Maruti Suzuki paid 38.2 billion rupees ($510 million) as royalty to its Japanese parent Suzuki Motor in the fiscal year ending March 31, 2020 NEW DELHI: India’s commerce minister has asked automakers to find ways to reduce royalty payments to foreign parent companies for use of technology or brand names, two sources told Reuters, in an effort to boost local investment and reduce outflows. In India’s competitive auto market, top-selling carmakers Maruti Suzuki and Hyundai Motor’s local unit pay millions of dollars in royalties to parent companies in Japan and South Korean for using their technology and brand to build and sell cars. The minister, Piyush Goyal, in a meeting last week asked officials from groups representing carmakers and auto parts manufacturers to review such payments with a view to reducing them, said people with direct knowledge of the discussions. “The concern raised during the meeting was that the outflow is high, even for old technologies, and something should be done about it,” said one of the sources. The sources declined to be named as the talks are private. The ministry did not respond to a request for comment. India, for years, has debated imposing stricter caps on royalty payments which spiked after 2009 when foreign investment rules were eased and restrictions on such payments were removed. The country’s markets regulator last year suggested imposing curbs on payments exceeding 2 percent of revenue. The limit was finally set at 5 percent after complaints from some sectors and fears it may dissuade foreign firms from investing or sharing technology. Recently however, Indian Prime Minister Narendra Modi’s government has made a renewed push to make the country a major manufacturing hub by encouraging domestic production and curbing imports. It also wants to increase local investment and reduce foreign outflows. While India does not restrict the amount that can be paid as royalty, any payment by a locally listed company exceeding 5 percent of revenues needs shareholder approval. Listed companies such as Maruti Suzuki and parts makers including Bosch, Schaeffler India and Wabco India typically pay royalties of between 1 to 5 percent to their foreign owners. Maruti Suzuki paid 38.2 billion rupees ($510 million) as royalty to its Japanese parent Suzuki Motor in the fiscal year ending March 31, 2020, amounting to 5 percent of its revenue, according to its annual report. Privately-owned companies such as Hyundai paid $150 million or 2.6 percent of revenue as royalties to its South Korean parent in 2019 and Toyota Motor paid $88 million or 3.4 percent of revenue to its Japanese parent, government data shows. Royalty provision has been important in attracting foreign investments into various sectors in India, especially autos, said Vaibhav Gupta, partner at tax firm Dhruva Advisers. “Depending on the form in which the government brings back such caps ... it may impact the ability of auto companies to benefit from the use of foreign brands and technical know-how,” said Gupta.