Government tightens rules for GM seed technology providers

The GM seed technology provider cannot charge a royalty that exceeds 10% of the maximum sale price of the seeds


In March, the government cut the price of genetically modified Bollgard II cotton seeds to <span class='WebRupee'>Rs.</span>800 (per 450 gram packet) from <span class='WebRupee'>Rs.</span>830-1,000 earlier and slashed royalty fees by 74%. Photo: Abhijit Bhatlekar/ Mint
In March, the government cut the price of genetically modified Bollgard II cotton seeds to Rs.800 (per 450 gram packet) from Rs.830-1,000 earlier and slashed royalty fees by 74%. Photo: Abhijit Bhatlekar/ Mint

New Delhi: The Indian government has capped royalty fees payable to Monsanto Co. and other providers of genetically modified (GM) seed technology and barred them from denying a licence to any local company.

According to a notification issued on 18 May, for any GM trait commercialized in India, the technology provider cannot charge a royalty that exceeds 10% of the maximum sale price of the seeds, which is fixed by the government every year.

The cap of 10% will apply for the first five years. From the sixth year on, the royalty will decrease by 10% a year.

And the technology provider cannot refuse a licence to any eligible Indian seed company. If delayed by more than a month, the licence will be “deemed to have been obtained”.

The order, which relates to future GM traits and advances on existing GM seed technology, follows a dispute with Monsanto over the royalty and price payable for GM cotton seeds developed by the US-based company.

In March, the government cut the price of genetically modified Bollgard II cotton seeds to Rs.800 (per 450 gram packet) from Rs.830-1,000 earlier and slashed royalty fees by 74%.

The latest notification said agreements between technology providers and seed companies will be based on principles of Fair, Reasonable and Non-discriminatory (FRAND) licensing guidelines.

Technology companies cannot charge any royalties on GM traits that have lost their efficacy. They cannot charge any upfront fees from domestic seed companies that had paid these fees in the past.

From now on, the upfront fees will be limited to Rs.25 lakh for new licensing agreements, the notification said.

In the past, Monsanto used to charge an upfront fee of Rs.50 lakh for its Bt cotton technology Bollgard II.

The attempt to regulate what was otherwise a private contract between willing parties comes days after the government announced a new intellectual property rights (IPR) policy promising to promote innovation and strictly enforce intellectual property rights of private companies.

The new guidelines, officially called ‘Licensing and Formats for GM Technology Agreement Guidelines, 2016’, is more on the lines of compulsory licensing and seeks strong regulation of technology companies, said a seed industry executive who did not want to be identified.

Through a compulsory licence, a government authorizes a third party to produce a patented product without the permission of the patent holder. This is usually done for life-saving medicines in case of a health emergency or if the price of the patented drug is too high.

“Presently technology companies are forcing seed companies into one-sided contracts without any legal backing. Seed companies are not even allowed to test a new technology from another company,” said an official with the agriculture ministry who did not want to be identified. “In the past, companies like Monsanto earned royalties even on expired patents (for Bollgard I Bt cotton technology) and the latest order will protect farmers’ interest.”

The Association of Biotechnology Led Enterprises—Agriculture Focus Group (ABLE-AG) called the new order a “huge blow to the innovators in agri-biotech industry”.

“It clearly indicates the intention of the government to disregard research and innovation and thereby not protect intellectual property in the sector,” Shivendra Bajaj, executive director of ABLE-AG, said in a statement.

“This comes at a very difficult time for the technology developers due to the challenging regulatory scenario in the country where they have to wait for years to field-test their innovations,” the statement added.

Bajaj said the order creates an environment of policy unpredictability and arbitrariness of decision-making which is contrary to the recently launched IPR policy.

“This is a disincentive for bringing new technologies into India, which will ultimately harm the farmers as new technologies come slow to them,” he said.

In India, Monsanto Mahyco Biotech (India) Ltd (MMBL), a joint venture between Mahyco Seeds Ltd and Monsanto, licenses 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.

An MMBL spokesperson said the company is going through the order and will not be able to respond immediately.

Domestic seed industry lobby group National Seed Association of India (NSAI) said the order was fair and transparent and will encourage more domestic seed companies to enter the market.

“Farmers will have a wider choice and existing monopolistic practices of technology providers will go for good,” said Kalyan Goswami, executive director of NSAI.

The agriculture ministry on 7 December issued a price control order to bring uniformity in genetically modified Bt cotton seed prices across states. The ministry also said royalty fees should be lowered because Bt cotton’s ability to resist pink bollworm pest attacks had weakened.

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