India Affixes Cap On Royalty Fees For Gene Modified Cotton Seeds

March 10
7:45 PM 2016

The Indian Ministry of Agriculture and Farmers' Welfare has announced on Tuesday cutting the royalty fees for genetically modified cotton seeds by 70%. The cutting has been announced ahead of the warning made by Monsanto Co., the world's largest seed company, on pulling its biotech crop genes from the country.

The move appears following complaints from local seed companies have accused Mahyco Monsato Biotech (India) (MMB) for charging high royalties. MMB is a joint venture concern of Monsanto Co. with India's Mahyco.

The complaint has prompted India's farm ministry forming a committee to submit recommendations upon probe. The recommendations are now being reflected with the government move, reports Reuters.

MMB has filed a case with a Delhi court, challenging the authority of the panel to determine the trade fee agreed upon by MMB and local seed companies. The ministry's move has been applauded by The National Seed Association of India, a trade body for seed vendors, according to a report published in The Wall Street Journal.

The agriculture ministry has capped the so called trait royalties at IRs 49 ($0.73) per 450 gram pack of Bt cotton seeds, which is a 70% reduction from existing. MMB has previously charged licensees around IRs 163 for each packet. The ministry has also affixed the maximum sale price at IRs 800.

MMB, the joint venture licenses Monsanto technology to seed companies upon contract for trait fees. It has cautioned on March 4 to reevaluate every aspects of its business in India subject to substantial cut to royalties by the government. Such intervention will override MMB contracts with seed companies while undermining its operations, reports Bloomberg.

The joint venture, also known as Maharashtra Hybrid Seeds Co., has first introduced cotton plants capable of secreting bug-killing proteins in 2002. Around 97% of Indian cotton fields now prefer biotech plants. MMB provides pest-resistant genes to about 50 cotton seed companies in return for royalty payments.

In another development, the Competition Commission of India, the anti trust regulator, has expressed doubts on possible abuse of dominant position in the country during last month. The commission has instructed its director general to complete a probe by two months.

Average per hectare production of cotton in India has jumped 70% to 503 kilograms since farmers started to use gene modified seeds in 2002. However, production may be dropped 7.4% during 2015-2016 due to shortage of monsoon rain and attack of pests in northern states.

Indian cotton production is immensely dependent on MMB's gene modified seeds. MMB has been accused of exerting undue influence in realizing excessive royalty charges from the seed companies. Indian agriculture ministry on Tuesday has imposed cap for royalties on gene modified seeds ignoring threat from the seed giant for pulling out from India.

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