Saturday, February 6, 2016

NEWS : Delhi HC sets stage for price controls on Bt cotton seeds

Last Modified: Sat, Feb 06 2016. 09 56 AM IST

Delhi HC declined to grant a stay moved against the govt’s decision on 27 Jan to set up a central price control panel which would regulate the Bt cotton seeds price

Sayantan Bera &Priyanka Mittal

New Delhi: The Delhi high court on Friday cleared the way for the Union government to impose price controls on Bt cotton seeds by declining to stay its 27 January decision to set up a central price control committee.

The committee is tasked with regulating prices of Bt cotton seeds and payment of royalty to technology providers.

The court’s decision is a setback to Mahyco Monsanto Biotech (India) Pvt. Ltd (MMBL), a joint venture between Mahyco and Monsanto, a global technology provider of genetically modified seeds.
The development pertains to a case where MMBL petitioned the court to quash certain provisions in the price control order, specifically those allowing the centre to determine trait or royalty fees.

The price control order was issued by the agriculture ministry on 7 December 2015 and the nine-member committee was set up as a consequence.

The central price control order aims to keep Bt cotton seed prices affordable for farmers and bring uniformity in prices across states.

Around eight million farmers grow cotton in India and the double gene Bt cotton technology supplied by MMBL accounts for 95% of the seed market.

MMBL supplies the genetically modified Bt cotton technology to 49 seed companies in India in exchange for a trait or royalty fee.

While refusing to grant a stay until 4 March, the date of the next hearing in the case, Justice Manmohan said that any further action by the government would be subject to future orders of the court.

MMBL counsel Sandeep Sethi told the court that the centre only had jurisdiction to fix seed prices and not the technology fee that seed companies pay to MMBL.

“While we do not have an objection with price regulation of cotton seeds, but it must be seen that under the Essential Commodities Act, 1955, only the price of commodity—the cotton seed—can be regulated. The technology supplied by me (MMBL) is covered under the Patents Act, 1960, and cannot be fixed by the committee,” Sethi argued.

According to the order notifying the setting up of the committee, the price control committee will fix the maximum sale price of cotton seeds, including royalty fees and dealers’ margins before 31 March—ahead of the kharif season.

The first meeting of the committee is likely after 10 February, but by this month-end, after all stakeholders (such as seed associations, farmers and technology providers such as MMBL) submit their inputs, an official with the farm ministry said, requesting anonymity.

The centre earlier told the court (on 23 January) that the efficacy of the genetically modified Bt cotton to resist pest attacks has declined over the years and therefore, royalty or trait fees must also come down.

Besides, on 27 November, the centre wrote to antitrust regulator Competition Commission of India (CCI) to probe if MMBL, which licenses its patented Bollgard II technology to seed companies in India, abused its dominant position in the market.

Presently MMBL charges trait fees of Rs.163 and Rs.175 for Bollgard II Bt cotton seed packets (450 grams) that are sold to farmers (by different seed companies) at Rs.930 and Rs.1,100, respectively.
However, prominent cotton-growing states such as Maharashtra, Telangana and Andhra Pradesh have mandated trait fees be kept at Rs.20, Rs.50 and Rs.90, respectively.

“If they (the government) are interested in setting the price, then they should have first regulated the end price. That’s the one that concerns the farmers. Regulating technology fees should be the last resort,” said an intellectual property expert who did not want to be named.

“Once you regulate the end price, the other players will start renegotiating their prices. It has a huge economic impact. Setting the technology fee will always be arbitrary, which does not take into account the research and development cost of the technology,” the expert added.

“The trait value (royalty fees) comprises only about 1-2% of the total cost of cultivation for farmers in India whereas the benefits to farmers have been transformational,” MMBL told the Delhi high court on 29 January.

“In today’s hearing, the court heard our application requesting that the price control committee avoid interfering with private arrangements between MMBL and its licensees, and asked the centre to respond in the next 10 days,” said an MMBL spokesperson. “We repose complete faith in the courts and remain confident that the government will take into account views of all stakeholders in the spirit of comprehensive consultation and will revise the contentious clauses to encourage innovation in Indian agriculture.”

The case in the Delhi high court and CCI will determine the future of India’s intellectual property rights regime and, in the near term, how the forthcoming kharif season will play out for cotton growers across the country.

Shreeja Sen contributed to this story.

Sayantan Bera &Priyanka Mittal


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