Moneylife » E-gov projects and generous giveaways by govt prop up faltering IT companies?
E-gov projects and generous giveaways by govt prop up faltering IT companies?
During 2012, IT companies recorded insipid performance. However, with general elections on the horizon, several state governments and the central government through UIDAI, are eager to lend a “helping hand” to these IT companies
When the governments start spending huge money, one thing is sure; elections are on the horizon. This is true with states as well as the union government. No wonder, for every election, there are big, bigger promises (poll freebies) announced by all political parties and its affiliates. For example, recently the Uttar Pradesh government ordered 15 lakh laptops from HP, while Redington expects to execute and bill in fourth quarter an order worth Rs200 crore from the UIDAI. Separately, the Akhilesh Yadav-led UP government has floated a tender to procure 26 lakh units of tablet PCs, for distribution to class X students, in the first phase. The state government has budgeted Rs2,400 crore and Rs400 crore for procuring and distributing laptops and tablet PCs, respectively. Such orders lend a “helping hand” to faltering Information Technology (IT) companies.
While providing laptops is the new gimmick played by all political parties to lure voters, especially youth, the large order from the UIDAI however raises a question about the motive of the government. Over the past two quarters, growth expectations from IT companies have moderated progressively as concerns over stability of IT budgets, pricing power and client-specific issues have piled up. And who is better than a former chief of one of the largest IT companies to extend the “helping hand” in this scenario. No wonder, the entire IT industry is lining up to praise the UID project and the ‘brain’ behind it.
However, it is not only Indian IT companies that are vying the UIDAI contracts. Several global IT and IT enabled service providers are already into the fray. According to UIDAI’s own admission, the authority, so far has awarded contracts to about 38 companies and agencies, including Tata Consultancy Services (TCS), Wipro, Mahindra Satyam, Accenture, HCL Infosystems, HP India, Geodesic and MindTree. Wipro alone has won four contracts from UIDAI.
HCL had won the contract for managed service provider (MSP) worth Rs2,200 crore from the UIDAI beating giants like TCS, Accenture, TechMahindra, Wipro and few others backed by IBM and HP. HCL would implement and manage the Central ID repository (CIDR) of the UIDAI for seven years.
In another incident, TCS, India’s largest IT company was replaced by Infosys for managing the portals of ministry of corporate affairs (MCA). TCS had won the contract to manage the MCA 21 portal in 2005. The contract is worth $50 million and Infosys would manage the portal over next five years.
According to brokerages, the Indian economy is likely to witness consumption stimulus of around Rs1,300 crore over the next 12 to 14 months, without taking into consideration of the budgetary provisions. Over the next one and a half year, 13 states would witness assembly elections culminating into general elections and there are 2,100 electoral seats for grabs. This would contribute about Rs800 crore in consumption while the United Progressive Alliance (UPA) government’s ambitious Aadhaar-linked direct cash transfer is worth about Rs500 crore, says Axis Capital, in a research note.
Last month, HP competing with PC makers like HCL, Acer and Lenovo, won a contract to supply 15 lakh laptops to the UP government. HP quoted Rs19,058 per laptop, while HCL, Lenovo and Acer quoted a price of Rs21,983, Rs23,919 and Rs25,199, respectively. These laptops would be provided to students from UP, who have passed Standard XII during the 2011-12 academic year. The order is worth Rs2,585 crore.
Separately, the Akhilesh Yadav-led UP government floated a tender to procure 26 lakh units of tablet PCs, for distributing to Class X students, in the first phase. The state government has budgeted Rs2,400 crore and Rs400 crore for procuring and distributing laptops and tablet PCs, respectively.
During the 2001 assembly elections in Tamil Nadu, Jayalalithaa-led AIDMK promised free laptops for all higher secondary students. The Tamil Nadu government has started distributing 9.06 lakh laptops in the first phase. The Jayalalithaa government expects to distribute about 68 lakh laptops worth Rs10,200 crore to students in government-aided schools and colleges in the state. Last year, Electronics Corporation of Tamil Nadu (ELCOT) distributed 6,600 laptops, at various schools in the district, supplied by HP and Acer. Chinese Lenovo was the biggest supplier of laptops in the first phase. The second phase of procuring 7.24 lakh laptops is under way in Tamil Nadu.
No wonder, last week Lenovo, for the first time, had its board meeting in India. The Chinese vendor is also eying a contract from the UIDAI. According to media reports, Amar Babu RK, managing director of Lenovo India, has shown readiness to engage with the government on working jointly to provide cost-effective education solutions and even participating in the Aadhaar-based cash transfer with “specialised instruments” linking the beneficiaries’ bank account.
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