenditures. In 1992, we had created the EEFC account. Seventy per cent of the money in this account is required by software exporters to meet various commitments.

By August-end allowances have to be paid. We need more time. Again, when the dollar has to be converted into the Indian currency, some commission has to be paid. Why should exporters pay so much money as commission? I think only bankers are benefiting as a result of this move.

You have urged the RBI to reconsider its decision. What has been its response?

We have a meeting with the finance minister soon. I'm sure we'll find some way out.

Why do you think that the RBI's move is arbitrary?

I think that it's a complete anti-liberalisation move. The world is moving ahead, one should have a long-term vision. You cannot have knee-jerk measures like this. If we follow such measures, why will other countries even come to India? In any case, the software exporters are neither dependent on the government nor the RBI.

So what do you think the RBI should have done?

They should have sat down with us and discussed the matter. We should have been given more time. We also are patriotic. We also want a strong rupee. Last year, we accounted $4 billion worth of software exports.

This year we can bring in $6.3 billion.

Will the RBI give any special consideration to software exporters?

I really don't know. I'll come to know of their stand only after the meeting next week.

You have urged the government to take up the issue of non-tariff barriers imposed by the US. Could you elaborate on that?

During his visit to the US, the prime minister will raise the issue of signing of the 'totalisation' agreement so as to avoid the problem of double taxation of social security.

Indian software professionals working on H-1B or B-1 visas in the US but getting their wages in India, pay their social security in India and also 14 per cent of their wage as social security in the US.

According to the US law, a person has to work for 40 consecutive quarters, that is ten years, to claim any benefit under the social security regime. But an H-1B visa is valid only for three years and is extendable for an additional three years. These professionals don't even get a refund. The US has signed such an agreement with Ireland, Singapore and Australia. We are taking up this matter with the US administration.

What role is NASSCOM playing for increasing the cap of H-1B visas?

We are working through American firms such as Microsoft, IBM and Hewlett-Packard and trying to lobby with US Congressmen and senators. In 1994, we appointed a lobby firm which helped us increase the cap of H-1 B visas. I can't tell you much because one cannot speak openly about lobby firms.

In November, we will set up a new lobby firm in Washington DC so that it is ready by January to provide factual flow of information to the US president. Another point we are trying to raise is the locational visa issue.

How soon do you see the results coming in?

Definitely something should happen by the end of this year. We have been told that between Labour Day -- which is on September 4 -- and the election of the new president, not too many decisions are taken. We have also urged the prime minister to raise the issue of a global Internet law.

Take the 'I love you' virus, for instance. The Philippines couldn't do anything about it because they don't have a cyber law. So we have asked the prime minister to bring up the issue of a global Internet law to tackle problems like hacking, viruses and cyber terrorism when he speaks at the UN assembly.

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