 "Farmers harvest cotton in a field in Nana Viramgam village in Gujarat")
The Karnataka High Court’s recent interim stay on one part of the Centre’s Cotton Price Control Order has again brought the entire issue of seed and trait-value pricing back to where it all started.
The main bone of contention between seed companies and the license provider, which in the case of GM cotton seeds is Mahyco Monsanto Biotech Ltd (MMBL), was retail seed prices not keeping pace with the ‘trait value’ due to state intervention.
Trait-value, or royalty fee, is the price which technology provider like MMBL charge from seed companies on the sale of each packet of seed produced using that technology. In case of Bollgard-2, the trait value was around Rs 163 rupees plus taxes in a 450 grams packet of seed costing Rs 830 in Maharashtra.
Though MMBL has always maintained that it has lowered the ‘trait value’ every time there is a reduction in seed prices by state agencies, some seed companies dispute that claim.
The HC’s interim order stays that part of the Cotton Price Control Order, which gave the Central government power to fix the trait value (royalty price between license provider and seed companies), while the reduced MRP (the rate at which seed companies sell the seed to farmers) has been left untouched in the interest of farmers.
So for a seed company, the sale price is controlled, while the input cost is not. Some seed companies have alleged that earlier, too, the same situation prevailed after state governments interfered with the retail price on the grounds that they were too high and harming farmers’ interest.
This led to a situation where margins were getting squeezed and forced the closure of many seed companies. The sector, some seed companies allege, was suffering due to this arrangement; the High Court order now brings back the earlier arrangement.
Though it might be in the interest of the license provider to have freedom to fix the ‘trait value’, but if the sector suffers due to control over retail price, it might harm its interests in the long run.
An ideal situation would have been to let both the ‘trait-value’ and also retail price be dictated by market forces and also by any mutual agreement between the license provider and seed companies.
Then there’s the issue of efficacy of Bollgard-2 technology and allegations of its falling resistance to pink bollworm and whether license providers are justified in charging a ‘trait value’ for a technology that is losing its sting.
In balance, the overall situation does not look good for either parties be it seed companies or the dominant license provider.
