Panel proposes 70% reduction in royalty on GM cotton seeds

The nine-member cotton seed price control committee has recommended a maximum sale price of Rs800 for a 450g packet of Bollgard II Bt cotton seeds

A government panel on genetically modified Bt cotton has recommended a steep reduction in royalty fees payable to technology companies, and lower seed prices.

If accepted, the recommendations will benefit nearly 8 million cotton farmers in India, but may raise concerns about how India views its intellectual property rights regime. They will deal a blow to technology providers such as Mahyco Monsanto Biotech (India) Pvt. Ltd (MMBL).

The nine-member cotton seed price control committee, formed by the centre on 27 January, has recommended a maximum sale price of Rs.800 for a 450g packet of Bollgard II Bt cotton seeds.

The packets are currently sold for Rs.830 per packet in Maharashtra, Rs.930 in Telangana and Andhra Pradesh and Rs.1,100 in northern states such as Punjab and Haryana.

Further, the committee has suggested a 70% drop in royalty fees that domestic seed companies pay to providers of the patented genetically modified technology.

The panel has suggested a reduction in trait fees from Rs.163 per packet to Rs.49 per packet, a person aware of the development said, requesting anonymity.

The decision was taken at a meeting held on Wednesday, the person added.

Domestic seed companies are set to gain from this order, as they will be paying lower trait or royalty fees to technology providers such as MMBL.

MMBL, a joint venture between Mahyco Seeds Ltd and Monsanto Co., a global technology provider of GM seeds, licenses its patented Bollgard II Bt cotton seed technology to 49 seed companies in India in exchange for a royalty fee.

Over 90% of the cotton grown in India is based on this technology.

The recommendations of the committee have been sent for the agriculture minister’s approval and a final decision will be taken soon, the person cited above said.

The committee suggested the steep reduction in royalty as the Bollgard II technology’s ability to resist pest attacks has weakened over the years, the person said, adding, “as farmers’ crops in several states have been damaged by the pink bollworm, the committee thought they must not be paying a high price for the technology”.

A drastic reduction in trait fees could mean substantial losses for MMBL. The company, in an emailed response, said it does not comment on the specifics of its financials.

According to domestic lobby National Seed Association of India, MMBL collectedRs.4,479 crore in royalty fees between 2005-06 and 2014-15.

“All amounts collected towards trait value till date are in accordance with payment terms that form part of extensively negotiated private contracts with the respective seed companies,” an MMBL spokesperson said, adding that “it is also important to note that the trait fees at current levels only constitute 1-2% of farmers’ cost of cultivation and are also the lowest in the world”.

The centre’s approach seems to be ham-handed, and the government should respect contracts between companies and on patented technologies, said Avinash Kishore, a research fellow at the International Food Policy Research Institute, Delhi.

“The recent round of price controls in pharmaceuticals and cotton seed is like going back to the (pre-liberalization) control raj days,” he adds.

The agriculture ministry on 7 December last year issued a price control order to bring uniformity in Bt cotton seed prices, as several states such as Maharashtra, Andhra Pradesh and Telangana brought in their own price control orders.

The other reason, according to the ministry, is to make Bt cotton seeds affordable for farmers.

MMBL has petitioned the Delhi high court to quash certain provisions in the price control order, specifically those allowing the centre to determine royalty fees. The court will hear the case on 4 March.

On 27 November last year the agriculture ministry approached the Competition Commission of India (CCI) against MMBL, alleging that the company was charging unfair trait or royalty fees for its Bollgard II technology.

CCI ordered an investigation on 17 February after a preliminary finding that MMBL abused its dominant position in the seed market by setting unfair and high trait fees.

India approved the genetically modified Bt cotton technology for commercial cultivation in 2002. The selling point of the technology was its resistance to the bollworm pest that reduced use of pesticides. While the technology helped India become the world’s second largest producer and exporter from a net importer of cotton, in recent years, resistance of Bt cotton to pest attacks has become a recurring issue.