Forex curbs on tech buys abroad may go

NEW DELHI: Indian companies or individuals who wish to acquire technology or R&D assets abroad are likely to be freed from most of the restrictive forex control regulations soon.
Buoyed by the comfort level on the forex front, the government has decided to urge the Reserve Bank of India (RBI) to introduce changes in exchange control norms to ensure that these regulations would not hinder such takeovers, irrespective of whether they are of physical assets or IPRs.
To start with, the relaxation of forex regulations could be under certain defined parameters and for a few chosen sectors. The government now thinks that time has come for India to acquire technology on ownership or partnership basis, rather than by paying of royalty to the technology owner.
“Technology acquisition by one-time payment makes more economic sense than royalty payouts. With sufficient exposure to the frontier technologies in many crucial sectors, we have come of age to think of an aggressive bid for acquiring foreign assets for productive aspirations,� Rajeeva Ratna Shah, secretary, department of industrial policy and promotion (DIPP) told ET.
The proposal is to make the relaxed forex regime available to acquisitions of technology, design, R&D, marketing and distribution as well as physical (manufacturing) assets. The yardstick would be that the take-overs or joint ownerships of technology assets in foreign countries would help Indian companies or individuals to make use of them, in concert with the advantageous low-cost manufacturing in India.
The BPO model may be still good for certain sectors such as information technology. But there are areas where we have to translate ourselves from service providers to technology owners, said Mr Shah.
The government would, however, keep the ceiling on royalty payment to foreign technology providers at the current levels of 6% for domestic sales and 8% for exports.
Raising the ceiling or scrapping it might result in increased bargaining strength to the foreign technology provider, and avoidable forex outgo, the government feels.
Recently, the government has, as part of the decision to ease the capitalisation norms for issue of equity to non-residents, allowed domestic partners in joint venture companies to transfer equity shares to a non-resident on payment of royalty, lumpsum fee., in addition to cash payment. Therefore, royalty payment is now allowed without any curb on the duration of payment and irrespective of the non-resident’s equity share holding in the Indian venture. Earlier, issue of equity had been permissible only against inward remittance of convertible foreign exchange through normal banking channels or by debit to NRE/FCNR account of the foreign investor maintained with an authorised foreign exchange dealer or bank.