NEWS : Firms accuse lobby of seeking price controls on cotton seeds

Last Modified: Wed, Jan 27 2016. 01 02 AM IST

Eleven NSAI members, including Monsanto, say body lobbied centre for controls implemented in 7 December order

At least 11 member companies of the National Seeds Association of India (NSAI) have written to the industry body alleging motivated lobbying by it with the Union government for a price control order for cotton seeds.

This, the companies allege, will discourage innovation and deprive farmers of better seed technology.

In separate but similar letters written on 23 and 25 January, seed companies including Monsanto India, Mahyco, Bayer Crop Sciences Ltd, Syngenta India Ltd, Rasi Seeds, Sungro Seeds and Shriram Bioseed Genetics alleged that NSAI sought and defended the price control order even though it had challenged other such regulations before various courts in the past.

The letters reviewed by Mint also said that “NSAI has sought to intervene in certain contractual disputes between some of its dominant members against a technology provider”.

“This appears to be a gross misuse of the NSAI platform and financial resources which is not intended for such motivated purposes,” the letters added.

The reference seemingly is to an ongoing dispute between Nuziveedu Seeds Ltd (NSL) and Mahyco Monsanto Biotech (India) Pvt. Ltd (MMBL), where the former refused to pay MMBL trait or royalty fees (amounting to Rs.138 crore) for using its proprietary Bt cotton technology.

MMBL, a joint venture between Mahyco and Monsanto, has filed an arbitration petition on the non-payment of trait fees by eight firms including NSL in the Bombay high court. The companies owe MMBL about Rs.450 crore in trait fees on the grounds that several state governments have put in place price controls which also mandated lower trait fees than what was agreed upon bilaterally between seed companies and MMBL.

Currently, MMBL receives a trait fee of Rs.163 per packet of Bt cotton seeds (using patented Bollgard II technology) which are sold at Rs.930 per packet.

MMBL also terminated the contract with NSL and two of its units (Prabhat Agri Biotech and Pravardhan Seeds) on 14 November.

NSL, with a 20% market share in Bt cotton seeds, is headed by M. Prabhakar Rao, who is also the current president of NSAI.

Interestingly, the disagreement within NSAI—which has 357 members, including warring parties like NSL and Monsanto—comes into the open ahead of a crucial court hearing on 27 January where MMBL has petitioned the Delhi high court to quash the price control order issued by the agriculture ministry.

MMBL has contended in its petition that the price control order is “illegal and unconstitutional” as it regulates the contractually negotiated licence fee payable by its licencees for distributing patented Bollgard II technology.

Mint has reviewed a copy of this petition. MMBL has claimed that this is beyond the scope of price regulation under the Essential Commodities Act, 1955, as its technology does not qualify as an “essential commodity”.

NSAI’s executive director Kalyan Goswami earlier this month said that the industry body has been made a party to this case, on its request.

On the present set of letters Goswami said that NSAI is yet to receive any communication signed by the 11 companies.

“I am really very sorry to say that this statement is made today (Tuesday) by Monsanto looking at tomorrow’s (Wednesday’s) hearing in the Delhi high court,” he said, adding, “We would like to reiterate that the decision of advocating to the ministry of agriculture for price control was taken by the governing council (of NSAI). The council is elected by all the members, spread nationwide, and not by only selected members.”

Goswami further said that firms coming forward with Monsanto (in the letter) have direct or indirect business links with it.

“They should question the drastic and discriminatory actions and exercise of dominance by MMBL. On the contrary, they have short-term commercial interests. They are not thinking of the interest of farmers,” he added.

The agriculture ministry on 7 December issued a price control order to bring uniformity in Bt cotton seed prices, as several states like Maharashtra, Andhra Pradesh and Telangana had brought in price control orders. The other reason, according to the ministry, is to make Bt cotton seeds affordable for farmers.

In addition to court cases and the price control order, the ministry also wrote to the Competition Commission of India (27 November) requesting it to probe whether MMBL abused its dominant position as a technology provider for Bt cotton.

The multiple cases and disputes involving technology providers like MMBL, seed companies, industry bodies like NSAI and the ministry of agriculture will determine the future of Bt cotton in India.

The transgenic Bt technology, first allowed for commercial cultivation in 2002, catapulted India from an importer of cotton to its current position as a top producer and second largest exporter of cotton globally.

At least 6 million farmers grow cotton in India, over 95% of which is grown using the Bt technology which is licensed to 49 seed companies by MMBL.

Seed companies that wrote to NSAI also said that even though price control regulation is presently limited to cotton seeds, “it is inevitable that similar regulation will be applicable to all kinds of seeds and technology, thereby jeopardising significant investments already made by many members”.

The firms observed that the NSAI should not be used for short-term commercial interests of a few dominant members whose interests were prioritized over “larger group members”.

Sayantan BeraShreeja Sen

SOURCE : http://www.livemint.com/Companies/0vTiyQS0BXlnoAdcD0jacI/Firms-accuse-lobby-of-seeking-price-controls-on-cotton-seeds.html

NEWS : Falling Crop Prices: Double whammy for cottonseed companies

Poor demand and price controls squeeze the once fast-growing industry.

Written by Harish Damodaran | New Delhi | Indian Express | Updated: July 2, 2015 5:16 am

Labour, fertiliser and pesticide costs have all gone up, whereas the seed price has remained the same. If our margins are going to shrink, making it difficult to pay our seed growers and invest in R&D.    

Falling crop prices isn’t good news for seed firms, given implications on demand for their product.
This is being seen in cotton, where average kapas realisations of Rs 3,900-4,000 per quintal in 2014-15, against Rs 5,000-plus for the previous year’s crop, has dampened farmers’ enthusiasm to plant. Ground-level reports suggest significant acreage diversion this time, especially to pulses, groundnut and maize whose price prospects appear more promising.

But companies selling cotton seeds are facing a double whammy, not just from lower demand, but also inability to raise prices due to controls imposed by state governments in Maharashtra, Gujarat, Andhra Pradesh and Telangana. These four states account for over 70 per cent of the estimated domestic market of 50-51 million packets, each containing 450 grams of Bt and 120 grams non-Bt cotton seeds.
(Bt refers to Bacillus thuringiensis, a bacterium that produces proteins toxic to bollworm insect pests and whose genes are inserted into crops using recombinant DNA/genetic engineering tools).


When Bt cotton was introduced in India in 2002, the seeds were sold at Rs 1,600 per packet. But in 2006, the AP government fixed the maximum retail price (MRP) for Bt cotton seeds, incorporating the US life sciences major Monsanto’s Bollgard single-gene (BG-I) technology, at Rs 750 per packet.
Other states soon followed suit, even enacting their own price control legislations. In 2008, they extended the Rs 750 rate to even seeds based on Monsanto’s more advanced Bollgard double-gene (BG-II) construct, while further slashing the MRP for BG-I packets to Rs 650.

These prices remained unchanged until 2013, when they were increased to Rs 830 for BG-I and Rs 930 for BG-II packets. The rates haven’t been revised upwards since then; Maharashtra’s BJP-led government under Devendra Fadnavis, on June 8, actually reduced the MRPs of BG-I and BG-II cotton seeds to Rs 730 and Rs 830 per packet respectively for the current year.

The above price reductions were largely enabled by a lowering of the ‘trait fee’ being paid by seed companies to Mahyco-Monsanto Biotech — a joint venture between the St Louis-headquartered firm and its Indian partner, Maharashtra Hybrid Seeds Company — for introducing the Bollgard gene construct into their own cotton hybrids. The trait fee, originally Rs 900 per packet, was brought down to Rs 122.96 for BG-I and Rs 183.46 for BG-II technologies.

The reduction in MRPs helped in the widespread diffusion of Bt cotton technology, similar to what low call charges did for mobile telephony though the latter was more a result of market competition than state fiat. Annual sales of Bt seed packets soared from 1.05 lakh in 2002 to 500 lakh-plus last year. But state-directed MRP reductions are proving increasingly counter-productive, with seed companies struggling to get farmers to produce for them.

 “India has some 70 lakh farmers who produce kapas (raw un-ginned cotton) for commercial sale. But there are also 2 lakh-odd growers who produce the hybrid cotton seeds that the former plant. We cannot ignore them,” observed Raju Barwale, managing director, Mahyco.

Hybrid seeds production is a highly labour-intensive affair, where the male part of a flower is removed one day and the resultant female parent manually pollinated with the pollen from another flower the next day. It takes 7-8 labourers working over two months to produce cottonseeds from one acre.

“A normal cotton grower would harvest 10 quintals of kapas and incur expenses of Rs 20,000-22,000 per acre. The corresponding kapas yield for the hybrid seed farmer will be 4.65 quintals, taking an average seed recovery of 300 kg (kapas contains 65 per cent seed and 35 per cent lint). Also, his expenses would work out to Rs 55,000-65,000 per acre, of which Rs 45,000-50,000 is labour costs alone,” noted Sameer Mulay, managing director of the Aurangabad-based Ajeet Seeds.

The high labour requirement also means that hybrid cottonseed cultivation is concentrated in select pockets: Gadwal (Telangana), Madanapalle (AP), Attur (Tamil Nadu), Gajendragarh (Karnataka), Idar, Khedbrahma and Sabarkantha (Gujarat), and Jalna, Buldhana and Nanded (Maharashtra).

 “In the last five years, we have had to increase our procurement price from Rs 275-300 to Rs 480 per kg of first-stage ginned seeds,” added Mulay, whose company sources cottonseeds from over 50,000 growers.

According to the industry, the cost of 450 grams of fully-processed clean Bt cottonseeds is anywhere between Rs 275 to 300. To these, if expenses towards trait fees (Rs 183), 120 grams of non-Bt seeds (Rs 45) and administrative/factory overheads (Rs 100) are added, the total per-packet cost comes to around Rs 620.

“An MRP of Rs 830 hardly leaves much for distribution, marketing and branding, leave alone undertaking R&D and extension work,” an industry representative claimed, while pointing out that seeds (assuming 1.6 packets per acre) makes up just 6-7 per cent of cultivation costs for the farmer. “Labour, fertiliser and pesticide costs have all gone up, whereas the seed price has remained the same. If our margins are going to shrink, making it difficult to pay our seed growers and invest in R&D, the ultimate sufferer will be the regular kapas farmer,” he said.

SOURCE: http://indianexpress.com/article/india/india-others/falling-crop-prices-double-whammy-for-cottonseed-companies/