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”.
Author(s): Latha Jishnu
Issue: Aug 31, 2010
The Seed Bill takes away states’ power to regulate seed prices, could lead to Centre-state confrontation
Photos: Surya Sen
IT WAS yet another meeting in a series that began six years ago.
On July 28, close to 40 members of Parliament and state leaders met in Room 124 of Krishi Bhavan, the Delhi headquarters of the Ministry of Agriculture, in what seemed a last-ditch attempt to thrash out the contested points in a proposed law to regulate the seeds trade. The meeting was called by Minister for Agriculture Shared Pawar, who had put together the first draft of the Seed Bill in 2004, and is set on getting it passed during the current session of Parliament.
The amended Seed Bill, 2004, is a critical piece of legislation and could underpin the success—or failure—of Indian farming. The preamble says the bill aims “to provide for regulating the quality of seeds for sale, import and export and to facilitate production and supply of seeds of quality”, but its stated objective has not found favour with farmers, several state governments and the Left parties. The reason is simple: missing in this law is any mention of price regulation. That is the core issue, although there are other concerns, ranging from the amount and method of compensating farmers who incur losses on account of poor quality seeds to the bill’s conflict with other pieces of legislation.
The July 28 meeting addressed most of the ‘other concerns’, with Pawar listing out the various amendments that the government would incorporate in the amended bill to be presented to Parliament. But on the question of price regulation, the minister was unwilling to budge. A note circulated by the agriculture ministry at the meeting is categorical that the bill does not envisage any “provision for price control” and is intended purely to regulate the quality of seeds. According to several invitees to the meeting, the agriculture minister told them that “the prime minister is against any price control”. This leaves a big question mark hanging over the Seed Bill since opposition to it shows no signs of a let-up.
Leading farmers’ organisations accuse the UPA government of Manmohan Singh of selling out the farmer to multinationals. Krishan Bir Chaudhary, president of the Bharatiya Krishak Samaj, believes the bill “is to protect the interests of multinational seed companies like Monsanto”, which, he insists, are trying to capture the seed market in India. There are other outfits like the All India Kisan Sabha which voice similar worries—and accusations.
Congress-ruled Andhra Pradesh is the biggest opponent of the bill and its agriculture minister N Raghuveera Reddy has been campaigning ceaselessly for significant changes in the proposed law. Reddy, who participated in the July meeting, told Down to Earth that “states must have the power to fix the price of seed and trait value (the royalty paid on patented seeds) whenever necessary.”
As he sees it the system should involve both the Centre and the states. “We would like an independent body similar to CERC (the Central Electricity Regulatory Commission fixes tariffs and other issues related to the power sector), which oversees state regulatory commissions. Otherwise, the seed companies will squeeze the farmer.”
Raghuveera Reddy, who has the full backing of his chief minister K Rosiah, points out, “You simply cannot have a free market without a statutory regulator.”
This is the quandary that the UPA government finds itself in. Not only is the farm lobby and the Left against the bill but so is a major state ruled by the Congress. Andhra Pradesh’s role, in fact, is central to the fight for regulated seed prices in the country. Since 2006, it has been taking on the US biotech giant Monsanto on the trait fees it charges for its genetically engineered cotton seeds (sold as Bollgard and Bollgard II). The state says the trait fees charged by Monsanto’s marketing arm in India, Mahyco Monsanto Biotech (India) Limited, are predatory and monopolistic.
But it is a course that has led to a long legal challenge—and a new state law to control prices. Gujarat and Maharashtra, apart from Madhya Pradesh and Karnataka, quickly followed Andhra Pradesh’s example. It was a revolt by the states but the Centre did its best to thwart it by deploying the Essential Commodities Act or ECA strategically (see box: Games the Centre plays).
While this backdrop is essential to understand the politics of the Seed Bill, there is another factor: the differences within the Congress high command on the issue of price regulation. The reser- vations of Congress Party chief Sonia Gandhi are said to be instrumental in putting the proposed law in cold storage for the past four years. As chairperson of the National Advisory Committee, Gandhi had, in an October 2005 letter, warned, “There is a growing perception that the Seed Bill, 2004, is anti-farmer and that it favours the seed industry and large seed breeders, including MNCs.
Government has no mechanism to control prices… Seed suppliers are under no obligation to ensure reasonable seed supply to farmers.” That concern, however, has not been addressed in India so far, although elsewhere, notably in the US, the runaway price of seeds is inviting judicial scrutiny. Simultaneously, seeds giant Monsanto, a big player in the Indian market, is also being investigated across seven American states for unfair or deceptive practices (see: Prices under the scanner on p12). Sometime back, the UN’s Special Rapporteur on the Right to Food had warned that the increasing dependence on commercial seed varieties, “controlled by a handful of very powerful multinational companies”, could have a severe impact on small farmers in developing countries.
Farmers will not benefit from new technology if prices are not controlledMany of the recommendations of the Standing Committee of Parliament, which gave its report in 2006, have been incorporated in the 2010 version of the Seed Bill, but price stubbornly stays out of its ambit. The agriculture ministry’s stance is clear. “A free and competitive market environment will spur the growth of the seeds industry. Therefore, price is better left to market forces rather than to artificial controls.”
Noted agriculture scientist M S Swaminathan said: “I hope better counsel will prevail.” Now a member of the Rajya Sabha, Swaminathan, too, has been demanding price regulation in the bill. “I have said there should be price regulation where appropriate, not everywhere. The government should have the authority to use price controls in certain situations, but not to usurp the role of the market.”
The scientist, who is referred to as the Father of India’s Green Revolution, worries that lack of price control could have disastrous consequences for the Indian farmer in accessing new technology. “High seed prices and trait fees,” he warned, “will come in the way of social inclusion on technology access—and social inclusion is fundamental to growth of the sector.”
The government’s point that the earlier law—Seed Control Order, 1983, which the Seed Bill will replace—did not have any provision for price control either is specious, said G V Ramanjaneyulu, executive director of the Centre for Sustainable Agriculture in Hyderabad. “It is clear that the government’s objective now is to encourage private trade.”
There are concerns, too, about the opening of other doors to private companies, local and foreign. For instance, Swaminathan and CPI leader D Raja say that seed certification issued by foreign agencies should be recognised only if the seed is tested on Indian soil. However, the ministry argues that Clause 30, which allows the Centre to authorise any foreign certification agency working outside India, is intended to allow global trade in seeds, and would come within the scope of bilateral and multilateral trade agreements.
But Ramanjaneyulu says there is a contradiction on the role of foreign agencies. At one level the ministry has assured the Andhra MPs that their demand that “certification should be carried only by government and semigovernment agencies” would be incorporated in the amendments. Yet, in another instance, it said foreign and foreign- based agencies would be allowed to do so under foreign trade pacts.
“In place of truthful labelling of seed, the government is making certification compulsory, but this is geared to letting in private and foreign seed certification agencies into the business,” pointed out Ramanjaneyulu, former ICAR scientist. Besides, it would also permit multi-location trials to be carried out by private agencies on foreign soil. The ministry’s justification is that seed imported into India would be subjected to multi-location trials under the rules to be framed under the seed Act.
As for that most vexing issue of compensation to farmers in case of seed failure, an issue that exercises most critics of the bill, the ministry says the quantum of compensation and the mechanism to recover it will also be prescribed under the rules.
The demand for “a role for panchayats, state and district level committees can be considered at that stage,” according to the official note. Have the opponents of the bill been assuaged by such promises? Raghuveera Reddy, for one, is mobilising more support from the states. Last week, he wrote to all state agriculture ministers inviting them to Hyderabad for talks. “We should rise to the challenge since our farmers’ interests are at stake. I have also asked them to mobilise opinion among their MPs and political leaders.”
Whether this seasoned campaigner succeeds in getting like-minded states on board—like he did on the BT cotton issue in 2006—or not, Pawar and the Centre know that the battle could turn bitter. Agriculture is a state subject, and the passage of the bill, which would repeal all other seed laws, including the applicability of ECA and the special ordinances passed by state governments on price regulation, is bound to ruffle constitutional feathers.
In the latest memorandum sent to the prime minister and the agriculture minister, the Andhra Pradesh chief minister has demanded the inclusion of a separate chapter on seed pricing and royalty fees which would give equal powers to the states and the central government. He has also detailed the mechanism for this procedure.
In a telling remark, Andhra Pradesh points out that the power to fix royalty rates is available with member-states of WTO under its TRIPS Agreement on intellectual property issues. It remains to be seen if the Centre can be persuaded by such arguments.