BackMonsanto threatens to exit India over royalty fees
CEO Shilpa Divekar Nirula says if govt panel suggests a sharp, mandatory cut, firm will be forced to re-evaluate its India strategy
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New Delhi: Reports of a government committee’s proposal to slash royalty fees on genetically modified Bt cotton seeds have prompted global agricultural technology provider Monsanto Co. to consider re-evaluating its India strategy.
“If the committee recommends imposing a sharp, mandatory cut in the trait fees paid on Bt cotton seeds, we will have no choice but to re-evaluate every aspect of our position in India," Shilpa Divekar Nirula, chief executive officer, Monsanto India Ltd, said in an emailed statement on Friday.
On Friday, Mint reported that a nine-member committee constituted by the centre on cotton seed prices recommended a 70% reduction in royalty fees payable to technology companies like Monsanto, and overall lowering of seed prices. If accepted, the recommendations will benefit nearly 8 million cotton farmers in India, but may raise concerns about the country’s intellectual property rights regime.
The nine-member cotton seed price control committee, formed by the centre on 27 January, has recommended a maximum sale price of ₹ 800 for a 450 gm packet of Bollgard II Bt cotton seeds.
The packets are currently sold for ₹ 830 per packet in Maharashtra, ₹ 930 in Telangana and Andhra Pradesh and ₹ 1,100 in northern states such as Punjab and Haryana.
Further, the committee suggested a 70% drop in royalty fees that domestic seed firms pay to providers of the patented genetically modified technology. The panel has suggested a reduction in trait fees from ₹ 163 per packet to ₹ 49 per packet.
“Such a drastic intervention overrides existing private bilateral commercial contracts, and undermines the overall operating environment in India," said Mahyco Monsanto Biotech (India) Pvt. Ltd (MMBL), in its statement on Friday.
The statement added that the centre’s “intervention and any recommendation to reduce trait fees, if made, comes against the backdrop of a bilateral dispute where few licensees refused to honour their commitments to pay MMBL over ₹ 450 crore after collecting these amounts from cotton farmers in Kharif 2015".
It said the company was hopeful of the government upholding “fair business practices" and “predictability" due to “its intent to promote Make in India and improve ease of doing business".
MMBL, joint venture between Mahyco Seeds Ltd and Monsanto Co., licenses its patented Bollgard II Bt cotton seed technology to 49 seed companies in India in exchange for a royalty fee. More than 90% of the cotton grown in India is based on this technology.
The agriculture ministry on 7 December issued a price control order to bring uniformity in Bt cotton seed prices. The ministry also said royalties should be lowered because Bt cotton’s ability to resist pink bollworm pest attacks had weakened.
MMBL has petitioned in the Delhi high court to quash certain provisions in the price control order, specifically those allowing the centre to determine royalty fees. The court heard the case on Friday and the next hearing is on 9 March.
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