Legal Briefing

Indian government prescribes new guidelines for work visas

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India | 01 April 2010

The boom in the Indian economy has been accompanied by an increase in the perception of India as a lucrative avenue for employment. The employment of foreign nationals, especially as skilled or super-specialised labour in areas such as information technology, oil and gas, power projects or to lead Indian operations of multinational companies, is a common feature. Before August 2009, the legal regime of immigration laws seemed conducive to this, as was evidenced by the large number of foreigners working in India.

Before venturing into the guidelines issued by the Indian government in the past six months, it would be pertinent to have a background of the work-related visas it issued. There are primarily two categories, business visa (B visa) and employment visa (E visa). As the names suggest, B visas are for foreign nationals coming to India for business purposes or to explore business avenues, while E visas are for foreign nationals seeking employment in India on permanent or contractual basis.

background

The new guidelines widely acknowledged two facts. First, the sudden increase insemi-skilled and unskilled persons that were brought to India by foreign contractors, and secondly, the incorrect usage of the visas themselves, in a manner antithetical to the purpose of the category of visa. To elaborate on the second fact, this was primarily the problem of Indian and multinational companies getting foreign nationals to work in India on projects and contracts on B visas (instead of E visas) because of the speedier processing of the B visa and the lesser documentation requirements.

Though not directly accepted and credited in the guidelines, perhaps this was also a reaction to the increasing statistics of global unemployment adduced by the global recession. Whatever the rationale was, August 2009 onwards witnessed the Indian government issuing a spate of guidelines and restrictions on work-related visas.

new guidelines

The highlights of the new guidelines are as follows.

First, it was clarified that foreign nationals coming to India to execute projects and contracts may only avail themselves of E visas, and will not be viewed as fulfillingthe eligibility requirements for B visas. Further, E visas shall be granted only to highly skilled and qualified persons, to be employed in senior positions by companies, and not for semi-skilled, routine, ordinary, clerical or secretarial jobs. Additionally, E visas will not be considered for jobs for which a large number of qualified Indians are available.

Secondly, the guidelines detail eligibility criteria for both B and E visas. It was clarified that the B visa shall be issued only to persons visiting India to explore possibilities, to establish an industrial or business venture, or to purchase or sell products in India. The E visa shall be issued to a skilled and qualified professional or person who is being engaged or appointed by an entity in India on a contract or employment basis in a senior-level, skilled position, such as technical expert, senior executive or in a managerial position.

Thirdly, restrictions were placed in relation to the maximum number of foreign nationals that may be employed by an entity.1 It was specified that E visas for:‘Execution of project/contract may be granted by Indian missions to highly skilled and professionals to the extent of 1% of the total persons employed on the project subject to a maximum of 20.’ For power and steel sector projects the limitation is 1% or a maximum of 40%.2  If additional foreigners are required for any project, then clearance from the Indian government is required.

These guidelines led to confusion in the industry as to certain provisions – for example, the meaning of the term ‘project’ (whether it meant per contract or for the entire transaction), the procedure and time frame for getting clearances, and whether these restrictions are applicable to permanent employment.

Implementation and the Implications

The government asked all foreign nationals working on projects on B visas to leave India by 30 September 2009 and to re-enter with E visas.3

Further, the imposition of a maximum ceiling on the issuance of E visas without any notice, just before Christmas last year, took the entire business community by surprise. Companies involved in 24/7 operations and requiring the assistance of foreign experts on an urgent basis were denied visas by Indian embassies abroad. Indian embassies required additional documents, including an undertaking by Indian companies on the number of foreigners in their workforce. This further delayed the process and posed a serious concern for companies that were operating with a higher percentage of expats in their work force. The holiday season did not help their cause as the government offices were either shut or were not able to issue appropriate clarifications.

Except for the power and steel sector, the Indian government did not grant time to the other sectors to restructure and realign their operations, and create local expertise by appropriate training and development exercises. The information technology sector witnessed an adverse effect on their revenues and has approached the government for specific exemptions. In the oil and gas sector, for exploration and production activities, drilling companies faced a severe shortage of manpower, which affected their daily production. They have also approached the government for exemptions. Power companies have also been badly hit, as several of the projects are being commissioned by foreign contractors with a high percentage of foreign experts. The new restrictions will certainly have an adverse impact on the timelines and financial closing for these companies.

The guidelines have hurled an array of questions and require urgent clarification.

Future

While the reasons for the new visa norms seem plausible and even desirable for protecting the Indian labour market (especially semi-skilled labour), and for ensuring that E visas are issued for the purpose they were created (that is to attract super-specialised and skilled labour to the economy), the manner of implementation and suddenness of these norms left Indian industry reeling. While restrictions such as these are quite commonplace (the EU work visa norms being an instance), a growing economy also needs to provide a leeway for special cases, such as highly specialised jobs, unless it is certain that it has people trained and equipped for such jobs.

The need of the hour is a generic solution (as in a grant of a time period for the realigning of operations and specifying different limits for different sectors) with a window for the specialised needs of specific sectors. In view of the adverse impact caused across several sectors, it will be interesting to see how soon the Indian government responds to the problems faced by the companies and the approach it takes to address these concerns. A consultation process before such major impacts would not be misplaced.

Notes

  1. Guidelines issued by the Indian government on 16 December 2009.
  2. The limit has been raised for these sectors until June 2010.
  3. Later extended to 31 October 2009.