The Reserve Bank of India ("RBI") accords
automatic permission for foreign technology agreements in
high priority industries up to 5% royalty for domestic sales
and 8% for exports, subject to total payment of 8% of sales
over 10 year period from date of agreement or 7 years from
commencement of production. In addition, lump-sum technology
payments up to Rs. 1 crore, i.e., (Rs. 10 million) are
permitted under the automatic approval system. The
prescribed royalty rates are net of taxes and are calculated
according to standard procedures.
Subject to the aforesaid guidelines, automatic approval is
available in non-high priority industries, if no foreign
exchange is required for any payment. |
Transfer of technology agreements must be
subject to the laws of India. These agreements can be
subject to arbitration under the rules of international
institutions like the International Chamber of Commerce (the
"ICC"). Arbitration can take place in India or abroad. India
is a party to the 1958 New York Convention on Enforcement of
Arbitration Awards. Foreign awards are, therefore,
enforceable in India. Under Indian law, upon termination of
the transfer of technology agreement after its 7-10 year
period, the technology is deemed to be perpetually licensed
to the Indian party for use in India. Special rules apply to
the transfer of technology to Indian government companies. |