Few takers for BPO scheme in India's NE states

In India's North-East region only one offer for BPO/ITES operations was cleared in three rounds of bidding for 300 out of 5,000 seats.

The Indian government's much-publicised India BPO Promotion Scheme (IBPS) has been received well across the country but met with little success in the under-developed North East region comprising seven states -- Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura.

The scheme was announced in August this year to promote BPO/ITES operations only in small towns and rural areas across the country to March 31, 2017, when the 12th Five Year Plan will come to an end. With an outlay of about $75 million (493 crore Indian rupees), it aims for a balanced growth of Information Technology & Information Technology Enabled Services (IT/ITES) sector in each state.

The government planned to offer around 48,300 seats based on population percentage as per Census 2011 and they included 5,000 seats in the North East region. The last date for BPO firms to submit their bids was August 31. With the new plan, the government expects to create about 1.5 million jobs.

India is the world's largest sourcing destination for the IT industry, accounting for approximately 67% of the $124-130 billion market and has a workforce of about 10 million. The industry's contribution to India's GDP rose from 1.2% in 1998 to around 9.5% in 2015.

India's Information Technology and Business Process Management (IT-BPM) sector, including hardware, is estimated to have generated $146 billion in revenue during 2015 compared with $118 billion in 2014, implying a growth rate of 23.72% (see graph).

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The reason behind the IT industry's stupendous growth in a decade and half is India's cost competitiveness in providing IT services, which is approximately three to four times cheaper than the US in the global sourcing market.

Game changer

Indian Minister for Communication and Information Technology Ravi Shankar Prasad informed Parliament that 78 firms have evinced interest to setup BPO/ITES operations at 190 locations across the country for about 125,000 seats against the 48,300 seats. The government is looking into the bids and will finalise the companies to kick-start the BPO operations soon, the minister said.

"BPO is going to generate employment in all small cities ... BPO is a game changer in small cities," the minister said, and appealed to the law makers and state governments to chip in with their support for the plan.

Rajeshwar Singh, Joint Director for the Industrial Promotion division in the Department of Electronics & Information Technology, told ZDNet that in the North-East region, only seven bids were received and of them, one was finalised for 300 seats after three rounds of bidding.

Reasons for few takers

The IT and ITES industry is underdeveloped in the region and the companies are apprehensive regarding the locations as the region comprises of hilly tracts and dense forests. Law and order is one of the main reasons for the IT firms not to open their offices in the region.

"These companies don't understand the present situation and we are making efforts to make them know the ground reality. We should also look at the positive aspects of the region," Singh added.

It is not that BPO firms are non-existent in the region. It's that those operating in those seven states are struggling to survive due to infrastructure and other challenges such as power supply and the availability of land.