Avon had sought fresh permission last month from FIPB for payment of royalty of 5 per cent on domestic sales and 8 per cent on exports sales, an access fee of five per cent on annual sales turnover and another Rs 1 crore as technical know how fee. The FIPB rejected Avon's proposal as the present policy guidelines do not permit royalty payments by 100 per cent subsidiaries to their parent companies. The company's proposal was first rejected in 1997. Avon will also have to adhere to the dividend balancing condition.

As per this condition, Avon will have to balance the outflow of foreign exchange on account of dividend payment by export earnings. The balancing of dividend would be over a period of seven years from commencement of production. In its fresh representation last month, Avon contended that royalty and access fee are distinct from each other. The company claimed that royalty is a fee that the licensor receives from the licensee's use of know-how. The concept of royalty extends to all forms of industrial property; payments made for the use of such property, the ownership rights of which are established by statutory laws of respective nations.