India’s Cotton Industry & Monsanto
India is the world’s second largest producer and exporter of cotton. While India produced cotton before the introduction of genetically modified seeds, Monsanto Company’s (Monsanto) Bacillus thuringiensis (Bt.) cotton technology has helped the country achieve astronomical gains in cotton production as illustrated below in Figure 1.
Figure 1: Average cotton yields in India, 1950-2010
Monsanto’s presence in India is as Mahyco Monsanto Biotech (MMB), a 50:50 joint venture between Maharashtra Hybrid Seeds Company Private Limited (Mahyco) and Monsanto. MMB licenses two types of Bt. cotton seeds in India known as Bollard I and Bollard II, respectively. A description of these varieties is as follows:
- Bollgard I:
- Introduced in 2002, Bollgard Bt. I cotton was India’s first biotech crop technology approved for commercialization. It has built-in protection against infestations by the destructive American Bollworm, Heliothis Armigera, and contains an insecticidal protein from a naturally occurring soil organism. Use of this variety does not require the payment of a royalty fee as bollworms have developed resistance against this variety.
- Bollgard II:
- Bollgard Bt. II was approved in mid-2006. It provides protection against bollworms and Spodoptera caterpillar, which leads to better boll retention, maximum yield, lower pesticide costs, and protection against insect resistance. Use of this variety requires the payment of a royalty fee.
MMB currently licenses the Bollgard I and Bollgard II technologies to approximately 50 Indian seed companies. These seed companies have introduced the Bollgard technology into their own germplasm and manufacture over 300 different Bt. cotton hybrid seeds. As a result, MMB is the only supplier of genetically modified (GM) cotton seeds in India and more than 90% of the cotton grown employs Monsanto’s technology.
Cotton Farmers in India
Unfortunately, the rise of cotton production in India has not translated to prosperity for the country’s cotton farmers. Instead, high numbers of Indian farmers have committed suicide since 1995, with heavy indebtedness accrued from their cotton business believed to have played a role. The factors contributing to this heavy indebtedness are discussed in more detail below.
Cost of seeds
Bt. seeds can cost up to four times more than traditional varieties of seeds. Farmers purchase fresh seeds annually because the resulting hybrid cultivars contain “terminator” technology, thereby preventing farmers from replanting the seeds the following year.
Need for irrigation/wate
Bt. seeds require irrigation. Sixty-five percent of India’s cotton crop comes from farmers who rely on rain and who do not have access to irrigation. Therefore, unfavorable weather conditions acutely hurt their crops and pockets.
Need for insecticides
The bollworm was not a major pest in Indian cotton in the 1970’s but higher yielding plants produced from GM seeds have drawn more pests. In 2010, Monsanto admitted that insects developed resistance to its Bt. I cotton seeds and that the Bt. I hybrid crops were no longer effective against the bollworms. In view of this, Monsanto has advocated that Indian farmers switch to Bt. II cotton seed technology because these varieties have a greater ability to delay insect resistance.
Critics have pointed out that insects will eventually develop resistance to the insecticide produced by Bt. II cotton seeds. They have also noted that the toxin produced by the Bt. II cotton seed is active only for 90 days and that the bollworm is a late season pest (cotton season can last as long as 160 days). Therefore, bollworms have become problematic for cotton farmers. With the rise of industrial agriculture in India and the use of new hybrid and GM seeds, farmers have become increasingly reliant on insecticides. Unfortunately, the bollworms have evolved to become resistant to these insecticides and their natural predator populations have also declined. As a result, farmers must purchase large quantities of insecticides to harvest cotton.
Low pay for cotton farmers
Cotton farming is a low paying profession. Not surprisingly, a dip in the global price of cotton can spell disaster for farmers. As a result, many farmers have turned to loan sharks to pay for fertilizers, insecticides, and hybrid and GM seeds. Cycles such as this have driven farmers deeper into debt and tragically to suicide.
Many of the materials needed for farming and agriculture in India are heavily subsidized or offered without cost to the farmers by the Indian government. Therefore, the purchase of insecticides and high priced GM seeds as well as the reliance on irrigation and sporadic rains ultimately drain farmers’ finances. Figure 2 below shows that over time, increased adoption of Bt. cotton correlates with an increase in number of suicides by farmers.
Figure 2: Farmer suicides in India, 1997-2006
India’s Cotton Seed Regulations
The farmer suicide epidemic has resulted in the Indian government regulating prices for Bt. cotton seeds. The aim is to help decrease the financial burden of India’s cotton farmers and break MMB’s monopoly on the GM seed market.
On December 7, 2015, the Ministry of Agriculture and Farmers Welfare (“Ministry”) issued a price control order, entitled the “Cotton Seed Price (Control) Order, 2015”, to bring uniformity in GM Bt. cotton seed prices across the states in India where previously none existed. This Order was created under the section 3 of the Essential Commodities Act, 1955.
On March 8, 2016, the Ministry issued a Notification, under the Cotton Seed Price (Control) Order, 2015 which capped GM cotton seed prices at Rs. 800 (11.90 USD) for a packet of 450 g of seeds for the financial year 2016-2017. It also reduced the royalty fees (referred to as “trait value” in the Notification) to Rs. 49 (0.73 USD) per 450 g of seeds.
|Components||Bollgard I version of Bt. cotton hybrid||
Bollgard II version of Bt. cotton hybrid
|Seed value (in rupees)||635||751|
|Trait value including taxes (in rupees)||
|3||Max. Sale price (in rupees)||635||
Before the Notification, Bt. cotton seeds were sold at prices ranging from Rs. 830-1000 (12.30-14.80 USD). The royalty fee received by companies such as MMB was cut by 74% (excluding taxes) from the previous royalty fee of Rs. 163 to Rs. 43. The Ministry said that this Notification was prompted because Bt. Cotton’s ability to resist bollworm pest attacks had weakened.
On May 18, 2016, another Notification, entitled Licensing and Formats for GM Technology Agreement Guidelines, was issued under the Cotton Seed Price (Control) Order, 2015. This Notification provided tighter restrictions on GM technology providers, such as MMB. The main restrictions are:
- GM technology providers cannot deny a license to any qualifying domestic seed company wanting to incorporate the approved GM technology into its own hybrids and varieties.
- GM technology providers must award license for the GM technology within 30 days of receipt of a request from an eligible seed company. In the event this obligation is not met, the licensee (domestic seed company) is deemed to have obtained the license.
- GM technology providers cannot charge royalty fees exceeding 10% of the maximum sale price, which is fixed at Rs. 800, for the first five years from the date of commercialization of the technology. After first five year period, the royalty fees are reduced by 10% of initial value every year.
- If GM technology loses its efficacy, the GM technology provider is not eligible for any royalty fees.
Critiques of the Regulations
The Indian biotechnology industry opposed the regulations on GM technology providers. The Association of Biotechnology Led Enterprises-Agriculture Focus Group, a pro-GM advocacy group (which represents crop research companies such as Monsanto, Mahyco, Syngenta, DuPont, Pioneer, Bayer BioScience, BASF, Advanta) stated the decision would discourage companies from investing in research. Critics from the agriculture industry have called the new regulations arbitrary and innovation stifling. Opponents have criticized the regulations saying that they do not offer methodology on how the Indian government arrived at the final royalty fees, GM technology providers have little to no say on whom to give licenses, and that the aim of these regulations is to benefit one stakeholder: the domestic seed companies.
Monsanto representatives voiced that it would be difficult to justify bringing new technologies into India given the new regulations. The company also threatened to shut down its business in India.
Rescindment of the May 18, 2016 Notification
On May 24, 2016, the Central Government rescinded the notification of May 18, 2016 based on the advice of the Controller and after consulting with the Committee under the Chairmanship of Joint Secretary (Seed) and Controller, Department of Agriculture, Cooperation and Farmers Welfare which was involved in developing regulations.
After the rescindment, the Indian government laid out the May 18, 2016 Notification for 90 days for comments and suggestions by the public before taking a final call. The decision to seek input by the public was taken at the highest level of the Indian government because had the May 18, 2016 Notification been final, the move may have hurt foreign investment in agriculture research and discouraged the introduction of new technology in India.
This post was written by Lisa L. Mueller and Himani Nadgauda of Michael Best.