Being one of the world’s most favourite destinations for Business Process Outsourcing (BPO) companies, India has very efficiently ousted many strong opponents including China, Australia, Philippines, Vietnam, Brazil and Ireland so far. But the way Business Process Outsourcing (BPO) is becoming the fastest growing segment of the Information Technology Enabled Services (ITES) industry, there is no doubt about the fact that India needs to take necessary steps time and again to retain its position. Since the mid-90s, due to investor-friendly tax structure and favourable geographic location, India has made this industry popular like anything by providing magnificent employable workforce. The BPO industry has transformed the very nature of the business work process and thereby leading to feasibility in administration and management within the business.
India BPO Scheme (IBPS), 2015
As far as the Indian BPO sector is concerned, considering the emerging threats from the next best alternative countries to India such as Philippines, etc., the Government of India in the year of 2015 took an initiative and introduced the India BPO Promotion Scheme (IBPS), aiming to further promote the investment in IT/ITES sector for the purpose of expansion of the base of IT industry, and secure balanced regional development. It would create more employment opportunities for youth as working in BPO enterprises is one of the choices of millions of young professionals.
As per the recommendation of the Nasscom-Kushman and Wakefield Report of 2014, the Central Government formulated this dedicated policy with the aim of fostering the growth of the industry with support from the State Governments for emerging locations. With the availability of a large pool of skilled and efficient workers, the scheme seeks to incentivize establishment of 48,300 seats across the states and UTs, specifically in digitally deficit areas, based on the population percentage as per Census 2011. The scheme was envisaged under the ‘Digital India Programme’, but unfortunately, the benefits under this scheme would be available till the end of 12th Five Year Plan i.e. March 31, 2017.
As per the Department of Electronics and Information Technology, the scheme seeks to establish the seats with an outlay of about Rs. 493 crores for the generation of direct employment to about 1,44,900 persons keeping three shifts’ operations in considerations.
Salient Features of India BPO Scheme (IBPS)
- Total Number of Seats: Under the BPO scheme, about 48,300 seats will be distributed across the states and UTs (excluding certain states, see “Excluded Cities from IBPS”).
- Viability Gap Funding (VGF): The eligible companies will be entitled to avail all the financial support in the form of Viability Gap Funding (VGF) as follows:
- Capital Support: The government will provide capital support of up to 50 per cent of one-time expenditure incurred on admissible items subject to an upper ceiling of Rs. 1 Lakh per seat.
- Special Incentives: Below are the special incentives that will be provided within the ceiling of total financial support, i.e. Rs. 1 Lakh per seat:
Incentive for diversity & inclusion
It aims at incentivizing those units which shall provide employment to women and persons with disability.
Incentive for providing employment beyond target
It aims at incentivizing those units which shall provide employment beyond employment target (1.5 times the number of seats).
Incentive for wider dispersal within State including rural areas
The scheme provides an incentive of 5% of the eligible capital support for those units which shall set-up BPO/ITES operations at locations other than the State capital.
Incentive for promoting local entrepreneur
The scheme seeks to provide the incentive of 5% of the eligible capital support for those units which shall set-up BPO/ITES operations as a consortium with a local entrepreneur who has a domicile of the State/UT in which BPO/ITES operations will be established.
Special Package for Hilly Region
The turnover criteria and Bank Guarantee have been relaxed by the government for the companies setting up BPOs in the hilly area of Himachal Pradesh, Jammu and Kashmir, and Uttarakhand.
- It is provided that a company having minimum 50 seat operations with an average annual turnover of last 3 FYs as Rs. 1 Crore instead of minimum 100 seat operation with an average annual turnover of last 3 FYs as Rs. 2 Crore, can seek to avail the benefits under the scheme.
- It is also provided that the hilly States have been given 5% Performance Bank Guarantee instead of 100% Bank Guarantee.
Quantum of capital support through an open bid system
In order to determine the lowest amount of capital support, bids shall be invited through Request For Proposal (RFP) from eligible companies. The capital support shall be provided as Viability Gap Funding (VGF) in respect of each State/UT.
Limitation to Financial Support
BPO companies cannot avail the financial support under any other similar schemes of the Central/State Government if they are already claiming the above-mentioned benefits under IBPS.
Excluded Cities from India BPO Scheme
Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, NCR (including Delhi, NOIDA, Gurgaon & Faridabad) and Pune, along with their Urban Agglomeration (UA) area, based on Census-2011, has been excluded from India BPO Scheme (IBPS).
It should be noted that the whole initiative might be based upon the very fact that India as a leading country in the BPO sector has got hidden but quite obvious threats. One of the threats seems to have been coming from another major player in the BPO industry, i.e. the Philippines. Filipinos have accents similar to American, and most of the Indian BPO employees lack the same.
As per the estimates done through various studies, it has been shown that almost $10 Billion in potential revenues in the voice segment have been lost by the Indian BPO sector because of the sole reason that Indians are intrinsically incapable to understand American accent. Another drawback which India has as compared to the Philippines is that the latter need not incur expenses over accommodation and other benefits for its employees, and whereas, India makes the whole process costlier for the investors.
In the same way, there are other serious contenders like the Latin American Region, Vietnam and Brazil which have got the immense potential to surpass India in the BPO sector. Moreover, the Chinese have proven their work unbeatable in terms of speed and cost-efficiency.
Hence, India came up with the IBPS under the flagship of ‘Digital India’. In order to retain its position in this industry, India needs to improve the BPO industry with an efficient implementation of IBPS-like similar schemes.
Presently the leading cities generating 85% of the IT revenues are Bangalore, Chennai, Delhi-NCR, Kolkata, Hyderabad and Mumbai. Before the recommendation of Nasscom-Kushman and Wakefield Report of 2014, the NASSCOM-AT Kearney, 2008 Report found Guwahati and Gangtok as “aspiring” cities and Agartala, Shillong, Aizawl as “potential” locations for BPO and ITES industry. However, the scheme excludes certain cities (as mentioned earlier) along with the North Eastern Region (NER).
But recently the Union Government of India launched NEBPS (North East BPO Scheme) in February 2016 giving special attention to the North Eastern Region (NER). Furthermore, in May 2016 a meeting was organized to provide employment in the Tier II and III cities. The STPI (Software Technology Parks of India) – the implementing agency of this scheme, invited bids from varying cities including Indore, Bhopal, and Jabalpur, etc. The Deputy Director of STPI, Mr S.H. Abbas Mehdi, very specifically mentioned at the meeting that, “Our aim is to rope in maximum companies and create huge employment opportunities for the youth”.