It is unbelievable that a free market economy-touting Bharatiya Janata Party (BJP) government is interfering in the free marketplace to dictate the cost of high technology seeds and licensing of modern seed technologies.
A Cotton Seeds Price (Control) Order (CSPCO) dated December 7, 2015, issued by the Ministry of Agriculture and Farmers Welfare that seeks to regulate cotton seed prices in all key cotton-growing states across India has been suspended pending public input to review the order. This price control order not only seeks to fix the maximum sale price of Bt cotton hybrids, but it also seeks to regulate the trait fee that is governed by private contracts. This order provides an authority to the committee to regulate bilateral private contracts between the technology provider and the seed company (licensees) in violation of contract law between two private parties.
During the election campaign, Prime Minister Narendra Modi repeatedly said the government had no business to be in business. This BJP government seems to be showing a great deal of proclivity to stay the socialist course for its own fears of incurring the wrath of one or the other vote bank. Interfering in the marketplace to determine the cost of doing business will be counterproductive in the long run. It seems the BJP government has forgotten the basic tenet of vikas: to unleash the market forces that have been held back for too long in India. The government's ham-fisted public policy by issuing an order to control prices of seeds and seed technology traits royalty is a regressive policy. This policy will kill the future of any technological infusion into India's seed sector. It is abhorrent for a government to fix prices of private party contracts. It is antithetical to free market principles. This policy stifles innovation and investments in agricultural biotechnology for good, and there would be no inflow of modern technologies. This will result in "no vikas kisike saath (no development for anybody)".
While moves to rationalise the retail price of seeds are well intentioned, the CSPCO, in its present form, constitutes a substantial overreach on the part of the government in seeking to regulate private commercial contracts related to trait fees. The order enables the government to set prices for existing as well as future patented technologies in which technology innovators would have no say. Biotech seed companies will no doubt challenge this order in the courts based on the constitutionality of the contract law.
Such interventions in price control undermine the government's recent pronouncement on intellectual property rights (IPR) to boost the confidence of investors in the country. Direct government intervention to determine the value of for patented innovation, ignores intellectual property considerations and renders the existing contracts null and void. Bollgard II® technology is protected in India and in other countries through patent rights owned by Monsanto. The order creates significant uncertainty and unpredictability with respect to existing and future technologies and has the potential to significantly impact not only the growth of agriculture. Laws safeguarding IPR need to be respected to ensure that the innovator's interests are adequately protected. The innovator invests significant resources in getting a product/technology into the market, and funnels the returns to further research and development. In order to ensure that technology providers continue to make risky investments to develop new technologies, the government must seek to avoid such actions and promote policies conducive to long-term investments. It will be worthwhile for the government to pause and realise how existing trait fees have led to wide acceptance of Bt cotton in India, benefiting farmers substantially in monetary terms.
The trait value of Bt cotton is only one to two per cent of the farmer's total cost of cultivation in India. The benefit of Bt cotton technology built into plant protection in high-yielding hybrid cotton seeds along with improving farming inputs and favourable conditions helped create Rs 68,371 crore in additional value for more than six million cotton farmers by significantly reducing insecticide usage and increasing yield, according to a study by the International Food Policy Research Institute and the International Services for Acquisition of Agbiotech Applications. According to the International Cotton Advisory Council, Indian farmers have experienced the greatest benefit from Bt cotton technologies compared to their peers anywhere in the world.
Increased cotton production has had a positive cascading impact on ginning, cotton seed crushing and textiles industry apart from exporters, and the domestic seed industry. Over the last decade, Bt cotton has played an important role in transforming India from a net cotton importer to the second-largest producer of cotton globally. If the price control order is passed as it is, it will be akin to killing a golden egg-laying goose.
The government seems to have acted hastily due to pressure from the domestic seed industry that does not want to honour signed contracts. Cotton farmers are not complaining. Providing the latest technologies for Indian farmers is critical for increased productivity. If India really wants to tackle the problem of climate change already wreaking havoc on Indian agriculture, there is no alternative to modern seed biotechnology. The Modi government must take a serious relook at its regressive seed policy and set it right.
The author is a professor at University of Maryland-Eastern Shore, Princess Anne, MD, USA
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
