Honda to charge tech fee based on rollouts

Japanese car maker Honda Motor Co has decided to charge technical know-fee from its Indian arm Honda Siel based on the number of new models launched rather than a lumpsum fee.

The premium car manufacturer also proposes to change the percentage of royalty paid to the Japanese parent to two distinct rates "" one each for domestic and export sales "" from an existing uniform rate for all sales.

This changed scheme clearly indicates that more new models from the Honda stable are set to hit the Indian roads in the coming years.

Exports from the Indian operations are also likely get a big push since, under the new scheme for charging royalty, export sales will attract a higher rate as compared with domestic sales.

Under the new scheme, approved by the Foreign Investment Promotion Board, Honda Siel will pay Honda Motor Co technical know-how fee of ¥800 million (Rs 33.6 crore) on each new full model change over a period of three years and ¥ 400 million (Rs 16.8 crore) on each minor model change over a two-year period.

According to original scheme of arrangement with the parent firm, Honda Siel had agreed to pay a lumpsum technical know-how fee of $30.5 million (Rs 133 crore), subject to taxes, paid over five installments beginning from the third year of commencement of commercial production and a royalty payment of four per cent on both domestic and export sales for a period of seven years during the period agreement.

The Department of Heavy Industry had earlier raised objection to the proposed changes stating that since the company was earlier granted approvals for payment of lumpsum fees, royalty fee/model fee, the overall amount of the lumpsum free paid by the company to the foreign collaborator may exceed the permissible limit under the automatic route.

The objections were deliberated and have since received the approval of the department of heavy industry, with support from the Department of Commerce and Department of Industrial Policy and Promotion.

The new scheme of arrangement regarding royalty has also undergone changes under the renewed technical collaboration agreement.

Honda Siel proposes to pay five per cent on domestic sales and eight per cent on export sales.