BSA CEO Espinel seeks rationalisation of software localisation norms

To bid for government projects in India, the government mandates that a certain percentage of the product, including software solutions, be made domestically

India’s localisation norms for procuring software meant for government contracts need to be rationalised so that companies can understand the processes better and bid accordingly, said Victoria Espinel, global chief executive officer (CEO) of policy advocacy group Business Software Alliance (BSA).

 

While most global companies have their software development teams in India, it is very difficult for them to establish what percentage of the product has been made in the country and what amount developed outside, she said.

 

Software companies, however, have flagged this requirement as arbitrary because of the lack of objective standards through which domestic value addition can be determined.

 

“It is almost impossible to quantify that we meet the localisation requirement of, let us say, 20 per cent or 30 per cent or whatever the percentage is. It can be quantified for physical goods by determining how much is made in India or the design determines this percentage. Even homegrown software companies have a hard time determining how to demonstrate local content addition,” said Jared Ragland, director, Asia-Pacific policy at BSA.

 

To bid for government projects in India, the Centre mandates that a certain percentage of the product, including software solutions, be made domestically.

 

For example, the Department for Promotion of Industry and Internal Trade (DPIIT)’s guidelines mandate that to meet the local content requirements, class-I suppliers must ensure 50 per cent local content. For class-II suppliers, it is 20 per cent.

 

This is in addition to any other localisation requirements that may be imposed by the respective line ministries for the software they wish to procure.

 

“The procurement process (for government projects) is very complicated. On top of that, there is almost an impractical obligation to demonstrate local content. But for that, you cannot count things like capital investments, research and development and after-installation service, among others, for local value addition,” he said.

 

Countries such as Saudi Arabia have local software content addition requirements. But they allow factors such as investments in research and development, job creation and setting up of global capability centres, among others, to be counted as domestic value addition, Espinel added.