Seed producers protest as ministry cuts Bt cottonseed price, trait fees

 The Agriculture Ministry in a late night notification cut the government-controlled price of BG-II genetically modified cottonseed by Rs 60 to Rs 740 per pack of 450 grams, leading to protests from producers.

It has also cut cut the "trait fees" for the GM produce by another Rs 10 to Rs 39 per pack. Trait fees are paid to the patent holders on GM products. 

"It is a shock to us," said M. Ramasami, Chairman and Managing Director of Rasi Seeds and President of the Federation of Seed Companies of India (FSII), reacting to a notification of the agriculture ministry.

Seed companies will take a hit of Rs 50 per pack, because the government had also reduced the fee payable to the technology licensor, Mahyco Monsanto Biotech (MMB) for the genetically-modified insecticidal Bt trait.

Trait fees "were less than 1.5 percent of the cost of cultivation for farmers. It is unfortunate that today's order further erodes trait fees, which are now less than 0.5 percent of the cost of cultivation, while the technology continues to provide value to farmers," Arun Gopalakrishnan, a spokesperson for MMB said.

Cottonseed was brought under price control nationally in December 2015. Till then prices were fixed by states. In March 2016, the agriculture ministry notified Rs 800 as the price of BG-II cottonseed, which was Rs 30 lower than its controlled price in Maharashra. (Telangana, Andhra Pradesh, Gujarat, Tamil Nadu and Karnataka had pegged it at Rs 930, while Punjab and Haryana had kept it Rs 1,000).

Seed companies had gained then, because trait fees had been cut by 70 percent from Rs 163 to Rs 49, while the maximum retail price had been reduced by 4 percent. 

The newly-notified prices do not even account for inflation over the past two years, Ashwani Yadav, Executive Director of FSII said. The association had asked the price to be revised to Rs 875. The National Seed Association of India (NSAI) from whom FSII had broken away in August 2016, had sought a price of Rs 945. 

An agriculture ministry official, who asked not to be named, said seed companies by their own admission were paying Rs 330 per pack to farmers producing the seed. The balance of Rs 371, minus the trait fee of Rs 39 would leave them enough profit margin after accounting for distributor and dealer margins, marketing and packing costs, financing charges and overheads. Many of the seed companies claim R&D costs without actually undertaking any research, he said.

While admitting this was true of most seed companies, Ramasami said the bigger players in the acutely-competitive cottonseed market owe their position to the research they undertake. Rasi Seeds, he said, employed 10 cottonseed breeders who were doing research on a 120-acre plot in Salem, Tamil Nadu. The increase in India's cotton production was mainly due to high-yielding varieties developed by Indian research-based seed companies. 

MMB's Bt trait had helped by protecting those yields from bollworm attack. One of the best-selling cottonseed hybrids, RCH-659 was brought to market in 2012 after more than 10 years of breeding activity. But it took three years of demonstration and education in good agronomic practices for it to catch the fancy of farmers. Continuous research is required for a hybrid to remain ahead of the competition, Ramasami said. 

Not all cottonseed is sold at the maximum retail price. But companies that maintain trait purity and germination quality above the government-notified standards, do not discount their prices by much. 
Last year 40 million packets were sold. Assuming that they were all sold at highest permitted price (which is not the case), the industry would suffer a setback of Rs 200 cr. MMB would take a hit of Rs 40 cr.

Bt cottonseed prices were brought under price control for the first time in 2006. At that time it was retailing for Rs 1,800 a pack and the trait fee was Rs 1,200. Farmers complained and the Monopolies and Restrictive Trade Practices Commission and state governments intervened.