Piyush Goyal asks auto firms to reduce royalty payments to parent companies

Reduction in royalty can help them reduce the cash outflow, bring down the vehicle prices and help in boosting their domestic sales, Goyal added

Commerce and Industry Minister Piyush Goyal on Friday asked automobile companies present in India to reduce royalty payments to their parent firms as it would help them to sail through the crisis easily.

The minister said this while addressing the Society of Indian Automobile Manufacturers' (Siam) annual convention.

He said the automakers that hold a sizeable chunk of the country's auto market pay "millions of dollars as royalty" to their parent companies. Reduction in royalty can help them reduce the cash outflow, bring down the vehicle prices and help in boosting their domestic sales, he added.

"Goyal asked the automotive companies present in the country to ask their principles to reduce royalties. Reducing this could help the Indian units of these companies to sail through the crisis easily," an official statement said quoting the minister.

Royalty is paid to a foreign collaborator for the transfer of technology, usage of brand or trademarks.

Goyal also said, "Should it be advisable that we have a phased increase in import duty, to encourage more and more auto companies particularly the newer ones who are coming in with completely knock-down kits or semi-knock-down kits and just assembling them in India? We are open to suggestions that the industry as a whole comes up with."  He said certain issues like tariff and non-trade barriers imposed by other countries hamper India's auto exports.

Citing examples, he said countries like Australia have certain import duties and Indonesia puts quotas for import.

"We are working to resolve the issues...With Australia, we have a good dialogue. I have flagged the matter with Indonesia. Industry should get fair access," he said.

On the issue of Quality Control Orders (QCO), Goyal said that these should not be seen as barriers.

"It is high time India starts looking at quality control and provides the world with high-quality products. Once we get the quality consciousness in the country as a whole, we will transform India's future, and that is the effort we are taking," he added.

He also said that to help the auto industry with affordable logistics options, Indian Railways is ready to reduce freight rate.

The automakers should find out innovative finance options, which would attract the financiers to lend money, as well as attract the buyers.

He added that to help the auto sector, especially exporters, the government will be happy to come up with innovative credit guarantee schemes.

"India is willing to provide a very facilitative environment to companies, looking for a more trusting trade partner and a better supply chain. We have to look at sectors where we have the edge over other countries," Goyal said.

Further he said, "We are engaged with many companies who are looking for more resilient value chains. We have to identify sectors where we have a comparative and competitive edge over other countries."