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With the sharp decline in the rupee’s value, information technology hardware makers have reiterated an old demand for an exchange rate variation (ERV) clause in all government contracts.
Under the clause, a tenderer has to indicate the content that would be imported and the currencies used for calculating the value of imported content. The tenderer might be asked to indicate the base exchange rate for each foreign currency and extent of forex rate variation risk he is willing to bear.
Hardware makers mostly import the components of personal computers and other computer peripherals. The rupee has depreciated 16 per cent since May; the downward spiral has accelerated in recent days.
“We don’t know where it (rupee depreciation) is going to end,” Anwar Shirpurwala, executive director of the IT hardware industry body, Manufacturers’ Association for Information Technology (MAIT), told Business Standard.
Adding: “If the government takes measures and implements an ERV clause in government tenders alone, that will support us to a great extent. There are tenders done six to eight months earlier and if they are going to come to closure in the future at the same dollar price, the industry will not be able to survive.” MAIT on Thursday said the recent fall might lead to an about 10 per cent rise in prices of IT and electronics products, which might hit consumers.
“Imagine a situation where a company launches a product and announces that it will be sold at a certain price. Advertisements are running and on-ground activity is happening on that price, and then the dollar starts strengthening. Since the product has been advertised at that price, it will be sold at that price. But how much of losses can the company absorb?” asked Shirpurwala.
