Seeds of discontent

Print edition : January 27, 2006

The Andhra Pradesh government hauls up Monsanto before the Monopolies and Restrictive Trade Practices Commission as the Bt cotton seeds of the company fail to meet expectations and it shows reluctance to compensate farmers who saved them.

K. VENKATESHWARLU in Hyderabad

Harvesting a cotton crop in Kurnool district of Andhra Pradesh. Monsanto's seeds produced poor yields in parts of the district for three consecutive years after their introduction.-

WHEN Mahyco-Monsanto Biotech (India) Limited launched its flagship Bt cotton seed in Andhra Pradesh amidst a high-decibel campaign in 2002, it would not have factored in the challenges it would face down the years, least of all, on the pricing front.

After all, the launch was in a State known for its progressive farming practices and headed, at that time, by the poster boy of reforms, N. Chandrababu Naidu. Yet problems began almost within a year, when farmers in some districts reported Bt cotton crop failure, a fact still contested by the company. The Chandrababu Naidu government's brinkmanship seen in the way it passed the buck to the Union Ministry of Environment and Forests' Genetic Engineering Approval Committee (GEAC) saved the day for Monsanto.

Bt cotton, a transgenic plant, produces an insect-controlling protein, Cry1A(c), the gene which has been derived from the naturally occurring bacterium, Bacillus thuringiensis (Bt). The cotton hybrid containing the Bt gene produces its own toxin against bollworm, the cotton pest. Since the hybrid cottonseed guards against bollworm, Monsanto named it Bollgard, but it has become commonly known as Bt cotton.

With the change of government in the State, the rules of the game changed. When the crop failed again in some parts of the State for the third consecutive year and the company was reluctant to pay compensation, the government came up with a different strategy to tame the company. Realising the limited options of making a big issue of the technology, which now had wide acceptance, it sought to hit the company where it hurt the most - pricing.

So, when Agriculture Minister N. Raghuveera Reddy announced the decision of dragging the company to the Monopolies and Restrictive Trade Practices Commission (MRTPC) on December 28 for collecting an "abnormally high price", it would have come as a bolt from the blue for Mahyco-Monsanto. It became a watershed event. No State had ever dared to take on the multinational giant in this manner.

Along with Mahyco-Monsanto, three other seed companies, Pro-Agro, Raasi and Nuzvid, all producing and marketing Monsanto's Bt cottonseed, were made respondents. While filing the case before the commission in New Delhi on January 2, the Minister charged the company with indulging in "monopolistic trade practices with unreasonably high prices and limited technical developments".

The restrictive trade practices included "maximising profits and market power and manipulation of the prices through the supply mechanism", he said. Since there was no patent over Bt cotton in India, the company was charging a "trait value" that was different from other countries. The company procured seeds at Rs.200 to Rs.250 for 750 gm from farmers but sold the same to growers at Rs.1,850 a packet of 450 gm. Of this the company held back Rs.1,250 as trait value. In contrast, Monsanto sold a 750 gm packet of the Bt cottonseed at as low a price as Rs.450 a packet in other countries.

Agriculture Minister N. Raghuveera Reddy.-P.V. SIVAKUMAR

He further argued before the commission that the high prices were detrimental to the interest of lakhs of farmers. Mahyco-Monsanto was taking advantage of having monopoly source material of bollworm-resistant technology. Technologies developed by other companies in the country were still in the testing stage and may take three years for commercial production, he said.

The Minister alleged that the company sold seeds worth Rs.130 crores in India since 2002 and held back Rs.78 crores of this amount for itself as trait value. But it never responded to demands to pay Rs.3 crores as compensation to farmers whose crop had failed in Andhra Pradesh.

The company responded quite wryly to the Minister's announcement. Skirting the specific charges of overpricing, charging a high trait value and fixing high profit margin, the company's spokesperson couched the response in generalities. The "pricing philosophy in the agriculture industry is based on sharing the value that products and technology deliver to the farmers," the spokesperson said.

Determination of the price depended on several factors such as replacement cost. It encompassed cost of agronomic methods and their effectiveness, benefits and limitations. It was also based on agronomic benefits such as additional yields, labour, equipment and fuel savings or application flexibility that a product or technology provided farmers, the company said. Interestingly, it also listed out the non-agronomic benefits such as "time saving, efficiency, risk management, peace of mind, etc".

According to the company, technology fee may be part of the prices charged to farmers and are used both to support current products in a market and to fund research that will deliver new products. The fee is shared with the retail technology, seed partners and Monsanto shareholders and cover the costs of doing business.

It further contended that the farmer had recognised the value of Bt cotton or Bollgard technology, and it continued to gain acceptance in India. The ever-increasing area, 3.1 million acres (1,254,500 hectares) now across nine States, demonstrated that the Indian farmer was willing to adopt a technology that delivered consistent benefits in terms of reduced pesticide use and increased income. The company went on to quote the findings of the Indian Marketing Research Bureau survey that the net profit increase for Bt cotton farmers was 60 per cent compared to those who raised conventional cotton.

With the government and the company sticking to their respective stands, an interesting battle is on the cards. The Minister had given enough indications of roping in other States to support his government's battle against the seed giant.

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