Automakers should cut royalties to foreign parents: FinMin official

Reuters / PTI New Delhi | Updated on September 17, 2020 Published on September 17, 2020

Reiterates Piyush Goyal’s statement in the context of controversy over Toyota Kirloskar’s plans for India over ‘high tax’ regime

Indian carmakers should reduce royalty payments to foreign partners to bring down costs instead of seeking tax cuts, a finance ministry official said on Thursday, days after reports that Toyota would halt expansion in the country due to high taxes.

Last month, Commerce Minister Piyush Goyal had said in a meeting with Indian automakers, including local representatives from Toyota and Maruti Suzuki, that they should find ways to reduce royalty payments to foreign parent companies for use of technology or brand names.

Read more on that: DPIIT to review royalty payments made to firms abroad

Maruti Suzuki paid ₹38.2 billion ($518.5 million) in royalties to its Japanese parent Suzuki Motor in the fiscal year ended March 31, 2020, amounting to 5 per cent of its revenue, according to its annual report.

Privately-owned companies such as Toyota Motor’s India arm paid $88 million or 3.4 per cent of revenue to its Japanese parent, government data shows.

PTI adds: Toyota Kirloskar Motor (TKM) said on Thursday it remains deeply committed to the Indian market and its national objectives, refuting the claims by a senior company official earlier that it would stop further expansion in India due to high taxes.

Also read: Covid, ‘high’ GST rate force Toyota to go slow on hybrids

The automaker, which sells models like Innova and Fortuner, said it has a “firm belief in the core strength of the country’s economic growth potential and is fully committed to continually work towards contributing to economic development.”

“In sync with the vision of ‘Grow India — Grow with India’, during the past two decades of presence in the country, the company has worked tirelessly to invest in creation of a world-class talent pool and for building a strong competitive local supplier ecosystem in line with the ‘Skill India’ and the ‘Make in India’ initiatives,” TKM Managing Director Masakazu Yoshimura said in a statement.

The company’s operations in India are an integral part of its long-term global strategy, he added.

“As part of these efforts, Toyota Group in India is targeting to invest over ₹2,000 crore in India in the coming years on technology and electrification, both for the domestic and the exports market,” Yoshimura noted.

The company “reaffirms that it intends to make all efforts to promote and introduce newer, cleaner and world-class technologies and services in the market,” he added.

TKM is a joint venture between Toyota Motor Company and the Kirloskar Group.

The controversial remarks

On Tuesday, TKM Vice-Chairman and whole-time director Shekar Viswanathan had said in an interview that the company would stop expanding in India, ruling out future investments, as the government keeps taxes on cars and motorbikes so high that companies find it difficult to build scale.

Read more on that: Toyota halts India expansion, blames it on high tax regime

Later, the company’s Vice Chairman Vikram Kirloskar refuted the comments and said TKM planned to invest over ₹2,000 crore in India in the next 12 months.

Reacting to Kirloskar’s tweet on investment, Union Heavy Industries Minister Prakash Javadekar had tweeted: “The news that Toyota Company will stop investing in India is incorrect. @vikramkirloskar has clarified that Toyota will invest more than ₹2,000 crore in next 12 months.”

Endorsing the Minister’s remark, Kirloskar tweeted: “Absolutely! We are investing 2000+ crore in electric components and technology for the domestic customer and export. We are committed to the future of India and will continue to put all effort in society, environment, skilling and technology.”

Before that, TKM had also issued a statement saying its priority would be to utilise its existing capacity in India which will take time.

The company has an installed capacity of 3.10 lakh units spread across two plants in Bidadi, near Bengaluru.

TKM rolls out Innova, Fortuner and Vellfire (imported as CBU) from the first plant, and Yaris and Camry Hybrid from its second facility.

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Published on September 17, 2020
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