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DRDO COVID-technology transfer for MSME manufacturing: Know more about the terms & conditions

The Financial Express logo The Financial Express 22-05-2020 Huma Siddiqui
a close up of a box: The terms and conditions are very specific for the ToT to the private sector, MSMEs and others. © Provided by The Financial Express The terms and conditions are very specific for the ToT to the private sector, MSMEs and others.

Recently Defence Research and Development Organisation (DRDO) has listed 35 (approximately 13 major items) technologies related to COVID-19 pandemic for manufacturing, marketing and sale as per the specifications mentioned on its website. The concept detailed there is to ensure that DRDO developed 'Counter Covid-19 Technologies' are available in every part of the country to fight COVID-19. DRDO plans to transfer these technologies to industries through Licensing Agreement for Transfer of Technology (LATOT) to be signed on an Rs 500/- Stamp Paper, between industries and the concerned lab of DRDO with no charges for ToT or for the royalty when sold in India. However, such items shall attract a royalty of two per cent of invoice value when exported.

It is expected that the signing of LATOT shall provide the Indian industries benefits like becoming a bonafide ToT holder of DRDO and use of DRDO logo on the final product. However, DRDO has restricted itself to transfer of technology Papers only (viz. Bill of Material, complete know-how, processes, Quality processes etc.). Any upgrades of technology shall be made available to the industry without any charges. In the case of selection by a foreign customer, the export of these products too shall be easier. Already few industries have been listed for manufacturing of these items, however, the number is observed to be low, when compared to the overall requirement of the country.

The terms and conditions are very specific for the ToT to the private sector, MSMEs and others.

The research organization states that due to emergency in production, it can consider giving manufacture support to its ToT partner firm and take over the responsibilities of testing and Specification checks for all COVID related manufacturing with its own ambit. A hands-off approach with the Industry may be discouraging to a small manufacturer. Travelling an extra mile to support the country in times of crisis is required, while DRDO staff is already available on attendance in their respective Offices.

It also states that for any technical assistance given beyond this Technology Transfer period for deputation abroad ?Name of the Company? shall pay the consultation charges of $ 500 (Five Hundred US Dollars) per man-day to DRDO. ?Name of the Company? shall also bear the transport and lodging costs of the scientists and staffs, as per Government rules.

?Such conditions during COVID crisis seems to be against the logic of Make in India support, and mention of charges in the US Dollars is beyond the grasp and are on the higher for DRDO personnel (already being on Government salaries),? opines an industry source.

According to the terms and conditions, a product developed by DRDO and manufactured and marketed by ?Name of the Company? shall have following markings ?Product Developed by DRDO? or words to this effect DRDO, the logo shall be visibly displayed.

Sharing his views, in industry source stated, ?The products which are being manufactured by the MSMEs or the private sector with the ToT from DRDO are not easily available in the market. This means that the marketing aspect of such products needs to be given more focus.?

?Our defence minister Rajnath Singh has been urging the DRDO and OFB to share technology to enable the private sector and MSMEs to do mass production. Proper marketing, easier procedures for the ToT from both DRDO and OFB will help in making the medical kits, PPE, sanitizers a huge success.?

Force Majeure Clause

Under this, neither party shall be liable for any failure of performance, due to causes beyond such party?s reasonable control, including but limited to acts of God, fire, flood or other natural catastrophes; any law, order, regulation, direction, the action of any civil or military authority, national emergencies, insurrections, riots, wars, strikes, lock-outs, work stoppages or other labour difficulties provided however the party to which the force majeure has happened shall use commercially reasonable efforts to eliminate such an event.

Interestingly, the Force Majeure Clause yet does not contain ?Pandemic? as a Term and commercial partner of ToT may like to consider including this for the success of his business.

According to the source quoted above, ?The ToT Agreement can be made more Industry friendly during such emergency times, instead of being written as per ?normal? circumstances. A sensitivity in understanding the ground situation and re-structuring the ToT Agreement Terms shall surely encourage Industries at MSME level to explore the manufacturing of Technology made by DRDO for COVID-19. This is important as the DRDO is not a manufacturing unit for any product.?

With the MoD urging all DPSUs, DRDO and OFB to work together in these tough times, perhaps it will also encourage that the DRDO and OFB may consider encouraging MSMEs to utilize their spaces so as to have true spirit of ToT implemented. ?Such a step will also go a long way in helping the MSMEs who are pitching in with the mass production of the COVID-related products may save their expenses in rentals, travel charges of DRDO personnel etc. for by such measures and Industry shall welcome this new concept of close hand-holding in such testing times,? the source urged.

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