In a move that is expected to hit Indian IT companies majorly, the US Government has decided to hike H-1B visa fee from next fiscal.

The US has hiked H1-B visa fees and this move could further impact profitability of Indian IT companies in the 2013 fiscal.

The US Citizenship and Immigration Services (USCIS) today announced that application fee of H1-B visas will go up in the range of $325–2,000 from April 2012. This is applicable for companies employing 50 or more workers in the US and more than 50 per cent of this workforce is in H-1B or L-1 non-immigrant status.

Another $500 will be charged as fraud prevention and detection fee. Further, for fast processing of applications, another $1,225 will be applicable. While the exact amount of an H1-B visa can't be ascertained, a rough estimate, according to the IT industry, pegs it at $4,300-12,600 is the per employee cost for an H1B visa.

“While this is a steep y-o-y increase, visa charges as a share of revenue for Infosys were higher in FY 07 and 08,” said Mr Peter Schumacher, President and Founder, Value Leadership Group Inc. The upping of H1-B visa fees will impact Indian IT companies which are already reeling under cost and margin pressures due to the persisting slowdown in the US markets.

Second time

This is the second time in the last couple of years that H1-B visa fees have been hiked since 2010. The Indian IT industry has filed fewer H1-B visas this year compared to previous years.

According to the US Government Accountability Office, demand was driven by large Indian IT companies which tend to garner over a quarter of all H-1B approvals.

“The overall value added is much more when you compare with small increase in fee. The brighter side is that cost of getting a visa will come down as US announced a waiver to those who are to renew their visas,” Mr Bipin Chandra Pendyala, Secretary of ITsAP (IT and ITES Industry Association of Andhra Pradesh) and Vice-President and Site Manager of CA, told Business Line .

“This is going to adversely impact heavily both small and big IT companies alike. A couple of small body-shopping firms (with small presence in India but depend on US operations) have already wound up,” Mr J.A. Chowdary, Chief Mentor of TiE (the Indus Entrepreneurs - Hyderabad), felt.

‘double whammy'

“This is a double whammy for the industry. On one hand visa rejections are on the high side and on the other they are increasing fee. For the big firms, it means higher cost of operations because they have to send people with specific skills such as ERP in big numbers to ensure smooth implementation,” he said.

Ms Janice L Jacobs, US Assistant Secretary of State for Consulate Affairs, a week back said that the US has issued 67,105 H1-B visas. In April 2009, Senators Chuck Grassley and Dick Durbin moved a legislation to prohibit companies with more than 50 per cent of their workforce using H1-B and L-1 visas under the Employ American Workers Act.

The cap on H1-B petition as mandated by the US Congress for FY 2012 is 65,000, which is the same as previous years.

>venkatesh.ganesh@thehindu.co.in

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