Commodity Analysis

What the Bt cotton row is all about

Rajalakshmi Nirmal | Updated on May 20, 2018 Published on May 20, 2018

And how it may impact biotech innovations across sectors

The fate of 100-plus agri-biotech patents granted by the Indian Patent Office is now hanging by a thread. Last month, the Delhi High Court declared invalid Monsanto’s patent on Bollgard-II technology held through its Indian arm Mahyco Monsanto Biotech. The case has serious implications for biotech-based innovations across sectors.

The High Court held that plant varieties and seeds cannot be patented in India and that the trait fee (royalty) on genetically modified (GM) technology would be decided by the PPVFR (Protection of Plant Variety and Farmers Right) Authority.

The moot question now is: why has the patent on Bollgard-II technology been invalidated now after Monsanto having had it for 10 years?

With the case currently in the Supreme Court and the hearing scheduled for July 18, here’s an explainer on the background.

Monsanto, through its JV arm Mahyco Monsanto Biotech, sells its Bollgard technology to 49 Indian seed companies.

GM seeds have worked wonders on India’s cotton yield and output. NITI Aayog, too, has acknowledged this in its recent report ‘Raising Agricultural Productivity and Making Farming Remunerative for Farmers’. Since the introduction of Bollgard I and II technologies, cotton acreage and yield have risen significantly. The yield has increased from 302 kg/hectare in 2002-03 to 552 kg/hectare in 2013-2014, helping farmers make a higher income.

The price a farmer pays for Bt cotton seeds goes to seed companies. The firms only pay royalty to Monsanto. This though, is in addition to the one-time lump sum paid for the technology.

The process works thus: breeder companies (those that make hybrid seeds) buy donor seeds from Monsanto and produce their own hybrid seeds and sell them to farmers. The trait fee for Bollgard-II technology was earlier fixed by Monsanto. But in 2015, some of the sub-licencee seed companies sought to unilaterally reduce the trait fee to which Monsanto disagreed. This opened a legal battle and saw the government step in.

After the initial confrontation, some companies, however, honoured the bilateral trait fee agreements with Monsanto. But, three companies, including Hyderabad-based Nuziveedu Seeds, refused to pay. They argued that the patent held by Monsanto was invalid as the Patents Act doesn’t cover seeds and their varieties.

Till date, Nuziveedu Seeds and its group companies continue to owe trait fees to Monsanto, claims the agri giant. The issue between Monsanto and Nuziveedu Seeds got elevated to the policy level, bringing about a few changes.

Price control order

The Ministry of Agriculture and Farmers Welfare, issued a Cotton Seeds Price (Control) Order on December 7, 2015, to regulate cotton seed prices in all key cotton-growing States.

Through this order, the government sought to also regulate the trait fee, which was till then governed by private contracts.

Consequently, for the past three years, the government has been fixing the MSP for Bt cotton seed packets and the trait fee, exercising the powers conferred on it by sub-clause (1) of clause 5 of the Cotton Seed Price Order.

From ₹930 (for a 450g packet) in 2016-17, the price of Bt cotton seeds was cut to ₹800 in 2017-18.

This year, it has been further reduced to ₹740 (for the 2018-19 season).

Trait fee, a component included in MSP, has also been cut, from ₹163.29/packet in 2016 to ₹39 in 2018-19.

Arguments of NSAI

The National Seeds Association of India (NSAI) which used to represent all the seed manufacturers, got split into two in August 2016 after the Monsanto-Nuziveedu tiff intensified.

The defectors (mostly firms having biotech operations and who want protection for new technologies under the Patents Act) formed the Federation of Seed Industry of India.

NSAI sided with Nuziveedu, maintaining that Monsanto has been making false claims under the Patents Act and charging high trait value.

Speaking to BusinessLine, Kalyan Goswami, Director of NSAI, said: “The Delhi High Court judgement made it very clear that Monsanto enjoys IPR (intellectual property rights) only under the PPVFR Act.”

He added that NSAI believes that the breeders have a right under the PPVFR Act to access any transgenic variety to develop new varieties and need not sign licence agreements to carry out basic activities such as developing new varieties and producing/marketing seeds of such varieties.

PPVFR Act

IPR for plant varieties, including transgenic ones, is provided only under the PPVFR Act.

The duty of the PPVFR Authority, a government body, is to establish an effective system for the protection of plant varieties, guard the rights of farmers and plant breeders, and encourage the development of new plant varieties.

If there is a mandate that the technology provider can have IPR only under the PPVFR Act, there should also be a mandate to ensure all seed companies register their hybrids under the PPVFR Authority, say industry insiders.

“If you as a seed company don’t register your hybrid under PPVFRA, what recourse does the technology provider have?” asked a highly placed source.

Currently, only a few companies have all their seed varieties registered with the authority.

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