InvestorQ : Is it true that the auto MNCs have been asked to pay lower royalties to their parent companies by the government of India?
diksha shah made post

Is it true that the auto MNCs have been asked to pay lower royalties to their parent companies by the government of India?

Answer
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1 month ago


Well, these are business decisions but you are right that the Commerce Minister, Piyush Goyal, has asked Indian auto companies to explore ways and means to reduce the royalty payouts to their parent companies. Let us first understand what exactly is this?

Most of the multinational companies in India pay royalties to their parent companies as a fixed percentage of sales for the technology and brand to their global parents. In fact, Goyal has pointed out that Hero Moto and Maruti paid millions of dollars as royalty each year.

While payment of royalties has been part of any such sharing contract, the latest objection from Goyal comes as to whether the huge royalties were justified in the case of technologies that were relatively old, as in the case of automobiles.

It may be recollected that the Indian government earlier suggested a 2% cap on royalties payable to their parent companies. However, owing to strident objections from various MNCs operating in India, that limit was subsequently raised to 5% of sales.