The government wants to make it easier for foreign companies to remit money from India as royalties, licence fees and other payments from local companies.
As a part of its plans to attract greater investment, the government wants to remove all regulatory restrictions on payments received by foreign companies from their Indian partners, joint ventures and subsidiaries, for providing funds as well as technical assistance. Sources said that announcements to this effect are likely to be made in Budget 2008-09.
Under existing rules, foreign companies can charge their Indian subsidiaries 7.5-12.5% of revenues as royalties or license payments. The government wants to remove these caps and let the charges specified in the agreement between parent and subsidiary to prevail. The company will not be required to approach FIPB or any other regulatory authority for this purpose.
There are no restrictions on what a foreign company can charge an Indian collaborator that is not a subsidiary, but the former is expected to take FIPB permission.
The department of industrial policy & promotion also wants to make it easier for domestic companies to issue equity shares in lieu of a lump sum fee, royalty or external commercial borrowing in convertible foreign currency, subject to meeting all applicable tax liabilities and procedures. The government has constantly been reviewing its policy on payment of royalties under the Foreign Technology Collaboration channel.
?Many foreign companies have seen fixing the royalty and license cap as an irritant in entering into collaborations with Indian companies. The government wants to ensure that any outward remittance by an Indian company to its foreign partner is governed only by the agreement between the two companies,? said a senior official.
?We have a comfortable foreign exchange situation and fixing royalty payments, technical fees, etc., should be left to the commercial agreement,? he said.
