Indian government plans to reduce royalties that the company charges farmers and says it’s not worried by Monsanto threat
NEW DELHI, India (Reuters) —Monsanto is welcome to leave India if it does not want to lower prices of genetically modified cotton seeds as directed by the government, a cabinet minister said.
It’s a sign that the rift between New Delhi and the American company is widening.
The comments come as Prime Minister Narendra Modi’s nationalist government expects to develop its own GM cotton varieties early next year to end Monsanto’s dominance. The company it controls more than 90 percent of cotton seed supply.
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However, experts have warned that even if India did develop a home-grown GM cotton variety next year, it would struggle to sustain a program that needs to refresh seeds every decade or so.
The introduction of Monsanto’s GM cotton in 2002 helped turn India into the biggest producer of the fibre, while other crops such as pulses continue to suffer because biotech food is banned and local research has stalled.
GM cotton has benefitted more than seven million farmers in India, but some of them and their associations, including one affiliated to Modi’s ruling party that promotes self-reliance, have complained Monsanto overprices its products.
Modi’s government has imposed a 70 percent reduction in royalties that Monsanto receives for its cotton technology as it comes under pressure to mollify farmers hit by three straight crop failures because of bad weather.
India’s anti-trust regulator is also investigating whether the company misused its near-monopoly to raise rates. A Monsanto joint venture with a local company says it is confident the allegations will be proved groundless.
Monsanto has taken the government to court over the royalty and has said it would have to reevaluate its India business because it was difficult to bring in new technologies in an “environment where such arbitrary and innovation-stifling government interventions make it impossible to recoup research and development investment.”
However, Sanjeev Kumar Balyan, the junior agriculture minister, said the government was trying to rectify what he called past mistakes that allowed a foreign company to dictate seed prices and stifle local crop research.
“It’s now upon Monsanto to decide whether they want to accept this rate or not,” Balyan said.
“If they don’t find it feasible, then they are free to take a call. The greed (of charging) a premium has to end. We’re not scared if Mon-santo leaves the country because our team of scientists are working to develop (an) indigenous variety of (GM) seeds.”
Analysts said Monsanto was unlikely to withdraw from India lightly, given the huge size of the market and its strategic importance now that China has bid to snap up the company’s biggest rival, Syngenta, for $43 billion.
Monsanto India is the firm’s only listed unit outside its home base, and it has been selling seeds and herbicide in the country for more than four decades.
The company has cut its global earnings forecast as seed prices fall amid lower farm spending, and any price reduction in India could lead to demands for cuts in other markets.
Monsanto warned in January that its international GM traits businesses could face unpredictable regulatory environments that may be highly politicized.
“The decision of the government to override contracts signed by private entities sends a negative signal when the prime minister is going around the world seeking private investment,” said Ashok Gulati, an agricultural economist.
He said India might be able to develop its own GM cotton based on Monsanto’s current Bollgard II technology, but its efficacy would drop sharply in four to five years as the pests it is meant to kill become resistant.
“What will we do then? Invite Monsanto again?” he said.
Developing new technology would require expensive and extensive research, he added.
Monsanto has said heightened regulation by India went against the government’s policies to promote innovation and make it easier to do business. It also said it was important for the country to ensure sanctity of contracts and recognize intellectual property rights.
The emphasis on home-grown technology could be good news for a GM mustard variety developed by Indian scientists and being considered by the government.
A committee of government and independent experts will have their fifth meeting this year in April to evaluate the trial results.
Monsanto is also developing GM corn varieties to be sold in India if allowed, which analysts cite as another reason why pulling out would be difficult.
“India is too huge a seed market for anyone to leave (of) one’s own choice,” said Ajay Vir Jakhar, chair of Farmers’ Forum India.
- India is the second largest producer of cotton worldwide.
- The Indian textile industry contributes four percent to the national gross domestic product and 12 percent to the country’s total export earnings.
- Cotton cultivation in India is pegged at 30 million acres this year compared to about 28.4 million acres last year .
- During 2013-14 production year, Indian cotton yarn production increased by two percent and cloth production by mill and power loom sector increased by five percent and six percent respectively.
- The value of cotton yarn exported from India in the period from April to December of 2014 was estimated at US$ 2.9 billion.
- China is the biggest importer of raw cotton from India. The other major cotton importing countries from India are Bangladesh, Egypt and Taiwan.
