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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?

Yogesh Sapkale | 04/02/2013 04:25 PM | 

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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Vaibhav Dhoka

Vaibhav Dhoka 3 years ago

In India elections are fought on public money only.Freebies is not from politicians pocket but it is going to be collected post election in form of increased taxes.

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Sachin 3 years ago

What author want to convey ? Procusing PC/Laptop is good or bad ? Distributing them to students is good or bad ? Procuring laptops from least bidder is good or bad irrespective of company being from india, china or USA ?

Govt spending is MUST to boost the economy. Otherwise from where money will come ? Money has to flow in some way. Govt gets money from taxes (mostly salaried employee) and gives them back to PSU/Private companies to do some work. This money flow cycle is required for everyone to grow. Only we need to make sure that leaks are kept to minimum. And this article do not say about leaks/fraud any where.

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pravin varma

pravin varma 3 years ago in reply to Sachin

Oh my god.this perpetual motion vision of economics is most funny.the money which is with private citizens is not lying is invested in banks/capital markets or spent on their wants and needs.with the govt in betweern,all that happens is a transfer of wealth from the productive people to rent seekers(babus/netas -remember rajiv gandhi's 85% comment?).when private people spend,it is spent on the things they really want.when politicians spend others money,it is spent on things that get them votes.kindly rethink your economic view of the is a bit 17th century old.

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Sachin 3 years ago in reply to pravin varma

Pravin, Thanks for enlightening my 'perpetual motion vision of economics'. Issue discussed here is not what is level of my knowledge or your HIGH IQ knowledge. I wanted to say in a very layman language that govt spending is must.That is why govt collects taxes so it can return that in some or other form. And I hope this is not 17th century thinking.
Please do not politicize the issue saying politicians are corrupt, bubu swindle money in between blah blah. Every one knows what happens in India and that is the reason i said we have to plug holes (leaks) in the system. And yes i even remember Justice Katju's remark of 90% indian...

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Ravi Duggal

Ravi Duggal 3 years ago

Interesting story. But what would be more interesting is the underlying story of the loot that must have happened in awarding these contracts. Something worth investigating because a huge amount of resources from the public budget is being grabbed by private players through such contracts under crony capitalism.

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Mukesh kamath

Mukesh kamath 3 years ago

So what does yogesh want to say ultimately? That such IT spend is useless? It may benefit people also how can he be so sure?

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