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    Bt Cotton royalty reduction: Boon or Bane?

    The Government of India recently reduced the royalty fees to be paid to Mahyco Monsanto Biotechnology Limited (MMBL) by 74 % on Bt cotton seeds (Bollgard II technology) sold in the country. What prompted a government, whose main theme is “Make in India”, to take a decision that creates a perception about its wavering commitment to IP and Technology Transfer in Agriculture sector in the country? There is no denying the fact that BG II technology has changed the lives of cotton farmers across the country. However, the technology has not lived up to the expectations in the last few years, thus affecting profit of farmers. It is probably this decline in the benefits accruing from the BG II technology that has led to the government’s decision.

    On one hand, this decision will provide relief to 8 million cotton farmers in the country, even though the cost of seed accounts for less than 5% in cotton cultivation. It will also benefit the licensee to the technology in the country. In addition, non-payment of royalty fees by Indian seed companies is also a cause of concern for technology providers, who invest heavily in their R&D activities. This may also work as a dampener on innovation by companies as there will be less incentives to develop new technologies rather than reaping the benefits from them.

    On the other hand, it raises more questions on the structure and duration of royalty fee payments. Does it make sense for the licensees (directly) and farmers (indirectly) to pay the royalty fees when the technology is not working satisfactorily, which can happen often in the agriculture sector? Will it not be more prudent to have a time frame after which the royalty fees need to be revised so that all stakeholders feel they are getting the best deal out of it? It is because in a country like India where agriculture supports 58% of the population, such cases can make or mar the technological landscape in the given sector.

    Though all the stakeholders in the current decision have merits to their viewpoint, we believe that issues related to Intellectual Property Rights need to be dealt in a way that guarantees the incentives for innovation, technology transfer and licensing; especially in a country like India where these will, in future, be major drivers for growth in different sectors.

    Author

    Anand Singh

    Anand Singh is the Manager in Life Sciences Advisory Group. He is Ph. D. in Botany with specialization in Plant Pathology. Anand has versatile experience of 14 years working in diverse functions including product management, capacity development and ICT implementation in agriculture and project management, product delivery and development in information technology.

    View all posts by Anand Singh

    Discussion — One Response

    • Vijay May 19, 2016 on 12:49 pm

      Good summary, however the question remains who is the real beneficiary of the reduction in royalty of trait value? As your article mentions the farmer is marginally (least?) impacted as seed account for only 5% of the total cost. Probably the only beneficiary here is the rest of the seed industry that was dependent on third party technology for developing their own version of Bt.Cotton seeds. Forced reduction in royalty will improve their profitability significantly. So government’s move in reducing the royalty has nothing to do with the savings of farmer because affordability was never in question. The question of technology, and innovation does not arise here because of skill gap in the Indian context to develop GM technologies. What is required probably is a healthy competition in the industry with more players, a single company will always be considered to be in dominant position.

      Instead of waiting for Govt’s intervention Monsanto (and its partners) could have pro-actively encouraged a healthy market creation by mutual discussions with all the seed companies along with farming community with a larger plan of rolling out subsequent versions for not only Cotton but also for other crops thereby creating a larger ag.biotech industry. Communicating the importance of the technology at the grassroot level is equally important.

      Not a apple-to-apple comparison but in a mobile phone there are >30 IP agreements and all the IP is available to everyone which leads to a larger market creation. For example Intel does not restrict its latest chip to only one company but provides access to every company that is interested in “integrating” its technology into its “own version” of mobile phone thereby creating a much larger market. If we relate this to Bt.Cotton story we see that only one company is in a dominant position on account of its licensing agreement and 10 years has been a long time. 🙂

      Reply