The Centre is set to unveil a new liberalised regime that allows companies to import technology for projects appraised and funded by financial institutions (FIs) without attracting any of the existing lumpsum and royalty payment ceilings.
Such imports are to be allowed as per terms recommended by the appraising FIs through a new automatic route.
Technology imports under existing norms through the automatic route attract a lumpsum payment ceiling of $2 million. Besides, such imports are also subjected to royalty payment ceilings of 5 per cent of domestic sales and 8 per cent of export sales for a maximum period of seven years, which can be extended on special permission.
For making payments above the ceiling, companies have to seek the approval of the Foreign Investment Promotion Board in the case of foreign direct investment (FDI) and the Public Investment Board (PIB) in all other cases.
Existing norms also stipulate that payment to the technology donor can be made only in three equal installments, with the last installment due only after the project commences commercial production.
The new policy on technology imports will be finalised at the meeting of the core group on economic matters slated for this week. It will be a boost to domestic companies that want to buy high-cost technologies but are constrained by existing payment ceilings. Often, local companies are forced to enter into financial tie-ups with the technology donor to access such technologies.
The new import norms for technologies, which will be allowed through an additional automatic route independent of the existing one, will be based purely on FIs' appraisal terms of the projects. Companies can make payments to their technology donors at rates recommended by FIs, which could be even higher than the ceiling rates stipulated under existing norms.
Besides, foreign partners in joint ventures that have funding by FIs will also stand to gain under the new policy. Rates of royalty to overseas partners have been a major issue in several joint ventures, mainly in high-tech areas.
According to officials, the move to liberalise the technology import regime is based on the government's perception that FIs are better judges on matters related to technology than government bodies.
FIs have experts to vet technology imports for projects, considering various factors, including the valuation of the technology and the projected cash flow of the project.
According to officials, the new policy on technology imports is also influenced by current thinking in the government that there is no longer any need to keep a check on forex outflow from companies for technology imports if such technologies enable them to add much more value.
