Cotton season may have forced delay in GM royalty cap

The government on March 18 had issued a notification capping royalties of GM cotton seed technology companies at 10% for the first five years

The ongoing cotton sowing season has forced the government to keep in abeyance for three months the notification capping licence fees for all new genetically modified (GM) seed technologies. On March 18, the government had issued a notification capping royalties of GM cotton seed technology companies at 10 per cent for the first five years.

Had the notification been implemented, there were fears legal challenges could have affected BT cotton seed supplies at the time of sowing. Over 95 per cent of cotton sown in the country is BT cotton. The ministry of agriculture has withdrawn the notification on GM crops and is seeking wider consultation. The ministry likely to issue it after 90 days. This will provide seed licensees and licensors time to renegotiate contracts.

Shivendra Bajaj, executive director at the Association of Biotechnology-Led Enterprises-Agriculture Focus Group, however, said instead of capping royalties, more players should be allowed to develop and licesnse GM technologies, which would increase competition and keep royalties in check.

Mahyco Monsanto Biotech (India) (MMB) has nearly 95 per cent share in BT cotton. Industry players said the market leader had developed a superior BG-3 hybrid that was awaiting approval. Two other global companies have also sought approval for BT cotton technology.

Monsanto is in a legal battle with a few licensees over royalty. The government’s move to withhold the notification is likely to allow the litigants to renegotiate agreements.

Janhavi Prabhu, senior analyst, India Ratings, said, “If (the notification) is implemented, it is likely to dissuade investments in biotechnology.” “This will though create a level playing field among all seed companies under a reasonable and non-discriminatory licensing mechanism,” Prabhu added.

India Ratings has placed Mahyco on a ratings watch for uncertainty over future dividend income from Mahyco Monsanto Biotech because of the government notification in March.

Unconfirmed reports said some representatives of multinational seed companies had met senior officials from the agriculture ministry and tried to stress the need for wider consultation on the notification as it has wide ranging ramifications on their business in India. The ministry, some officials said, felt there was a need for such consultation. In the case of a notification issued on BT cotton in December, six rounds of discussions were held with all stakeholders before reaching a conclusion.