India's commerce minister has asked automakers to find ways to reduce royalty payments to foreign parent companies for use of technology or brand names, two sources told Reuters, in an effort to boost local investment and reduce outflows.
"The concern raised during the meeting was that the outflow is high, even for old technologies, and something should be done about it," said one of the sources.The ministry did not respond to a request for comment.India, for years, has debated imposing stricter caps on royalty payments which spiked after 2009 when foreign investment rules were eased and restrictions on such payments were removed.
While India does not restrict the amount that can be paid as royalty, any payment by a locally listed company exceeding 5per cent of revenues needs shareholder approval. Privately-owned companies such as Hyundai's local unit paid US$150 million or 2.6per cent of revenue as royalties to its South Korean parent in fiscal 2019 and Toyota Motor's India arm paid US$88 million or 3.4per cent of revenue to its Japanese parent, government data shows.