The Hindu Business Line : Why a re-think on GM crops is needed

Is genetically-modified crop the answer for India, especially its small and medium farmers? The Government's green signal for the first Genetically Modified (GM) crop — Bt cotton — came in 2002, at a time when farmers were looking for an effective insect-resistant variety. Today, Bt cotton is grown on nearly 9.5 million hectares worldwide. The US, China, Argentina, South Africa, Mexico and India account for nearly 99 per cent of the area under Bt cotton. In India, despite the failure of the first Bt cotton hybrids in 2002, newer ones have spread rapidly in Andhra Pradesh, Karnataka, Maharashtra and Gujarat, and covered about 15 per cent of the country's cotton area by 2005.

Though the technological superiority of Bt cotton has been well-demonstrated, accessibility of the GM technology at an affordable price is a crucial factor for the farmers of developing countries.

PRICING POWER

For instance, in the case of Bt cotton, the patent rights are held by the US-based Monsanto. Therefore, it has the power to fix the seed price and the royalty; neither the Central nor the State governments have any `say' over the pricing of Bt cottonseeds. As in other countries, the MNC has a tie-up with the seed industry in India for the production and marketing of Bt cottonseeds.

In 2005, Bt cottonseed was sold in India at Rs 1,850 per 450 grams(enough to cover one acre, orRs 4,625 per hectare). Out of the Rs 1,850, Rs 1,250 is royalty payable to the MNC. . Can small and marginal farmers benefit from Bt cotton at these rates? What is the position in other countries?

The seed cost of Bt cotton per hectare is $14 (Rs 620), $32 (Rs 1,380), and $58 (Rs 2,500) in South Africa, China and Mexico respectively. However, it is $103 (Rs 4,430), and Rs 4625 in Argentina and India respectively.

An article, "Genetically Modified Crops, Corporate Pricing Strategies, and Farmers' Adoption: The Case of Bt Cotton in Argentina," by Matin Qaim and Alain De Janvry (in American Journal of Agricultural Economics, November 2003), ecometrically estimated that Monsanto would get maximum profit from Bt cotton at $58 (Rs 2,500) of seed price per hectare. Also, the company charges royalty of only $13 (Rs 573) per acre in the US against Rs 1250 in India (based on figures given in the 2003 FAO "State of Food and Agriculture Report" on Agricultural Biotechnology: Meeting the Needs of the Poor?).

When India's small and marginal farmers are expected to be the beneficiaries of Bt cotton, why charge a royalty that is more than double that in the US? The answer to this question is partly explained by Matin Qaim and Alain De Janvry that the MNC charges lower seed price for Bt cotton in the US due to pressure from farmers' lobby.

DIFFERENTIAL PRICING

Is the company, then, charging a higher price for Bt cotton in India and Argentina to compensate for the lower price in the US? Such strategies can cause serious negative effects in the long run.

First, the very objective of Bt cotton will not be fulfilled at the exorbitant seed price.

Thus, cotton farmers' plight of low income, increased cost of production, etc. remains unsolved even with Bt cotton.

Second, the exorbitant seed price would lead to a `black market' in Bt cottonseeds. There have been reports of Bt cottonseeds being sold without the company's label at cheaper rates in Andhra Pradesh, Maharashtra, Punjab, etc.

Finally, the pricing of the seeds could further push the Indian farmer into the debt trap especially in the cotton-growing belts.

For instance, 83 per cent of AP's farmers (highest among all States) were in debt, as per the report of the National Sample Survey Organisation (NSSO) based on farm household surveys (2003).

Some of the indebted farmers, especially in the cotton belts, committed suicide unable to bear the debt burden.

What is the way out? Taking the recent Indonesian experience with Bt cottonseed, the Government should review rigorously and re-position its policy on extending approval to MNC-owned GM crop varieties.

Bargaining power

As seed is going to be the crucial input in the era of gene revolution and globalisation, the Government ought to consider seriously declaring "seed" an essential commodity to regulate its quality and price. If fertiliser can be an essential commodity, why not seed?

Further, the domestic seed industry should unite and improve its bargaining power while making deals with MNCs on technology sharing and royalty rates to keep the seed price low, as it also has the social responsibility to address the farmers' problems.

(The author is a Senior Scientist at the National Centre for Agricultural Economics and Policy Research, New Delhi. The views are personal and do not reflect the policies/views of his employer or the government. He can be contacted at ajanaiah@yahoo.com)

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