Amidst the mounting backlash against outsourcing in the United States, lawmakers in Indiana state opposed a bill to ban non-US citizens from doing government contract works, as they felt the law would affect overseas investment prospects.

The bill was introduced after Governor Joe Kernan cancelled a $15 million outsourcing contract won by an American subsidiary of Tata Consultancy Services for upgrading the computer system of a state agency.

During a debate on Monday, a majority of lawmakers, both Republicans and Democrats, on the Senate's panel on technology and economic development, opposed the bill as they felt it goes too far and could have unintended consequences as the state seeks overseas investments.

They are now trying to "limit the scope" of the bill and find "better ways" to help state companies to win contracts for government.

"In it's current condition, I think it's pretty dead," Sen. Vi Simpson, a Democrat and a member of the panel, was quoted by Indianapolis Star as saying.

In the hope of reviving the bill later, the Senate panel's chairman David Ford did not seek a vote. He said a modified bill could be debated in January after the General Assembly begins its 2004 session, the report said.

The bill's author, Sen. Jeff Drozda, said he filed it because he opposes Indiana spending public money to create jobs for low-paid workers from other countries.

Drozda criticized the $15.2 million contract state officials signed in August with Tatas to upgrade state computers used to process unemployment claims.

TCS America won the Department of Workforce Development contract after its proposal came in $8.1 million lower than the next-most-competitive bid.

Tatas had said they would hire local subcontractors and do some local recruiting but most workers would be Indians.

"This is a real significant issue for American workers," Drozda told the committee, adding, "These companies don't pay taxes. It doesn't help our economy one bit."

Several panel members suggested limiting the scope of the bill or finding a better way to help Indiana companies compete for state work.

Kernan's deputy chief of staff, Tom McKenna, said Drozda's concerns can be taken care of through changes in the state's contracting procedures.