Volvo Truck Corporation, the Swedish parent of Volvo India Pvt Ltd, has decided to manufacture its next-generation trucks -- the FM 9 series -- with a nine-litre engine and advanced safety features at its Hoskote plant near Bangalore.
The parent has also decided to charge royalty from the local arm for technology transfer for the first time since inception, sources said.
Volvo Truck is part of the Volvo group of companies and is the world's largest truckmaker. It is a subsidiary of AB Volvo, the holding company of the Volvo group.
The Indian arm manufactures trucks and has recently launched a luxury bus for the domestic market.
It currently manufactures the FM 7,a 290 hp, 4x2 tractor-trailer and the FH 12, a 340 hp, 6x4 truck.
So far the parent has not charged royalty since it wanted the local venture to become viable first, a company executive said.
However, with India gradually becoming a hub for manufacturing of several new models, including the next-generation trucks which are likely to be exported, the company now feels it is time to charge royalty for technology.
The royalty payments, subject to government clearance, will be applicable from November 5 this year.
Royalty will be charged at a rate of 8 per cent on exports (net of taxes) and 5 per cent on domestic sales (net of taxes), the sources added.
A source revealed that Volvo has filed necessary documents with the Union industry ministry, which could not be confirmed.
A company spokesperson said he was not aware of such a proposal or about the decision to manufacture the new products in the country.
Volvo is now in the fourth year of operation in India. Its facility was set up with a project cost of over Rs 300 crore.
The company has been capitalised to the extent of around Rs 105 crore by the parent through a mix of equity and preference shares. The last time Volvo brought foreign direct investment into India was in November 1999, when around Rs 94.6 crore worth of preference shares were issued to the parent.
As per the government policy, payment of royalty upto 8 per cent on exports and 5 per cent on domestic sales by wholly owned subsidiaries to off-shore parent companies is allowed under the automatic route without any restriction on the duration of royalty payments.
