Software companies seek tweak in local value addition norms

Microsoft, Oracle, Adobe and other global software companies have sought a change in “local value addition” norms for software, claiming that they are unable to bid for government contracts since there are no standards to determine software localisation, people aware of the matter told ET.

In a letter to the ministry of electronics and information technology in July, BSA India--the Indian arm of a software alliance comprising the companies mentioned earlier and others like Amazon Web Services, Cisco, Salesforce, Autodesk and Slack--said these companies find it difficult to bid for or list their products and services on the government’s GEM (government e-marketplace) portal as they are unable to determine or define “local value addition”.

Software development is often undertaken by global teams and involves outsourced providers in different geographies, BSA India said in the letter, adding that it is very difficult or impossible to determine the contribution of particular locations to the overall value of the software. ET has seen a copy of the letter.

The letter said that since government norms on software and service procurement do not consider the nature of how software and related services are developed, it deprives companies developing them of the “reasonable opportunity” to compete for state-run projects and procurement.

Since the government has barred companies from including after-sales service, support, training and installation as a part of local value addition, these software companies are finding it difficult to establish credentials for the minimum value of localisation to be done by the companies as per a Department of Promotion of Industry and Internal Trade (DPIIT) memorandum, the letter said.

“The procurement of software products and services should be based on their technical merits, product quality, functionality, and efficacy, regardless of where such products and services are developed or manufactured,” BSA India said.

Email queries sent to Microsoft, Adobe, Cisco, Oracle, Amazon Web Services, Salesforce, Autodesk and Slack remained unanswered till as of press time on Monday.

An official for GeM, however, said the ‘Make in India’ and localisation provisions for all kinds of goods were applicable “only when it is possible to implement them”.

“Software companies can apply for exemption and get approval from the authorities if they are unable to meet the requirements,” the official said, adding that companies selling basic as well as advanced software are operating on GeM.

GeM is a government portal for the procurement of commonly used goods and services for all government departments, ministries and public sector firms. Launched in 2016, it replaced the directorate general of supplies and disposal. In FY23, the procurement of goods and services from the portal crossed Rs 2 lakh crore.