Backed by Bombay High Court order, cottonseed firms to seek a cut in royalty fee

With the Bombay High Court upholding Maharashtra decision to reduce cottonseed price to ₹830 per packet of 450 grams, a few seed firms have decided to make an appeal to the genetic technology licence provider Mahyco-Monsanto to reduce the royalty fee (or trait value) component in the bilateral agreements.

A small group of seed firms would submit a memorandum to Mahyco-Monsanto asking it to take the court decision into consideration and reduce the fee.

While the technology provider charges a fee of about ₹180 (including Service Tax), the Maharashtra notification calculated it at ₹20 at five per cent of the cost of production.

“This is the first time a court gave an order on Bt cottonseed pricing. Though there are a few cases pending in other courts, this is for the first time a court spelt out the State’s right to fix the price. As Maharashtra government also indicated royalty fee in the order, this would help result in reduction of this component in different States,” a source, privy to the development, told BusinessLine. While dismissing a petition last month, the Nagpur Bench of the court had said that the State had enough material to ascertain the price and had the right to reject the recommendations made by the committee it set up.

Different rates The Maharashtra government had issued a notification on June 8, fixing the cottonseed price at ₹830 (for Bollgard-II).

Telangana and Andhra Pradesh governments had maintained a status quo at ₹930. This has caused a stir in the seed industry that argued that reduction would mean severe losses to them.

Royalty fee contention The seed industry, however, is in a fix as different State governments announced different royalty fee.

While Telangana reduced it to ₹50 from ₹90, Andhra Pradesh kept it at ₹90, while Maharashtra fixed it at ₹20 for the current kharif season.

However, seed companies continue to pay Mahyco-Monsanto the royalty fee (₹165 plus a Service Tax of about ₹25) as agreed upon in the technology licensing agreements.

(The firm gives BGII technology to different seed companies which would use it in its seeds.

HC observations With the Bombay High Court upholding the State’s right to fix the seed price, which includes the royalty fee at ₹20, a few seed firms have written to Mahyco-Monsanto asking it to consider reducing it in the licence agreements too.

A State agricultural university report, on which the Government based its order, put the royalty value at ₹20, calculating it at 5 per cent of (₹396) the ex-factory cost of production.

About 50 firms use the genetic technology in cottonseeds.

Of this, about 10 firms dominate with a share of 75 per cent of the five crore packet market.

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