Karnataka HC stays govt order on Bt cotton seed royalty fees

Government tells Delhi high court that Monsanto Mahyco Biotech was trying to approach different fora for an order in its favour


Photo: Bloomberg
Photo: Bloomberg

New Delhi: The court battle over the centre’s move to cut royalty or trait fee on genetically modified Bt cotton seeds disregarding the discontent of global seed major Monsanto Co. intensified on Wednesday with the centre telling the Delhi high court that Monsanto Mahyco Biotech (India) Ltd or MMBL, a joint venture of Mahyco Seeds Ltd and Monsanto, was trying to approach different fora for a favourable order.

The government’s statement in the court comes in the wake of the Karnataka high court’s stay on the centre’s decision on a plea filed by the Association of Biotechnology Led Enterprises Agriculture Group (ABLE-AG), the industry lobby of research and development (R&D) firms, on Monday.

In the interim order, the Karnataka high court said that the centre cannot fix royalties as they are based on mutual agreements between different companies. It, however, allowed the government to fix the maximum sale price (MSP) of Bt cotton seeds for the benefits of farmers.

“Fixation of trait value under the (government) notification shall not be given effect... since it would be a matter between (companies)... based on agreements entered into amongst themselves,” the court said in its order.

“While making seeds available to farmers, the maximum sale price as notified in the (centre’s) notification (on 8 March) shall be ensured and it shall not be exceeded,” it added.

The government decided to cut prices of genetically modified cotton seeds and slashed royalty fees by 74% on 8 March. The centre’s contention is that the technology has lost its efficacy in resisting certain pest attacks and hence royalty fees on the technology has to be reduced. While the move will benefit nearly 8 million cotton farmers in India, it raises concerns about the country’s intellectual property rights regime.

The MMBL had first moved the Delhi high court in December to quash certain provisions in the price control order (issued on 7 December), specifically those allowing the centre to determine royalty fees.

Additional solicitor general Tushar Mehta, representing the centre, told the court on Wednesday that MMBL, a member of ABLE, has lost the right to present its case as it approached two courts on consecutive days. “The petitioner (MMBL) has lost the right of audience before this court by (its) conduct. It has foreclosed the right of being heard,” he said.

According to Mehta, MMBL filed a plea on 15 March seeking a stay on the 8 March price control order and sought it to be heard on 17 March. It was not heard on the day. However, ABLE filed its case on 18 March (at the Karnataka high court) on the same grounds, Mehta told the court. The government’s contended that ABLE-AG, in its petition, failed to mention that the Delhi high court had declined to stay the central price control order earlier.

Lawyer Abhishek Manu Singhvi, representing MMBL, argued that ABLE was a different entity with 400 members, of which MMBL is a member. The court directed the government to file its allegations in the form of an application and allowed MMBL to reply to it. The case will be heard next on 7 April.

An MMBL spokesperson said that the company informed the Delhi high court about the Karnataka high court order.

“We remain confident in the merits of our legal claims and are optimistic that the government will take into account arguments that will result in an outcome that will continue to encourage innovation in Indian agriculture,” the spokesperson said.

Meanwhile, multiple court cases have made the future of the price control order unclear.

“If a high court rules on a central government order, it is effective across the country unless another high court differs from it,” said Alok Prasanna Kumar senior resident fellow at the Vidhi Centre for Legal Policy. In case two high courts disagree, usually a ruling from the Supreme Court resolves it, he said.

On 8 March, the centre reduced the maximum sale price of genetically modified Bollgard II cotton seeds to Rs.800 (per 450 gram packet) from Rs.830-1,000 earlier. The sharpest cut was on royalty or trait fees. They were reduced by 74%, from Rs.163 per packet to Rs.43 (excluding taxes).

“We strongly oppose the decision... By slashing trait fees, the government has clearly shown that it is going for short-term populist measures rather than supporting innovation in the long term,” ABLE-AG had said earlier in response to the centre’s price control order.

The interim stay of Karnataka will come as a relief to agriculture technology companies like Monsanto which licences its seed technology to domestic companies in India.

In India, MMBL licences its patented Bollgard II cotton seed technology to 49 seed companies in exchange for a royalty fee. More than 90% of the cotton grown in India uses this technology.

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