Bayer-Monsanto merger far from complete

Monsanto losing market as Bt Cotton sowing has fallen by 5-8%

Mega merger of Monsanto with Bayer globally may have cheered investors in India as both companies' share prices are rising. However, analysts who track the sector say that like globally, in India also getting the deal approved from competition watchdog will not be easy. That said, it's not the only challenge.

This sowing season Monsanto's Bt Cotton sowing has already taken a hit and is estimated to have fallen by 5-8 per cent due to reducing effectiveness of the BG-S variety. Not only that, the government this year has reduced royalty payment to be made to Monsanto significantly. It was Rs 184 per packet of 450 gram, which has been reduced to Rs 49. Monsanto moved to various high courts but failed to get stay.

 

Dr. Kalyan Goswami, Executive Director, the National Seed Association of India said: "We estimate seed industry growing at 10 per cent this year due to normal monsoon. However sale of Bt Cotton variety is estimated to be lower this season by 5-8 per cent due to white fly attacks in north India, pink bol worm attack in few other states and major cotton producing states in south have also seen lower production as farmers there were advised to move to other crop". He also reiterated that Bt cotton sales would be good in the next Kharif. Since Bt Cotton seed share in revenues of seed companies is around 40 per cent, he added, "In value terms seed companies' growth may be confined to not more than 6-8% overall."

Even in a case in the Competition Commission of India, Monsanto has lost the case where the CCI has found prima facie violation of competition law by Monsanto India and had ordered a detailed investigation against the company on complaints then filed by the Agriculture Ministry and three other domestic seed companies.

Goswami also said Monsanto India is facing a challenge in case where the Competition Commission may impose panalty on them or asking them to compensate farmers whom they compelled to pay higher prices using their monopoly status.

Globally Bayer-Monsanto have to get approval for 30 different regulators to see the merger getting through. However for Monsanto India may be a small market, the challenges are bigger because of growth potential India has.

Monsanto has already said they it has withdrawn an application to sell a new variety of genetically modified cotton seed in India because of its concerns over the country's attempts to restrict the biotechnology business. Some industry executives on the condition of anonymity said that, the global company may blame government but farmers are finding falling resistance of Bt cotton's existing variety and Monsanto is facing CCI challenge. He also said that even globally rising cost of GM seeds is becoming an issue because farmers are paying higher prices for GM varieties but agri crops are not always remunerative.

Even a report by the Wall Steet Journal today echoed similar voice. The report published today by the newspaper noted that, "Today, farmers are finding it harder to justify the high and often rising prices for modified, or GMO, seed, given the measly returns of the current farm economy. Spending on crop seeds has nearly quadrupled since 1996, when Monsanto Co. became the first of the companies to launch biotech varieties. Yet major crop prices have skidded lower for three years, and this year, many farmers stand to lose money."

Another issue being raised is of draining bio-diversity of land due to use of BT crops.

Vijay Sardana, expert in commodities, said, "GM seeds has been used globally. India has not permitted them in food crops. However imported edible oil contains oils made from GM oil seeds. India should, in the interest of consumers to give them a choice, make labelling of GM or non GM compulsorily mentioned on all products." He emphasises that in the globalized world, not permitting GM may not be the solution but labeling will help consumers and awareness on that will help recovering bio-diversity. In case of cotton, with over 90 per cent area under Bt variety, bio-diversity of cotton growing area has destroyed.

Bio-diversity is also become a global priority because spread of new form of infections in crops. The traditional generic crops and generic crop care chemicals should be promoted to ensure cost effective production system.

Matter for Monsanto doesn't end. Indian Council of Agricultural Research (ICAR) has initiated testing of 20 indigenously developed Bt cotton varieties during Kharif 2016 to identify suitability of the varieties in different agro-climatic zones and these lines will be further promoted through front line demonstrations and Central Institute for Cotton Research, Nagpur, University of Agricultural Sciences, Dharwad and National Botanical Research Institute at Lucknow are also involved in trying to develop genetically modified cotton seeds in the country. Seed industry sources believe that, "When this verities are permitted, it will be cheaper and unlike Monsanto which licensed the technology to only 49 seed companies against 300 operational companies, government can be expected to give licenses to many more players imparting competition and bringing down cost for farmers".