Plugging the royalty gap

Payments to MNC parents need checks and balances

Royalty payments by Indian subsidiaries of multinational firms has been a sticky issue for many years. While multinational companies should be compensated for brand and technology, a high amount hurts minority shareholders who do not have a say in determining the royalty fees. Thus, the reported move of the Securities and Exchange Board of India’s (Sebi’s) corporate governance committee to take a close look at the royalty payments issue should be welcomed.

The government had removed restrictions on royalty payments in the wake of the global slowdown after the financial crisis in 2009, and subsequently many multinationals, including Maruti Suzuki, Hindustan