Monsanto warns it will bail out of India

By: | Updated: March 5, 2016 8:06 AM

Move after reports suggest 70% cut in royalty

 

MMBL has sub-licensed Bt cotton seed technology since 2002 to various domestic seed companies. (Reuters)MMBL has sub-licensed Bt cotton seed technology since 2002 to various domestic seed companies. (Reuters)

While a government committee has reportedly recommended a 70% cut in Bt cotton trait value as part of the move to clamp price controls on the seeds, US biotechnology major Monsanto on Friday threatened to re-evaluate its presence in India and hold back new technology if the plan is not rolled back.

“If the committee (set up by the agriculture ministry) recommends imposing a sharp, mandatory cut in the trait fees paid on Bt-cotton seeds, MMBL will have no choice but to re-evaluate every aspect of our position in India,” Monsanto India region CEO Shilpa Divekar said.

Mahyco Monsanto Biotech (MMBL), a joint venture between Monsanto and Maharashtra-based Mahyco, currently charges trait fees of R122.96 and R183.46 per packet of Bt Bollgard I and Bt Bollgard II seeds, respectively.

Divekar said it would be difficult to introduce new technologies in India if there is no sanctity of contracts between the two private parties and no guarantee of recovering investments made in research activities. The stance of the global biotech major comes at a time when the government is taking steps to correct India’s poor ranking in enforcement of contracts and thereby improve the ease of doing business here.

The Centre had last December issued an order to control cotton seed prices including trait or royalty value effective from the 2016-17 crop year.

While the Delhi High Court is hearing a petition against the price control move by MMBL — the mater will be next heard on Wednesday — the agriculture ministry is expected to soon notify the “maximum price inclusive of seed value, licence fee, trade margin and local taxes or duties, at which the cotton seeds or transgenic varieties of cotton seeds can be sold to the farmers”. The nine-member committee is learnt to have recommended a pan-India maximum sale price of Rs 800 for a 450 gm 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.

MMBL has sub-licensed Bt cotton seed technology since 2002 to various domestic seed companies. It is alleged that some of these companies have to pay MMBL some Rs 450 crore after collecting the amount as trait value from the cotton farmers in kharif 2015.

About 90% of the country’s cotton area of 11.8 million hectares (in the 2015-16 season) is under Bt cover. The country’s cotton production has risen manifold since the introduction of Bt seeds — from 13.6 million bales in 2002-03 to a projected 36.5 million bales in 2015-16.

“It will be difficult for MMBL to justify bringing new technologies into India in an environment where such arbitrary and potentially destructive government interventions make it impossible to recoup research and development investments focused on delivering extensive farmer benefits and where sanctity of contracts is absent,” Divekar said. Noting that certain reports in the public domain are false, she said, “We sincerely hope that the government will be fair in its approach.”

On February, 6, the Delhi High Court refused to stay the government’s notification to set up a committee to regulate Bt cotton seed prices in the country. The agriculture ministry, in accordance with the Cotton Seeds Price Control Order, 2015, had on January 27 set up a nine-member committee under a joint secretary to execute the order issued on December 7, 2015. under the Essential Commodities Act.

According to the December notification, the decision to put Bt cotton seeds under price control was taken in view of farmers finding the seeds “to be highly priced” and the need to bring “uniformity” in their prices across the country. MMBL had stated in its petition that the price control order is “illegal and unconstitutional”.

As many as 49 seed companies in the country use MMBL’s Bollgard-II double-gene technology, which provides in-built protection for cotton against the destructive American bollworm. The Centre’s move to regulate control prices of Bt cotton seeds and regulate the licensing of the technology followed steps taken by states like Maharashtra and Andhra Pradesh on similar lines.

Meanwhile, competition watchdog CCI has ordered a detailed probe against MMBL for alleged abuse of dominance by the Indian arm of the US-based genetically modified seed giant Monsanto.

Shares of Monsanto India dropped as much as 7% to a near two-year low on Friday before ending down 2.4%.

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