Scientific norms need to be put in place to compute cost of production of cottonseed and royalty for new technologies.

How much land does a man need? This question tormented the Russian writer Tolstoy, prompting him to write the popular short story with the same name. Though he sarcastically said it was just six feet that a man needs, what actually he meant was that one should be reasonable and rational.

A similar issue, again related to land, being discussed intensely is — what is a reasonable price for seed. The seed in question, obviously, is cottonseed. With the kharif season fast approaching, seed companies, seed growers and farmers are locked in conflict in Andhra Pradesh.

The issue, however, is not confined to the State alone. The entire seed industry and all cotton farmers are keenly watching developments because any decision here could well be a bellwether to the whole country.

Ever since it waged a pitched battle with Mahyco-Monsanto on trait value a few years ago, the State began to attract attention on the issue. So much so that other cotton-growing States wait for its call on seed pricing before announcing their own prices.

But it is sad to see lakhs of farmers, both commercial cotton farmers and seed growers, and seed companies anxiously wait for a Government's decision year after year on the cost of seed.

It puts all stakeholders in a fix because unlike other businesses, companies collect advances (it goes as high as 50 per cent of the total seed cost) from dealers. In turn, farmers too will have to put their lots with dealers. One wonders why a country of India's size, which boasts of being the top ranking cotton producer, lacks a scientific approach on seed pricing.

Take, for example, the Andhra Pradesh Government's dilemma – whether to increase or let it remain at last year's price. Its Minister for Agriculture, Mr Y. S. Vivekananda Reddy, put in his papers to seek election in the by-polls. Meanwhile, the Government is reluctant to increase seed prices, fearing a backlash from the Opposition and farmers.

COST COMPUTATION

Let there be a mechanism, a la CACP (Commission for Agricultural Costs and Prices), to assess the costs based on parameters such as how much a grower spends on developing the seed and, his variable costs. Though seed companies take the icing on the cake, it is seed grower who takes all the trouble. This, in fact, holds the key in pricing of the seed.

With labour cost (forget about his and his families' labour) rising sharply, the overall cost of production increased significantly. No wonder the growers increasingly preferto grow commercial cotton! Vexed with poor returns and rising cost of production, seed growing farmers are turning to commercial cotton, particularly in the wake of mouth-watering prices.

There is a need to compute the costs incurred by seed-growing farmers and suggest a method to compensate him properly. At present, this is being worked out as a mutual agreement between growers and seed companies. In a majority of cases, the agreements are not on paper, and hence they are not legally binding.

The second factor to be considered is the costs incurred by seed firms on doing value addition, acquiring technologies, distribution and marketing of the seed.

ROYALTY NORMS

The Government, in fact, doesn't need to institute a separate mechanism. CACP doesn't have one. The State Government could depend on the same institutes as the Commission. It could do a much better job because it is closer to the reality.

The other contentious issue is that of trait value or royalty fee. Why should this issue haunt us every year? Can't we evolve a policy that can scientifically ascertain the quantum of royalty for technologies and how it could be progressively decreased as years pass by?

Though Andhra Pradesh tried to intervene last year by reducing royalty to be paid for Mahyco-Monsanto, it did not work at all.

The State argued that by reducing royalty fee, seed companies could pocket more revenues, without having to increase MRP and burden the farmers. It proved to be a total fiasco as companies had to cough up the full royalty under their contractual obligations with technology provider, Mahyco-Monsanto. Why take a decision if it cannot be enforced?

Monsanto and Mahyco-Monsanto contend that the trait value should factor in the ‘incremental' benefit to farmers by using Bt seeds.

This, in fact, is the bone of contention. Unless this is discussed in detail and resolved, it is virtually impossible to solve the puzzle. Cotton-growing States (since agriculture is a State subject) and the Union Government should come together to discuss a method to calculate trait value.

MONOPOLY FEARS

Technologies related to seed are not the same as other technologies in FMCG or electronic goods. Exclusive technology pacts between the provider of technology and seed producing companies should be subservient to the larger interests of farmers. Arbitrary ways of fixing royalty would only lead to monopolistic controls in the long run. For now, we are facing a problem only with cottonseeds.

Tomorrow, we might see more technologies in more crops. The situation would only worsen if we follow unreasonable and irrational methods. We need not re-invent the wheel. We can borrow the internationally accepted formulae to fix and impose royalty. If we solve this problem in a scientific method, we, in fact, would have solved the problem forever. For farmers, a timely seed is worth far more than cheaper seed available to them after the opportune time. A delayed decision will not help their cause.

(This article was published on April 13, 2011)
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