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Bt cotton Seed Prices and Royalties-issues of concern

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Bt cotton Seed Prices and Royalties-issues of concern

Three hybrids of Bt cotton were introduced in India by Mahyco Monsanto Biotech Ltd (MMB) in 2002.  The prices were fixed at Rs. 1800 per packet of 450 g which can be used to sow in an acre.  In 2005 Rasi and Ankur seeds which also developed Bt cotton in license agreement with MMB also got approval for their Bt hybrid seeds.  The license agreementshow that the Indian companies which entered into the agreement have to pay upfront Rs. 50 lakhs and an amount annually fixed by MMB.  They were asked to pay Rs 1200 on every packet initially.

Mahyco Monsanto Biotech’s sublicense agreement has clauses which says any company entering into an agreement with MMB has to withdraw Cry1Ac (MON 531) based Bt cotton three years after the commercial approval of the Bollgard-II (with staked genes cry1Ac & cry2Ab (MON 15985) or five years after the first planting of the Bollgard-II.  the indian seed companies which have paid Rs. 50 lakh initially to aquire license and paid royalty (Rs. 1250 on every packet initially and now Rs. 150 for Bollgard-I) have to withdraw the single gene cry1Ac anyway by next year as per the license agreement.

In 2005 faced with the problem of price hike AP government sought the intervention of Monopoly and Restrictive Trade Practices Commission (See box on Bt cotton,  Royalties and Seed Prices).

AP government requested the Commission to declare the agreement between Indian seed companies and MMB as void as it is leading to monopoly and increase in seed prices.  MMB maintained that it is not monopoly as other events (Nath seeds and JK agri genetics) were also approved.  However, since the royalty collected is higher the state government should take action to reduce it.  As there was no law to regulate the seed prices, AP state government used its power of granting trade licenses under Seed Control Order, 1983.  The prices of Bt cotton seed were fixed at Rs 750 a packet (450 gm) and Rs 925 in 2006 for Bt I and Bt II respectively. This was further reduced to Rs 650 and Rs 750 respectively in 2008.  As the Agreement between MMB and Indian Seed Companies continues to exist and they still have to pay the royalty as demanded by the company.

The industry quickly changed the recommendation from one packet (of 450 g to two packets of 450 g per acre) which quickly doubled their business. MMB was collecting royalty of Rs 150 and Rs 225 on Bollgard-I and Bollgard-II respectively.

In 2007, Central govt removed cotton seed from Essential Commodities act 1955. With this cotton seed could no longer be controlled through Seed Control Order, 1983 which draws its powers from Essential Commodities act 1955.  Seed industry argued that states do not have control over cotton seed prices and marketing and a case was filed in AP high court.  In this context, AP government came up with a special legislation called The Andhra Pradesh Cotton Seeds (Regulation of Supply, Distribution, Sale and Fixation of Sale Price) Act, 2007, quickly followed by other states The Gujarat Cotton Seeds (Regulation of Supply, Distribution, Sale and Fixation of Sale Price) Act, 2008 and The Maharashtra Cotton Seeds (Regulation of Supply, Distribution, Sale and Fixation of Sale price) Act, 2009.

As the state level laws are more stringent, industry could again get the cotton seed back into essential commodities act in 2008. In 2011 a case was filed in Gujarat High Court which declared Gujarat Cotton Seed Act 2008 as null and void as the cotton seed is back in essential commodities act. A similar case was filed in AP high court and Mumbai High court.  In 2013 Mumbai high court upheld the Maharashtra Cotton Seeds Act and said state government has powers to regulate the quality and prices of seeds in the state (http://articles.economictimes.indiatimes.com/2013-10-01/news/42576338_1_seed-industry-mahyco-monsanto-biotech-seed-companies).  The seed industry has filed a case in the supreme court and the decision is still pending.

In 2010, the National Seed Association of India (NSAI), a body of seed companies association demanded that they should be allowed to increase the seed costs of bt cotton by Rs. 200/packet.  Their main argument is that ‘Farmers across the country earned Rs 25,000 crore, farmers in Andhra Pradesh realised Rs 4,000 crore after the introduction of Bt cotton. The farmers’ income, which was at Rs 16,000 in 2006, has increased to Rs 36,000 in 2009’.

In the mean time, as the state governments have not agreed to increase the prices, the industry started squeezing in the cotton seed producers.  From 2010 state governments started notifying the cotton seed procurement prices as well.  For example, vide G.O.Rt.No.199, A&C (FP.II) Dept., dated 4-3-2014 government of Andhra Pradesh has fixed the procurement of Bt cotton seed prices, over head costs, royalties and sale prices.

Source: G.O.Rt.No.199, A&C (FP.II) Dept., dated 4-3-2014

However, the MMB was collecting higher royalty and forcing the seed companies to pay the royalty.  The Indian seed companies has approached court to ask MMB to refund the excess royalty of Rs. 1300 crore.

This is challenged in the supreme court and in November, 2015 the central government has  issued notification that the cotton prices will be controlled by the centre here after (http://articles.economictimes.indiatimes.com/2015-12-13/news/69006454_1_mahyco-monsanto-biotech-bt-cotton-national-seed-association). (http://www.livemint.com/Politics/wRfyEO4tnX65VSGqlCMR6J/Delhi-HC-sets-stage-for-price-controls-on-Bt-cotton-seeds.html)

In this context, our submission is

  1. Government should clarify the issue of royalties or trait fee in seeds as Indian Patent Act do not honor patents on living forms including seeds. This should be part of the new seed regulation which is pending before the parliament.  The government also should clarify on how long the royalties will continue as it is already 14 years since royalties on Bt I are collected and about 10 years on Bt II.
  2. The licence agreements between the MMB and Indian Seed Companies have to be regulated and cannot be termed as private as argued by the MMB.
  3. The seed prices and royalties have to be regulated government should come up with a clear policy like the Drug prices control order as the issue is not restricted to cotton seed alone.
  4. In the context where Central govt has already declared that certain bollworms have developed resistance to Bt cotton (against Bt I in 2009 and Bt II in 2015), the centre should also consider cancelling the license for marketing of these technologies.
  5. The centre can define guidelines and fix maximum retail price. The states should have the freedom to fix the prices below the MRP based on their situations.  It cannot be uniform price across the country as the situations vary.

 

other material

http://economictimes.indiatimes.com/news/politics-and-nation/high-court-stops-nuziveedu-seeds-from-selling-bt-cotton-under-monsanto-brand/articleshow/51060790.cms

[1] ramoo@csa-india.org; 09000699702

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