Financial Daily from THE HINDU group of publications
Thursday, Dec 02, 2004
Agri-Biz & Commodities - Seeds
Amendments to seed law Yet to germinate fully
R. V. Ramana Murthy
Seed failure ranges from lack of germination to falling of flowers to poor yields. But the proposed amendments may not fully address the grievances of victims and improveme the quality of seeds. There is need for a wider debate to understand the seed crisis and the economics of the seed market before re-drawing the legal regime.
Agriculture in Andhra Pradesh has seen an unprecedented crisis for the fifth consecutive year. The severe droughts and power shortages have been compounded by the problem of spurious seeds and pesticides. Cotton and maize plants have not flowered either, leaving the farmers enraged and demanding compensation from the seed traders. This crisis compelled the State government to announce a new Seed Protection Bill.
Commercialisation and seeds
There has been a near-total commercialisation of Indian agriculture with farmers, today, increasingly producing for the market, choosing the most profitable crop. The major determinants of crop choice are the price, the production cost, the crop stability and the market access.
The introduction of high-yielding (HYVs) and hybrid varieties has led to a complete dependence on the market for seeds. The seed industry has taken roots in the State over the past two decades there is increasing market purchase of seeds of rice, cotton, onion, chilly, jowar, oilseeds and vegetables.
While the HYVs were developed and disbursed under the aegis of agricultural departments and universities, the new generation of hybrids came from the private sector including local companies and multinational corporations. Private seed companies grew but without a strong regulatory framework and with difficult legal mechanisms.
The new generation commercial crops such as cotton, chilly, oilseeds and vegetables are essentially spread across the dry and well-irrigated areas of Telangana and Rayalaseema and other non-command areas of the State. These non-command areas depend on costly private irrigation drawing upon groundwater resources. The cultivation of crops such as cotton is done against suitability of the soil. Agricultural extension services are poor and farm policy has encouraged crop diversification. There is growing incidence of tenancy in the rural areas increasing migration of well-off and upper caste peasantry to the urban areas, letting their farms on lease.
The rents are high owing to high market demand. The oral tenancy denies tenant farmers access to institutional credit for lack of collateral. The dependence on private finance has raised the cost of credit to the farmers. It is the rise in the production cost , rather than rational expectations, that is driving farmers to go for risky crops and led to a desperate dependence on traders for advice on pesticides and seeds. The role of seeds in commercial agriculture has gained importance today as traditional practices of preserving them have vanished and almost all seeds are purchased from the market.
The failure of seeds attained phenomenal levels with the growth of an informal market for seeds. In the seed market there are as many genuine as fake companies, confusing the farmer. Poor quality seed makers rely on high-decibel advertising and higher margins to traders and disappear from the scene when they realise that their game is up.
The Seed Act 1952
The Seed Act of 1952 is inadequate to address the problem of spurious seeds. It does not make certification mandatory for sellers and permits labelling and trademarks as an alternative. The penalty on seed companies/sellers for selling fake seeds is Rs 500 for the first offence, and Rs 1,000 plus one-year imprisonment for a repeat.
Neither of these is incentive enough for a victim to got to court. The penalty goes to the state and no compensation is available to the victim. Second, even in the case of a repeat offence, the burden of proof increases, given the criminal liability. Yet, no succour is available to the victim as the offence is essentially civil in nature. Besides, the meagre penalty of Rs 500 or Rs 1000 is hardly a deterrent. The economic theory of crimes suggests that it is perfectly rational to commit a crime as long as the actual benefits of the crime exceed the expected costs of punishment. The civil law-makers seldom appear to understand this economic logic.
The new amendments to the Seed Act 1952 seek to increase the penalty to Rs 1 lakh and make the certification compulsory. This hardly addresses the grievances of the farmers who gain little in seeing the injurer being punished. There are, of course, other laws under which a farmer can seek redress for the seed failure, such as the Consumer Protection Act, 1986.
However, under this Act, the victim is only entitled to the cost of the product purchased, but not the collateral damage. For compensation of the crop loss, one has to file under the tort or the contract law under the Sale of Goods Act. But the delays and the court fees would surely deter an ordinary farmer who is perhaps already on the brink on account of the damage done by the spurious seeds. Thus, remedies available under the civil procedure are negated by the structural impediments and inadequate consumer protection laws.
If at all the State wants to redress the grievances on spurious seeds, it has to incorporate the damages clause in the Seeds Act. The Government can come out with a notification on the extent of compensation payable.
The failure to pay compensation should attract the attachment of the assets of the firm and criminal liability should follow. The civil liability will then make the companies be careful in preparing seeds and also deter bogus seed companies. In case the civil liability proves too costly for the seed companies, they can go for insurance and the insurer, in turn, can oversee the precaution taken by the seed firms.
The threat of bankruptcy, through the litigation process, should discipline the seed companies.The proposed amendments, however, emphasise the much-needed clause on compulsory certification. Certification was optional in the earlier Act, where the seeds were merely required to be labelled.
Unless a compensation clause is added to the Act, things are not likely to change. This will not only leave the hapless farmer harassed, but alsoallow the spurious operators to run the market down.
(The author is an Assistant Professor at NALSAR University of Law, Hyderabad.)
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