seed price regulation in india

7/23/2019 Seed Price Regulation in India

http://slidepdf.com/reader/full/seed-price-regulation-in-india 1/5

Dr. D. Narasimha Reddy, [email protected]

Seed Bill, 2010

Why Price Regulation?

1. US Experience

Experience of farmers in US says that seed companies would benefit more from unregulated seedprices. Similar to the way the airline and hotel industries price their products based on seasonal

demand, US seed companies are able to price seeds based on demand and the market rate for theend commodity grown.

“We consistently review our products,” Mimi Ricketts, a public affairs representative for

Monsanto said1, “so we assess the ongoing value and we adjust those prices based on the farmer

experience and the local performance that those products deliver.”

In other words, seed prices can change at any point in time throughout the year, leaving the

farmer to guess how much he is going to face in seed costs.

And since soybean seeds don’t hold and store well, farmers are not able to purchase seeds in bulkif prices are low. Each fall they must buy new seeds for the upcoming spring when prices might

be potentially higher.

1 Downloaded from Internet: For%20Illinois%20farmers,%20seeds%20prices%20soar.htm




Seed prices have been steadily climbing over the past decade, while yields have hardly increased.Seed prices for central Illinois farmers have nearly tripled since 2000, while the U.S. inflation

rate over the same period rose just 28 percent, according to research by the University of Illinoisat Urbana-Champaign, US.

Seed companies such as Monsanto Co. say the increase in price is due to advances in seedbiotechnology that help farmers achieve higher yields.

2. Indian Experience

Governments should have powers to regulate seed prices, whenever they raise beyond the reachof the farmers.

In 2006, after MRTP commission’s ruling to reduce the bt cotton seed price, AP

government reduced the cotton seed prices to Rs. 650 and Rs. 750 for bollgard I and II.Challenging this, MMB moved to Delhi high court on this issue.

In 2010, Monsanto filed case in AP High Court requesting to stop state govt fromreducing the royalty arguing that it does not have any power to do so. The case is still

pending in the court.

Private seed industry is supplying high-value, low volume seeds to the farmers, through localproduction and imports. Seed prices are being arbitrarily fixed, leading to a huge burden on the

farmers. Today, the percentage of expenditure on seed in the overall cost of production rangesfrom 6 to 40%. Hence, it is imperative that we need to discuss, prices of all seeds, progressively,

while focussing on Bt cotton seed.

Seed industry representatives are always bringing to the table their worries about returns.However, we need to ponder on the question what is that they are delivering, for a cost. Industry

has been claiming success of their seeds/labeled products, as an argument to increase the seedprices. Thus, they brought performance of seeds as a causal factor for seed pricing. Hence,

performance of seeds needs to be assessed, especially given the claims of farmers about lossesand their counter-claim of benefits. It would be important to measure the performance against the

current price.

Cost of production of seed has been the contentious issue. While seed farmers are crying hoarseabout practices of the private seed industry, which denies them proper price for their sweat and

efforts, seed industry so far has not responded with any transparent and acceptable mechanism ofbenefit sharing with the seed farmers. Seed farmers need an assured price and a mechanism that

is supported by the government in ensuring proper returns for them.

Royalty or trait fee continues to be the major problem. One needs to study this aspect moredeeply and extensively. International norms and practices in other countries need to be referred

to. Trait fee is supposed to be based on the R & D investment. However, it would be absurd tolink it with paying capacity of the farmers. As with every commercial product, cost of production

continues to be the basis for arriving at the market price, and not the market price of the benefit




accrued from the supplied raw inputs. Market price for the harvested crop cannot be the criteriafor fixing the seed price. Even if by any chance this principle is applied, then the loss also needs

to be linked.

When Bt 1 cotton seed is no longer performing as per its original expectation, as admitted by the

seed industry, why trait fee is being levied for the same?

While the price for refuge crops is included in the cost of production given by the industry, in the

field, one can see that there is no supply of the same. As a result, Rs.50 to 75 is being collectedby the companies, without supplying the same.

Research cost is being shown as part of the cost of production. Like any entrepreneur, research is

part of the investment made and is recovered from the business turnover. Nowhere, research isincluded in the cost of production. Further, it is understood that trait fee is being paid for the

R&D investment. However, it is being shown differently from the research cost.

In the costing sheet provided by the seed companies, there is an item titled “Seed Procurement,Processing, Treatment, Production Supervision, Quality Control, Packing, etc”. It would be

important to separate “seed procurement” costs, which alone can gives us a fair idea of what isbeing paid for the seed farmers. The whole argument put forth by the seed companies for

increase in the cost of seed has been based on the need to pay more for the seed farmer.

Inclusion of production supervision separately, in the seed procurement, even while their being aseparate financial and administration cost, would only camouflage the actual costs being paid for

human resources of the company.

Given the above, and also examining the cost the sheet, it is clear that except the seedprocurement costs, all other costs are expenditures of the company. Apart from the truth in such

expenditures, and also admitting that there would be costs, more than 70 percent is taken by thecompany from the price paid by the farmer on each packet of seed.

3. Price regulation is one method of controlling quality of seeds

Price regulation in Telecom and power sectors has encouraged the growth of private industry. It

has not stifled it. All high technology products are regulated, primarily to increase the reach ofthe consumers. Since the seed industry claims it is a technology intensive industry, such a

regulation would help in calibrating the growth as per the needs of the Indian situation.

When MSP is given to farmers as a subsidy, seed price is an important factor in determining sucha price. A scientifically and transparently developed seed price would ensure a win-win situation

for farmers and seed companies, instead of leaving it to market forces.

Bt cotton seed is completely controlled by one single company, i.e Monsanto. It has exclusiveproprietary rights. Seed bill, after registration, would grant exclusive and inalienable rights. With

government’s emphasis on seed replacement rate, no variety would last more than two years.




In the last ten years, with proprietary rights, patents and internationally-accepted intellectual

property regimes, world seed industry is gradually consolidating into three companies, whoseglobal market share is nearing 40 percent. More consolidation is happening. Acquisitions,

mergers and takeovers have increased. Huge multi-national conglomerates have become reality

in a country like US, where anti-trust and anti-monopolisation laws are very strict. In India,consolidation and monopolistic behavior can be curtailed only through price regulation.

There are more than 350 seed companies in India. All of them are mere licensees of Bt cottonseed given by only company, Monsanto. Thus, almost 75 percent of all the business generated in

Bt cotton goes to this particular company. With the seed bill, which emphasizes on registrationand compulsory licensing, a single company is likely to benefit more. A monopolitics situation is

likely to arise because of this. At this stage, it is prudent to have price regulation to protectfarmer’s interests.

On Certification

Domestic certification process needs to be continued and reflected in the Seed Bill, 2010.

A workshop on OECD Schemes, for the officials of Designation Authorities, held on 4-5 August,

2009, at the National Academy of Agricultural Sciences, New Delhi, by the government of India,

examined and studied the differences in the five Seed Schemes for understanding the similarity and

variance between Indian and OECD certification systems under these five schemes. The workshop

concluded that it is not necessary to harmonize the Indian Minimum Seed Certification Standards

with the OECD Varietals Certification Rules and Guidelines. Whenever, a variety is registered

/offered for the OECD Seed Schemes, the OECD Rules and Guidelines will be adopted and

International varietal certification will be carried out.

Based on interaction with all DAs, the workshop also concluded that the existing domestic seed

certification by adopting the Indian Certification Standards will continue for the production of high

quality seeds as per the requirements of Indian farmers and stakeholders of seed industry.

It was also concluded in the workshop that even though India has become the member of OECD

Seed Schemes the two seed certification systems i.e., Indian Seed Certification and OECD Varietal

Certification Process would move parallel in our country for the production of high quality seed as

per the demand for the present.

The Indian Minimum Certification Standards and Systems were developed and are in use since 1974

for the domestic certification systems as per the need and requirement of Indian farmers and other

stake-holders of seed industry in India, whereas the OECD Seed Schemes Rules and Guidelinesare only for the benefit of participating member countries for their Varietals Certification

process to meet out the International seed standards and trading requirements.

On Compensation




The big problem today, as acknowledged by the government, is the spurious seeds in themarkets. Many farmers have faced losses because of this. This is increasing. Seed bill, through

registration, licensing and pricing of seeds, would help in protecting farmers interests. In 2005, after establishment of large scale cotton seed failure in Warangal dist, State

government asked Mahyco to pay compensation. This company refused to pay and

moved to AP high court on paying compensation saying state govt is harassing them. APHigh court orders also were in favour of Mahyco and till date the company has not paidthe compensation

In 2007, when Agriculture officers in Warangal district found that Mahyco Bt hybrids arebeing sold in Warangal market, they raided and seized the shop. Mahyco challenged that

cotton seed was removed from Essential Commodities Act, hence Seed control orderwhich draws powers from EC Act does not apply to cotton. At this juncture, AP

government made a new act to regulate transgenic cotton seed in AP. However, all theseActs, including Seed control order, will be repealed once the 2010 bill is passed, there by

taking away the rights of the farmers and also the powers of the State government.

seed price regulation in india

Documents