Royalty payments to foreign collaborators to get easier

Royalty payments to foreign collaborators may get easier. The industry department is preparing to put up a proposal to the Cabinet Committee on Economic Affairs (CCEA) to put such transactions on the automatic route. Siddharth Zarabi enlists the implications of the move. Till now, for any payment above USD 2 million or any royalty of more than 5% on domestic sales and 8% on exports mandatory prior approval had to be sort from the project approval board of the Government of India. This dispensation will now be done away with .

Here is a verbatim transcript of Siddharth Zarabi's comments on CNBC-TV18. Also watch the accompanying video.

This will benefit almost all the 8,035 foreign technology collaborations which have been entered into by Indian companies and other entities from 1991 till March 2009. The relaxation will apply to with Foreign Exchange Management Act (FEMA) 2000 rules not applying. Till now, for any payment above USD 2 million or any royalty of more than 5% on domestic sales and 8% on exports mandatory prior approval had to be sort from the project approval board of the Government of India. This dispensation will be done away with - FEMA 2000 will not apply and companies and other entities which have such tie-ups can go ahead and make royalty payments as per mutual contracts.

The backdrop to this - why this has been allowed is basically the comfortable foreign exchange situation and the government's realization that this is a needless hassle which comes in the way of greater foreign technology collaboration of course this is a proposal by the industry department, it will shortly go to the cabinet committee of economic affairs and we should see decision happening in the next few weeks.