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Why changes to ‘obsolete’ OSP rules could herald a new era for ITeS & BPO firms

The Modi govt’s new rules for ‘other service providers’ are expected to remove all red tape governing these firms and make it easier for them to do business in India.

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New Delhi: The Narendra Modi government Thursday announced substantive changes in rules and regulations governing India’s information technology enabled services (ITeS), and business processing outsourcing (BPO) firms.

These guidelines for ‘other service providers’ or OSPs are expected to remove all red tape governing these companies and make it easier for them to do business in India. Here’s a look at what these guidelines mean for the industry.

Who are OSPs?

OSPs refer to firms providing services like voice based and data based outsourcing and other services popularly known as BPOs. Firms providing tele-banking, tele-medicine and tele-trading services are also covered under this definition.

What are the new regulations?

The Modi government has done away with the need for these firms to register themselves with the government, specifically with the Department of Telecommunications.

Moreover, it has done away with many compliance requirements that these firms were subject to. These include reporting obligations, furnishing of bank guarantees and publication of network diagrams or a diagrammatic representation of how the computers of the firms are linked to each other.

The government has also enabled work from home as well as working anywhere from India for these firms.

In addition, all firms providing data related services have been removed from the ambit of OSP regulations. Only those providing voice based services will be subject to the eased guidelines.

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How will it help firms in India?

According to experts, the move will help in improving the ease of doing business for such firms as they will not need prior permission from the government to commence operations. This is likely to further strengthen India’s position as the back office to the world.

Nandan Nilekani, co-founder of IT giant Infosys, called the reforms “breathtaking in its simplicity” and termed it a “dramatic ease of business in the digital world”.

Rahul Matthan, a lawyer specialising in tech, media and telecom law, and a partner at law firm Trilegal, said the relaxed regulations for OSP will have a huge, significant impact.

“The previous regulations made life difficult for OSPs — there were restrictions on employees working from home when nowadays why would it matter where you work from when you have a smartphone and computer that lets you work from anywhere? There were other onerous regulations like the OSP having to submit a network diagram of how the computers of the company were connected to the telecom network which has been done away with as well,” he said.

“It’s also a big improvement that OSP need not register with the telecom department which used to be a time consuming process. It does not serve a purpose anymore for OSP to register with the telecom department in addition to the registration it must do with the Registrar of Companies,” he said.

Matthan added that with data related BPOs being exempt from the OSP guidelines, these new norms will ease business operations for many BPO companies as most of the work is data related now.

Telecom industry veteran Amitabh Singhal, the founder and former CEO of National Internet Exchange of India (NIXI) that oversees internet traffic exchanges, said the changes mean that regulatory compliance burdens and associated costs are almost all gone for OSPs.

“Registration process used to be time consuming, almost like obtaining a license to operate as a telecom service provider — now there is no need for registering. There were restrictions on using telecom infrastructure and different permissions had to be obtained for use of the telecom infrastructure resources — these restrictions have been eased away and removed,” he said.

The easier work from home norms will make the BPOs logistically and financially more efficient, added Singhal.

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Why the need to remove these regulations?

The experts point out that these regulations had become obsolete as they were introduced at a time when data was a precious commodity.

Matthan said these regulations were required 15-20 years ago when the internet was new and data was expensive. At that time, the telecom department wanted a list of companies that used the internet to ensure that the OSPs were not misusing data.

“Now when the internet and data is affordable this regulation becomes obsolete,” he said.

What could be the economic impact of the move?

The government expects that the new guidelines will provide a massive boost to employment and encourage more investments in the sector, with more firms setting up business in the absence of compliance burden.

Sanjeev Sanyal, Principal Economic Advisor in the Ministry of Finance said these reforms have the potential to create millions of jobs in the next five years, adding that these could make India the front office of the world too.


Industry leaders also said the move will encourage job creation, especially in smaller towns and cities.

Debjani Ghosh, president of Nasscom, an industry body representing these firms in India, said the move will increase the competitiveness and productivity of Indian firms as well as create jobs in smaller towns.

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