Technology firms wary of state contracts

Technology firms wary of state contracts

NEW DELHI: The desperate move of IT major Wipro to terminate Assam-NRC project over non-renewal of contract mirrors a deeper problem within the industry that continues to work various government projects despite thousands of crores worth pending dues.

Companies including Wipro, TCS and Infosys are, in fact, also turning their backs in bidding for various government contracts as delay in payments hurt their margins and revenues significantly, say industry executives.

“Companies are cautious of where to take a position in government projects because the ability to form payments aren't followed in practice as mentioned within the formal policy. Various government departments owe about Rs 6,000 crore in contract payments thereto services companies,” a senior executive at an IT firm said. Lack of clarity and new requirements within the middle of an ongoing project further adds to the woes, hurting their revenue growth, the chief noted.

Prasanto K Roy, tech policy consultant and former vice-president of Nasscom, said that “non-payment should end in termination of services anywhere, though it's rare for a personal contractor to possess the courage to try to to that with the govt . Clearly, this is often a business decision from a corporation driven to the sting .”

Roy, however, said that keeping in sight that payment delays for state projects is an “old story” and an “ongoing worry”, Wipro’s decision should “be a wake-up call” for the govt — that there's no reason why a personal company should keep it up delivering free services to the govt . Large contracts implemented by IT firms include implementation of Aadhaar, digitisation of passport services and therefore the modernisation of India Post.

After a rigorous tender process, Wipro was appointed because the system integrator for the National Register of Citizens (NRC) project in Assam in 2014. The service was terminated thanks to non-payment of Rs 70 crore and also non-renewable of subscription that cost Rs 3 lakh per month after its expiry in October 2019.

“But, as a gesture of goodwill, Wipro continued to pay the hosting service charge until January-end, 2020, which it had been willing to continue providing these services (only) if the agreement is renewed by the authorities,” Wipro said.

Payment delays hurting margins of personal firms

Companies like Wipro, TCS and Infosys are, in fact, also turning their backs in bidding for various government contracts as delay in payments hurt their margins and revenues significantly, say industry executives.