States used Essential Commodities Act to lower the price of Bt cotton And states fight back
For the past five years, the Centre and the states have been fighting a battle over seed pricing with Delhi frequently changing the rules to outsmart state governments that had decided to clamp down on predatory pricing.
Although agriculture is a state subject, the power to fix prices had remained with the Centre—until the states decided to take matters into their own hands. They passed enabling legislation that allowed them to regulate prices as and when required. Andhra Pradesh has been most tenacious in safeguarding its farmers from what it terms the exploitative and monopolistic pricing by seed companies.
In 2006, it used the Essential Commodities Act (ECA) to slash the price of the genetically engineered Bt cotton seeds by more than half, after first going to the Monopolies and Restrictive Trade Practices Commission. Gujarat, Maharashtra, Karnataka and Madhya Pradesh, followed Andhra Pradesh’s example and used the ECA to slash the royalty rates which accounted for as much as twothirds of the seed cost, to bring prices down sharply. As a result, farmers in these states could buy the Bt cotton (marketed as Bollgard and Bollgard II) at `750 for a 450 gramme packet compared with `1,800 in 2002-03.
However, in December 2006, the Union government quietly amended the ECA to exclude cotton seeds from the list of essential commodities. This, according to some analysts, enabled Mahyco and the All India Crop Biotech Association (AICBA), the association of multinational seed companies, to challenge the states on their jurisdiction in fixing cotton seed prices. Most state governments got around the legal hump by passing special laws that gave them the power to do so. In 2007, Andhra Pradesh passed Act 29 to regulate the sale and prices of cotton seeds because cotton seed was not covered either by the Seeds Act, the Seeds Control Order, the ECA or the Environmental Protection Act.
This has resulted in a cat and mouse game between the states and the Union government. For instance, when AICBA challenged Gujarat’s ordinance which was on the same lines as that of Andhra Pradesh’s, the Ministry of Agriculture came to the rescue of the multinationals. It sent an affidavit to the Gujarat High Court in January 2009 that cotton seeds were out of the “purview of any regulatory and quality control mechanism”. As such, “no administered control system should be introduced in the sale of seeds”. Even more curious was that in November 2009 the Union Cabinet decided to re-include cotton seeds in the list of essential commodities for six months. It said that once the Seeds Bill, 2004, was passed cotton seeds would cease to be under ECA.
The stakes are high in the seeds business. A 2009 study estimates the market at `6,000 crore, with massive potential for growth since farmers are switching over increasingly to hybrids (seeds which cannot be reused). Traditionally farmers in India have reused their seeds and as much as 70 percent of the seed requirement of Indian agriculture is met from seeds bred and sold, or exchanged, by farmers among themselves. Growth rate is buoyant at an annual 12-13 per cent, making the prospects for private seeds companies extremely lucrative since most of the state sector seed companies have almost withered away.
The Andhra Pradesh government is insisting on a standard formula for royalty rate in the bill: not more than 20 per cent of the cost of the bare seed for the first three years and 5 per cent for the subsequent period.
Prices under the scanner in US
Did Monsanto abuse its market power?
Seeds have turned into a hotbed of political conflict worldwide. As multinational companies increase their grip on the seed market, governments in developed countries are beginning to take a closer look at how the lack of competition is hurting farmers at home and abroad.
The most significant development is the investigation by the US administration into the steep rise in prices of major food crop seeds at a time when the recession had brought down the prices of most goods. Last year, corn seed prices were reported to have shot up 32 per cent and that of soybean seeds by 24 per cent. While the Justice Department has launched an antitrust investigation of the seed industry, at least seven US states are investigating whether Monsanto has abused its market power to lock out competitors and raise prices.
Monsanto controls the biggest chunk of the market for GM seeds (see table) that are designed to make crops resistant to pests and herbicides. In the US, its Roundup Ready gene was in 93 per cent of the soybean crop and in 82 per cent of the corn produced last year.
Christine Varney, who heads the antitrust division in President Barack Obama’s administration, announced in March this year that the Justice Department is investigating whether biotech-seed patents are being abused to extend or maintain companies’ dominance in the industry. A more recent report says that the investigators in the West Virginia attorney general’s office have reviewed several studies by agriculture experts showing that Monsanto’s advertised claims of higher yields for its high-priced new soybean seed, Roundup Ready 2 Yield, have not been realised.
Industry analysts say the sharp escalation in seed prices began a little over a decade ago with emergence of GM crops and the swift consolidation of the seed industry that accompanied it.
Of more significance to India, perhaps, is a heated debate in the Canadian Parliament over a bill that seeks to amend the Seeds Regulations “to require that an analysis of potential harm to export markets be conducted before the sale of any new GM seed is permitted”.