Agri Business

It’s time to roll back FDI in seed sector

Indra Shekhar Singh | Updated on May 25, 2020 Published on May 25, 2020

Farmers sow seeds in a paddy a field in Maharashtra's Sangli district (file photo). Photo: PTI

Foreign ownership of Indian seed and plant genetic resource risks our food and seed security

Self-dependence, self-reliance and buy Swadeshi were the three main takeaways from Prime Minister Narendra Modi’s recent address on the exit strategy. Many challenges lie ahead, especially in achieving this goal in the agriculture sector. One is reminded of the notorious ‘realpolitker’ Henry Kissinger, “If you control the oil, you control the country; if you control food, you control the population.”

With much of the Indian seed and plant genetic resource (PGR) in foreign control through 100 per cent FDI, Indian food and seed sovereignty may be at risk.

Seed companies across the world work with strategically valuable PGR protected under the Biodiversity Act. Of course, each country has its own laws, empowered by various global treaties. Sometimes these rules may clash and leave grey zones. For example, India doesn't allow patents on seeds, while the US allows it. This minor difference has become the root cause of an IPR nightmare for Indian farmers and biodiversity.

Learning from others’ mistakes, progressive nations have pushed for strategic local ownership in the seed sector to protecttheir biodiversity. China, Thailand and Indonesia have not allowed majority control with foreign ownership in the seed sector so as to safeguard their national interest and food security. Ten steps ahead of the game, Chinese companies are already working in the sub-continent and the world to mine precious PGR and take it back to their gene banks.

 

In many countries, 100 per cent foreign ownership is allowed only for research and development (R&D) purposes, whereas seed production and distribution activity is barred for companies with majority foreign ownership. China has even prohibited the export of parent lines of a hybrid. Indonesia, which allowed 100 per cent foreign ownership in seed companies initially, resiled the decision and enacted a new legislation three years ago, mandating all seed companies to reduce foreign ownership to under 50 per cent.

 

In these countries, the products of the research of such foreign-owned companies is distributed to the farmers through their JV companies in which citizens of the country have a controlling stake of above 51 per cent. This was the situation in India till 2006 as Foreign Investment (FI) in the seed sector was only available through technology collaborations with the specific approval of the Centre, whereas Foreign Direct Investment (FDI) was not allowed either under the automatic or approval route. Even with this condition, many leading companies in the field, including Pioneer, Syngenta and Monsanto (then Cargill) established their operations in India at that time.

The Govt. of India allowed 100 per cent FDI under the automatic route for “development of seeds under controlled conditions"in 2006 through Press Note No. 4. In 2011, in the consolidated policy, it was modified to “development and production of seeds and planting material” whereas the controlled condition was removed. As a result of this policy change, the existing JV companies of Pioneer (PHI Spic), Monsanto (Parry Monsanto) etc., have became 100 per cent foreign-owned, by taking over the stake of the Indian ownership. This has also resulted in many takeovers of successful Indian seed companies since then.

A plain reading of the above leads to the following conclusions.

A 100 per cent FDI was allowed only for R&D activities (i.e. development of seeds under controlled conditions) till 2011

There appears to be no clarity and a clear background about how 100 per cent FDI was suddenly allowed under the automatic route in the seed sector from 2006.

This needs to be verified in the files of the Ministry of Commerce (DIPP) and the Ministry of Agriculture.

In spite of the relaxation allowing 100 FDI under the automatic route, FDI inflows into the seed sector are estimated to be $500 million (about Rs 3,000 crore), which is not significant compared to the total FDI flow into the country.

What is ideal for India?

FDI, like in other Asian countries, may be restricted up to 49 per cent, with controlling stake in seed production companies remaining with Indian citizens.

Research and development can be allowed with 100 per cent foreign ownership as long as they don't enter into seed production and distribution either directly or indirectly.

GM traits shall be approved for commercial release on condition that the technology developer follows the provisions of the PPVFR Act.

It can be argued that this amounts to going back on the Government’s declared policy. However, it can be justified on the following grounds.

Seed Sector is vital for agriculture and strategic to the nation’s food security and independence.

FDI is still permitted for research and development with 100 per cent foreign ownership.

Technology transfer from R&D to the seed production and distribution companies will be encouraged, resulting in a robust seed sector in India, which is essential for a strong agriculture sector, farmer and consumer prosperity.

The above suggestions would help in injecting the required technological improvements in Indian agriculture and the simultaneous indigenisation of such technologies through companies taking up production and distribution.

Additionally, parent lines of hybrids shall not be allowed to be shipped outside the country. Only hybrid seeds will exported, but not the parent lines in China.

All the major multinational seed companies operating in India also operate in Thailand, China and Indonesia despite those countries not allowing them 100 per cent owned subsidiaries. For, by allowing 100 per cent subsidiaries, India is sacrificing its food security for pennies, while losing many million pounds. It’s a paradox that if an Indian company starts operations in China or Indonesia, they can own less than 49 per cent, whereas companies from China and Thailand already operate in India with 100 per cent subsidiaries. The Seed Division of DACFW of the Ministry of Agriculture can conduct a study to ascertain the facts and prepare a national strategy. As India moves towards indigenisation, it is crucial that we reform our seed sector and make it completely Indian.

(The author is Director - Policy and Outreach, National Seed Association of India)

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Published on May 25, 2020
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