The Government of India issued a Cotton Seeds Price (Control) Order (CSPCO) dated 7 December 2015 that will regulate cotton seed prices in all key cotton growing states across India. Thank God, they have put the Order on hold for now.
This price control order not only seeks to fix the maximum sale price of Bt cotton hybrids, but it also wants to regulate the trait fee that is governed by private contracts. A nine-member committee will be constituted to recommend the maximum sale price (MSP) of seeds each year. That committee will also prescribe the format for licence agreements for technology.
The Order provides authority to the Committee to regulate private bilateral contracts between the technology provider and the seed company in violation of contract law between two individuals. The Order reflects a lack of long-term vision for encouraging innovation in the nation’s most important economic sector, agriculture. It will result in No Vikas and No sab ke saath.
No parallel to such intervention
While moves to rationalise the retail price of seeds are well-intentioned, the CSPCO, in its present form constitutes an over-reach on the part of the government. Licence fee and license terms, on which technology providers licence patented technologies to cotton seed producers are determined through extensively negotiated terms set out in these private contracts. There is no parallel for such intervention in any other industry including pharmaceuticals. The order also enables the government to set prices for existing as well as future patented technologies in which the technology innovators do not have any say. Overly regulated pricing of technology can negatively impact the introduction of newer technologies needed by farmers.
Respect for intellectual property rights is essential for maintaining the agricultural innovation cycle across the industry. The order creates uncertainty and unpredictability on existing and future technologies and has the potential to impact confidence in new technology introduction and investments.
If we do not take care of the interests of the innovator, they may stop funneling money into our R&D. Remember, the innovator invests significant sums in getting a product into the market.
This price control order substantially dilutes returns on investments and will discourage private sector R&D investments thereby limiting Indian farmers the access and benefits of using newer productivity-enhancing technologies.
Gorgeous value of Bt cotton
Over 95 per cent of Indian cotton farmers use Bt cotton seed, proving that they see value in the technology. The trait value comprises only 1-2 per cent of the farmer’s total cost of cultivation in
India. Bt cotton technologies have helped create Rs. 68,371 crore additional value for over 60 lakh cotton farmers (ISAAA 2013). According to The International Cotton Advisory Council, Indian farmers have experienced maximum benefit from Bt cotton technologies compared to their peers anywhere in the world. Over the last decade, Bt cotton has played a significant role in transforming India from a net cotton importer to the second largest producer of cotton globally.
A mutually agreed mechanism for determining trait fee has been in place for years, and the current value of trait fee recognises the overall MRP levels which have been in place since 2011. Artificial ceilings on seed prices in an inflationary environment significantly impacts the ability of seed companies to invest in Research and Development, ultimately denying the farmers better products in the future.