Rhone-Poulenc Clears Royalty Payment To Parent

Rhone-Poulenc (India) Limited (RPIL), will pay three per cent royalty on domestic sales and five per cent on export sales to the parent company, Rhone-Poulenc Rorer S A of France.

The parent will also be paid a lumpsum technical fee of Rs 1 crore in three instalments, it was decided at a board meeting yesterday in Mumbai.

Based on 1995-96 figures, RPIL would have to pay Rs 3.90 crore on domestic sales of Rs 130.31 crore and Rs 0.37 crore on export sales of Rs 5.37 crore.

Outgo as a percentage of total sales would have been 3.15 per cent of the companys total sales turnover of Rs 135.68 crore for the year 1995-96.

 

On this royalty payment, the company will be paying a lesser tax of 20 per cent as against last years tax rate of 30 per cent. Tax rates on royalty payments and technological fees were reduced in the 1997-98 budget.

In a statement, the company defended its decision and said due to regulatory constraints it was not possible to pay this money in previous years.

The payment of lumpsum fees and royalties are but a token payment for the very substantial benefits that flow from RPRs technical and other supports including new products and introduction, said the statement.

RPILs move comes after another pharma company, Smithkline Beecham decided on a royalty structure to its UK-based parent.

Pfizer Limited, the 40 per cent subsidiary of Pfizer Inc of US, pays 2.2 per cent of the total sales turnover as royalty. It paid Rs 5.8 crore as technical and know-how fees last year. Smithkline Beecham Pharmaceuticals (India) Ltd also makes a royalty payment of 3 per cent on older products and 5 per cent on the new products. A company official said the company would pay 3 per cent of domestic sales as technical and know how fees on Iodex, the pain relieving balm.