I know about a few people from our institute who are working on FOSS
this summer:
Roshan Kr. Singh is developing Drupal modules at Srijan, Delhi.
Melvin is building online learning tools using Moodle at IIT Bombay (I think).
Abhishek Gupta is creating packages for Solaris at SUN, Bangalore.
Varsha Jaikumar is working on some DeepRoot project if i remember correctly.
Shreyank is working on some top secret project at Red Hat ;)
I am working on the next release of deepofix mail server, mostly perl work.
Amit Daga is working on OCR at ISI Kolkata, and I hope he decides to
help me out with http://code.google.com/p/tesseractindic/ .
Others who are working on fossy stuff, kindly let us know.