India Cuts GM Cotton Seed Royalty; FSII Expresses Grave Concerns

It’s for the third time in four years that India has cut the royalties that local seed companies pay to German drugmaker Bayer AG's Monsanto unit.  

According to a farm ministry order, PM Narendra Modi's government has decided to reduce royalties paid by Indian seed companies to Monsanto for its genetically modified (GM) cotton by 49% to 20 rupees for a packet of 450 grams. However earlier it was 39 rupees. 

The seed and technology associations have expressed their severe disappointment over the recent government order on Bt cotton seed price in which the cotton seed price for Bollgard-II has been reduced to Rs. 730 per bag compared to Rs. 740 last year. 

Though there is a marginal increase in seed component of the price, the most impacted is the trait value with a 49% cut. 

Mr. Ram Kaundinya, Director General of the Federation of Seed Industry of India (FSII) have expressed grave concerns and said, “Such an ad hoc mechanism of price fixation for Bt cotton makes cotton seed business unsustainable in the long term. The farmer won’t benefit much with slight price reduction, because the cost of seed is less than 5% of his revenue.” 

He added, “The previous reduction from Rs.800 per bag to Rs. 740 per bag itself caused a huge cut in the research budgets of cotton seed companies. Further decrease now and such gradual reductions over the years will cause the cotton seed industry to further cut their investments in research and upgradation of infrastructure.” 

Several cotton seed companies will struggle to exist and the reduction in R&D will lead to a decline in cotton productivity in the country at a time when the textile industry is growing and is looking forward to more cotton production in India. We are no longer the largest cotton producer in the world and with this trend, there is a strong chance that we will again become a net importer of cotton in the near future, said Mr. Ram Kaundinya. 

Dr. Shivendra Bajaj, Executive Director-Alliance for Agri Innovation (AAI) mentioned, “Further slashing of trait fee will result in putting new innovations on hold especially, in the cotton sector. The cotton price order is most disappointing. With ever reducing incentive, technology development will suffer. The paucity of newer traits will cause stagnating yields and decrease in farmer income in the near future.” 

He also added, “There is a clear need that the short-sighted view taken for trait pricing is replaced by a growth view that empowers innovation in cotton-based agriculture and allows industry to flourish.”

According to industry group Cotton Association of India, New Delhi's cotton output is likely to fall to 32.8 million bales of 170 kg each in the year to September 2019. It is the lowest in nine years, triggering higher imports of the fibre.  

Besides cutting Monsanto's royalties, the government raised the prices of GM cotton seeds by 1.43 percent to 710 rupees ($10.16) a packet. 

New Delhi approved Monsanto's GM cotton seed trait, the only lab-altered crop allowed in India, in 2003 and an upgraded variety in 2006 which helped in transforming the country into the world's top producer and second-largest exporter of the fibre. 

Monsanto's GM cotton seed technology went on to dominate 90% of India's cotton acreage. Though, Monsanto became embroiled in a dispute with Indian seed company Nuziveedu Seeds Ltd (NSL), which argued that India's Patent Act did not allow Monsanto any patent cover for its GM cotton. Monsanto and NSL are engaged in a maze of arbitration proceedings and legal cases.