The fee hike is set to be implemented from October 2, 2020
The recent move by the US government to change the method of H-1B visa allotment is a mixed bag for India, said experts.
While the move is expected to have a negative impact on the Indian technology services industry, which has for long being a beneficiary of the H-1B work visa programme, it is likely to be an opening for Indians studying higher degrees in the US.
Indian IT firms will have to pay more to hire locally in the US, while Indian students studying for higher degrees in the US could benefit from the new proposals.
The Department of Homeland Security (DHS) said on November 30, it has proposed a change in rules for H-1B work visas, commonly used by Indian IT firms for moving employees to the US for work on the client side.
The new rule would require petitioners seeking to file H-1B petitions to first electronically register with U.S. Citizenship and Immigration Services (USCIS), the agency that oversees legal migration to the US, during a designated registration period.
It further said that the USCIS would "reverse the order" to select H-1B petitions.
At present, the H-1B visa cap is 65,000 for general category and an additional 20,000 for advanced degree holders in the US.
The new rule will include advanced degree holders and general category candidates under the 65,000 cap in addition to the 20,000 vacancies for advanced degree exemption, "likely increasing the number of beneficiaries with a master’s or higher degree from a U.S. institution of higher education to be selected for an H-1B cap number, and introducing a more meritorious selection of beneficiaries".
The proposed process would result in an estimated increase of up to 16 percent or 5,340 workers in the number of selected H-1B beneficiaries with a master’s degree or higher from a U.S. institution of higher education.
"I see these changes as somewhat of a mixed bag for the Indian service and tech industry, on the positive side the move to electronic filling will reduce cost and wait times both of which is favorable to the Indian firms," said Peter Bendor-Samuel, CEO at research firm Everest Group.
The Indian IT industry body National Association of Software and Services Companies (NASSCOM) however, said on December 1 that it was evaluating the new proposals and implications on Indian IT firms.
It further said "there is not much time between now and when the next H-1B lottery season opens in April 2019. Companies have already begun assessing their needs and planning their submissions for next year, so we are concerned about the uncertainties that could arise as the government seeks to implement another major change in the H-1B process during that time frame".
In a post on "The Insightful Immigration Blog," Cyrus Mehta, founder and managing partner of Cyrus D. Mehta & Partners PLLC said: "Whether intentional or unintentional, the proposed rule will adversely impact the ability of IT consulting companies to sponsor such workers from India, even though the use of IT consulting companies is widespread in America (and even the US government contracts for their services)..."
He added that the H-1B visa in its existing form, has helped American firms enjoy "flexibility" at "affordable prices" for top talent.
This labour arbitrage model has in some sense been the backbone of Indian IT firms.
"However, by favoring high skilled workers with master degrees from US institutions, the DHS is shifting the H-1B allocations to higher wage applicants. This takes away one of the significant advantages the Indian firms have enjoyed," added Bendor-Samuel.
However, Indian firms have begun to reduce their dependence on the H-1B visa given the fact that the US has been contemplating a change in the visa policy since a couple of years.
In a note last month, Kotak Securities analysts said H-1B applications by tier-1 IT companies have reduced dramatically, being as low as 400 applications in all by Wipro last year.
Companies such as Infosys have stepped up localization programmes and recruited 5,800 employees as a part of hiring locally in the US, the anlaysts added. The company has earlier said it will hire 10,000 people in the US by next year.
Most other tier-1 IT companies are also upping local hiring in the US.
"None of the companies are reliant on fresh H-1Bs for staffing projects in the US. The challenge, if at all, will be on existing stock of visa holders in the US," the Kotak analysts added.
The popular view as of now is that the proposed new rule, which is open for comments until January 2, will eventually benefit Indian and Chinese students who form a large pool of the foreign students in US universities.
"From an over all Indian perspective, and with out regard to how it affects the Indian service and tech companies, I see these changes as positive. India has the largest contingent of high skilled students studying in the US and so will likely increase its share of the H-1B pool. However, these students are more likely to go into US firms at higher wages than the Indian firms pay. Again not all bad for the Indian students," said Bendor-Samuel.