The rupee’s fall has set alarm bells ringing for the Indian IT hardware sector and industry watchers are asking the Government to implement the Exchange Rate Variation (ERV) clause.

Including the ERV clause would help small and large companies indicate import content and the currencies used for calculating the value of import content in their total quoted price, which will be in rupees. The tenderer’s may be asked to indicate the base exchange rate for each such foreign currency used for converting this into rupees and the extent of foreign exchange rate variation risk they are willing to bear. This should be applicable to vendors who supply computers and other devices to the Government, according to Manufacturers’ Association for Information Technology (MAIT).

With the rupee sliding below 64 against the dollar, MAIT has expressed concern over difficulties faced by the industry and consumers.

According to J.V. Ramamurthy, President, MAIT, “We strongly recommend the Government to implement ERV clause, as mentioned in the Manual of Policies and Procedures for the purchase of Goods and should be incorporated for all government contracts under the circumstances, including DGS&D, NIC contracts.”

Since May 2013 due to the sliding of the rupee, equipment makers and distributors are grappling with rising costs, which has gone up by 10 per cent, according to industry watchers.

“Losses are accumulating, causing cash flow challenges and blocking investments,” said Amar Babu, Vice-President, MAIT.

> venkatesh.ganesh@thehindu.co.in

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