The government of India fixes the maximum sale price (MSP) for cotton seeds to the industry and the minimum support price (MSP) for raw cotton to the farmers year after year, making both unhappy. This is because the cotton farmers and the seed industry are staring at pests developing resistance to Bt cotton, increasing the cost of cultivation, rapidly decelerating cotton yield, declining export, and increasing import. The situation is such that the cotton farmers and seed industry are in a doldrum and have nowhere to go.

On the other hand, subdued cotton production has been forcing the textile industry to vouch for imported raw cotton, which increased to 21.1 lakh bales worth ₹10,353.96 crore in 2021-22 nearly bringing back the situation that existed before the introduction of the Bt technology. The flip-flop relaxation in import duty structure in recent years has aggravated the balance of trade in cotton, which remained favourable over the last two decades. The situation on cotton export has gradually dimmed. It peaked at 116.96 lakh bales worth ₹23,153.24 crore in 2014-15 and has been declining year-on-year to 15.5 lakh bales worth ₹5,021 crore in 2022-23.

What is the fuss about MSP?

Ironically, cotton is the only commodity for which the government announces the maximum sale price (MSP) for cottonseeds since 2015. The government also announces minimum support price (MSP) for seed cotton (kapas) to the farmers, which is announced annually by the Government based on the recommendations of the Commission for Agricultural Costs & Prices (CACP) since 1985.

Unfortunately, the cotton sector is entangled in a double-edged MSP from the seed to the kapas. In its recent announcement, the government fixed cotton MSP at ₹6,620 per quintal for medium staple cotton for the 2023-24 season (October-September). The irony is that MSP for kapas is an indicative market price where Govt’s intent is to safeguard farmers against the price volatility by time-to-time procurement of cotton by the Cotton Corporation of India.

In the last two decades, the market price of cotton remained above the MSP except in 2008-09, 2019-20 and 2023-24, is a classic example and thus the farmers’ demand for a legalize MSP to ensure the remunerative price realisation to the cotton farmers (Figure 1).

Figure 1. Cotton MSP Vs Market Price

Figure 1. Cotton MSP Vs Market Price

Contrarily, the prices of cotton seeds are regulated as maximum sale price (MSP) by the Central Government which gazettes MSP of cotton seeds every year before March 31 for the subsequent season. It is so embarrassing that a decision for maximum sale price (MSP) for cotton seeds is annually taken by a committee headed by a joint secretary after the so-called stakeholder’s consultation to determine whether the GOI should increase cotton seeds price by ₹5-10 per packet.

Interestingly, the fixation of cottonseed prices has been going on for the last 10 years under the Cotton Seeds Price (Control) Order, 2015 (CSPCO) notified by the Ministry of Agriculture and Farmers’ Welfare on 7th December 2015. Originally, the CSPCO, 2015 was gazetted keeping in view the so-called demand from the stakeholders to regulate prices of genetically modified (GM) cotton seeds such as BG-I and BG-II seeds of Bt cotton.

Over the last decade, the CSPCO 2015 has been used as a legislative means by the bureaucracy to deliberately scuttle the trait fee (royalty) to zero while gradually increased the seed value and maximum sale price (MSP) to ₹864 per packet of 450g seed in 2024, which is higher than ₹800 per packet MSP of BG-II cotton seeds which included both seed value and trait fee fixed under CSPCO in 2016.

At the same time, the seed companies benefited enormously due to adoption of refuge-in-bag (RIB) in which seed suppliers need to supply 475 grams RIB seed packet containing minimum 5% and maximum 10% non Bt cotton seed instead of supplying 570 grams cotton seed per packet, thereby effectively reducing seed weight by 95 gram per packet or 17% reduction in seed weight per packet.

The hate and love of MSP

While the minimum support price (MSP) for kapas to the farmers is necessary to safeguard farmers from market-led price volatility, the fixation of the maximum sale price (MSP) for cotton seeds is to exercise absolute control over seeds as an essential commodity. Ironically, if the purpose of the CSPCO, 2015 were to regulate prices of genetically modified (GM) cotton seeds such as Bt cotton, it has lost its purpose and has become self-defeating.

The CSPCO 2015 has become a tool to manipulate the components of the maximum sale price (MSP) of Bt cotton seeds which includes both seed value and trait fee or royalty (Figure 2). By arbitrarily fixing the market price of Bt cotton seeds in favour of seed producers and by thwarting technology fees, it has stymied R&D companies to innovate and develop new and high-yielding seed and biotech trait(s) for the cotton sector in India.

As a result, the cotton sector has not seen any new technology, pest such as pink bollworm (PBW) has developed resistance to age-old Bt cotton, majority of tech related projects have been discontinued, and no new investment in research and integrated resistance management (IRM) in the country. The breeding of new varieties of cotton is in shamble with no improved genetic and trait in the offing. The cotton seed industry both domestic as well MNCs are walking on the double-edged sword and unsure about the relevance of CSPCO, 2015. The classic case of illegal herbicide tolerant Bt seed occupying nearly 15-20 % area in Central cotton growing zone is the result of thwarting new technologies in cotton.

In a nutshell, the Order tends to become a death knell to the bioscience academia and seed and biotech industry in India. In the past, the Economic Survey 2015-16 of the Ministry of Finance rightly termed the cotton seed control order not only a regressive but also an unproductive step. In 2016, the FICCI and its member companies demanded the Government of India to revoke the controversial CSPCO 2015 and allow competition and a free and fair market for the growth of agriculture sector in India.

On June 19, 2023, the Ministry of Agriculture and Farmers’ Welfare while releasing the minutes of the “Round Table Discussion on Cotton” held under the chairmanship of Member (Agriculture), NITI Aayog and Secretary (A&FW) unanimously recommended to review of cottonseed price control regulation CSPCO, 2015, and assigned the task to the seed division of the Department of Agriculture and Cooperation to review of cotton seed price control regulation. More than a year, there has been no new progress, and the policy status quo continues as MSP continues to regulate the ailing cotton sector.

Figure 2. Fixation of vale of seed, trait fee and maximum sale price of BG-II cotton seeds (2006 to 2024)

Figure 2. Fixation of vale of seed, trait fee and maximum sale price of BG-II cotton seeds (2006 to 2024)

Revocation of the CSPCO, 2015

The CSPCO, 2015, has turned out to be an apocalypse for India’s cotton seed industry and farmers. By regulating the maximum sale price of cotton seeds, both the breeding and biotech seed industries have not introduced new and high-yielding seed and biotech traits fearing market price control resulting in rapidly declining cotton yield, and loss of almost 100 lakh bales per year from the peak of cotton production at 390 lakh bales in 2013-14, before notification of CSPCO, 2015.

Ironically, the cottonseed price control has gone beyond the Government’s mandate to fix MSP on cottonseed under the Essential Commodity Act 1955 and seems to interfere with the fundamental rights to sign confidential agreements between individual parties. The Order impinges on intellectual property rights, contractual agreements and imposes the licensing guidelines and format for all the GM technology licensing agreements, and thus discourages R&D and the flow of new technologies in the cotton sector.

Cotton in a ‘Catch-22’ paradox

The revocation of the draconian CSPCO, 2015, is the first step to unshackle the cotton sector from the bureaucratic control and license raj to ensure the availability of high-quality cotton seeds to the farmers at fair, reasonable and affordable prices. CSPCO drew its power and became a reality because cotton seed was again brought under the purview of the Essential Commodity Act 1955 in December 2010.

In the past, the cotton seed has been included and removed from the provisions of the ECA 1955 as the “raw cotton, whether ginned or unginned and cottonseed” is listed under the Concurrent List (List-III) of the Seventh Schedule of the Constitution of India, which empowers both Centre and State(s) to do so. As a result, both the Centre and State(s) have the power to make laws on cotton seeds.

If the Centre revokes CSPCO 2015, many cotton growing State(s) can make laws to regulate cotton seed prices which will make it impossible for the cottonseed industry to comply. The cottonseed industry is in a “catch-22” paradox to rightfully demand the revocation of CSPCO, 2015 as it can trigger price control from States.

The only solution to this peculiar problem is that our lawmakers must seriously look into the possibility of removal of “cotton seed” from the Concurrent List of the Seventh Schedule of the Constitution of India, which would enable our smallholder farmers to be productive and our cotton seed and biotech industry to be globally competitive.

The authors are from South Asia Biotechnology Centre (SABC), Jodhpur

Related Topics