India proposes landmark AI law: Developers must pay royalties for training content

he Indian government is moving to establish a pioneering legal framework that would mandate royalty payments from Generative AI developers for the use of copyrighted material in training their models.

A landmark working paper, released on December 8, 2025, by a committee under the Department for Promotion of Industry and Internal Trade (DPIIT), rejects "zero-price" and blanket exceptions for AI training, arguing that unrestricted use of creative works would "harm the creative ecosystem" and lead to an "imbalance" that risks long-term underproduction of content.

To resolve the complex standoff between tech innovation and creator compensation, the committee has proposed a Hybrid Statutory Licensing Model. This model is designed to provide AI developers with guaranteed access to copyrighted content while ensuring fair compensation for artists and rightsholders.

Key features of the proposed "pay-for-use" structure:

Mandatory Blanket License: AI developers would receive an upfront, non-negotiable blanket license to use the content for training purposes, eliminating high transaction costs.

Royalties Upon Commercialization: Crucially, royalty payments would only be triggered after the AI model is commercialized, based on government-set rates open to judicial review.

Equal Compensation: The framework ensures all creators receive fair compensation, regardless of their membership in a Collective Management Organization (CMO).

Centralized System: A system for centralized royalty collection and distribution will be established to handle the large scale required for AI training.

The DPIIT committee strongly asserted that a legal exception allowing unrestricted use of protected materials is not viable, stating, "No Absolutes."

While models like the EU's opt-out Text and Data Mining (TDM) exception were considered, the committee found them impractical without mandatory, transparent disclosures from AI firms—a step that could expose trade secrets and impose heavy compliance burdens.

The proposed Hybrid Model is positioned as a middle ground, offering legal certainty for AI startups while providing a sustainable revenue stream for the creative industry. The Ministry of Electronics & IT (MeitY) has supported this approach, though industry body Nasscom has lodged a dissent, recommending a full TDM allowance with opt-out mechanisms.

The working paper concludes that the long-term public interest lies in creating a legal foundation that protects both cultural development and responsible AI adoption.

"It would be most appropriate to craft a framework that ensures fair compensation to copyright holders, while enabling comprehensive data access for AI developers," the report states.

Stakeholders, including industry and the public, have 30 days from the release date (December 8, 2025) to email their comments to ipr7-dipp@gov.in.