Gujarat, the country's largest cotton producer, is all set to increase the price of Bt cotton seed even as Andhra Pradesh is hesitant to raise the price in view of the byelections in the state.
"The Gujarat government has decided to increase the price by Rs 200 for a packet of 450 gm of BG 1 and BG 2 hybrid cotton seed and the same may be announced tomorrow," a seed company official told Business Standard.
With Bt cotton seed requirement in Gujarat in the ensuing kharif season estimated to be at around 6.5 million packets, the expected price increase will yield an additional income of Rs 130 crore to the seed companies.
The companies have been demanding all the major cotton growing states to increase the MRP of Bt cotton seed at the earliest so that they could package the seed with new price tags and stock it in different locations before the commencement of the kharif season from June.
The Gujarat government held a meeting with all the seed companies on Wednesday to take their views on pricing besides eliciting a firm commitment for supply in the wake of reported short supply of Bt cotton seed across the country. The move is seen as a bargain tactic for agreeing to their request for price revision.
On the other hand, the AP government had forced the companies to reduce the price of Bt cotton seed first in 2006 and then in 2008 by enacting the Seed Control Act. The price was reduced from Rs 1,800 to Rs 650 per packet for BG 1 and from Rs 925 to Rs 750 for BG 2. Other states followed suit.
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Of late, the seed industry has not been able to keep pace with the growing demand and the companies attributed this to the erosion of profitability due to rising cost of production of Bt cotton seed. Punjab and Haryana have already increased the price of BG 1 to Rs 825 and for BG 2 to Rs 1,000 per packet. Though the states looked at Andhra whenever companies approached them for a price hike, they had to take a call this time as the Andhra government was hesitant in announcing the price revision even after assuring the companies of the same.
Maharashtra, the second major cotton producing state, is also expected to announce an increase in price soon, according to seed companies.
The major cause for concern for the states, though, is short supply of Bt cotton seed. The shortage is expected to be around 4.6 million packets during kharif-2011.
As the companies are expected to supply more to those regions where the price of seed is higher, the states are compelled to take an early view on this issue as almost all the acreage in states like Gujarat and Andhra Pradesh has now been replaced by Bt cotton.