Sowing the seeds of a crisis

Ram Kaundinya | Updated on January 20, 2018 Published on June 16, 2016


The proposed new licensing guidelines on GM traits will compromise Indian agriculture and impact investor confidence

The business model used for commercialising biotech traits in agriculture is through licensing them to seed companies and collect royalty on the basis of actual sale of the seed containing the trait. This model has been working globally for 20 years and in India for 14 years. On 18 May, the agriculture ministry brought out an order prescribing guidelines for licensing GM traits in India.

The order makes it mandatory for the GM trait developer to license the traits to any seed company while, at the same time, making it mandatory for the seed company to pay the trait license fee. The order also prescribes a 10-year life for every GM trait and fixes the maximum royalty at 10 per cent of the MRP with a sliding scale over a period of 10 years.

Though well-intended, the order was later withdrawn and put for public comments owing to pressure from different quarters. Still, it shows us the direction in which the Government is thinking on managing intellectual property in agricultural technologies.

A step uncalled for

For a government that declared its intention to promote research and innovation in agriculture, this order is a regressive step. It will not serve the interests of the Indian seed industry, the biotech industry or farmers. Any sensible biotech developer will be wary of making more investments or deregulating more traits for Indian market.

In reality, there was no need for this order. The agri ministry had already fixed the MRP and the max trait fee (royalty) payable to the technology provider in the Cotton Seed Price Control Order in December 2015. This has already ‘fixed’ the returns that technology providers can get. If the license agreements have any restrictive clauses, such licensees can always approach the Competition Commission to set it right.

Before bringing these orders, the Government did not hold any discussions with biotech companies or associations that represent biotech industry. Both the orders consider technology providers to be evil coming from outside India.

It takes more than 10 years and hundreds of crores of rupees of investment to bring one new biotech trait to the market. Not just multinationals, many large Indian groups such as the Tatas, DCM Shriram, JK and public institutions have invested in this space.

It is impossible for any technology developer to recover his investments under these conditions. This will compromise the interests of the farmers as new vital traits under development such as drought tolerance, salinity tolerance and nitrogen-use efficiency will find it very difficult to get commercialised.

On the one hand the Government has been trying to woo foreign investments into agricultural innovation space and on the other, the farm ministry seems to be damaging investor confidence.

There are many aspects of the new government order that are wrong in letter and spirit.

Wrong clauses

The protection of the transgenic variety under the Plant Variety Protection & Farmers Rights Act, 2002, overrides the patents granted to the biotech traits under the Indian Patent Act. Since the seed is the only carrier for biotech traits, the interpretation of the law makes trait patents redundant. Why grant such redundant patents?

The order blindly and arbitrarily assumes a life of 10 years for the trait. There are traits which are producing value for the farmer even after 20 years.

Next, is the 10-per cent cap on trait fee or royalty; this is a random number. More incomprehensible is the part that the royalty comes down by 10-per cent a year after the fifth year. This is completely arbitrary and is meant to restrict the return on investment for technology providers. We need to understand that all traits are not equal.

Some penetrate faster and the uptake of others may be slow. Some traits may be meant for niche segments while some may be meant for larger markets. Putting all of them in one basket is not correct.

The most bizarre of the provisions is the one that makes it mandatory for the technology provider to license the technology to any seed company that approaches it. If the technology provider does not give the license in 30 days, it is ‘deemed to have been given’ and the seed company can use it.

How does the seed company access the trait if the provider has not given it to them, unless they access it illegally?

Technology stewardship is a critical responsibility of the technology developer and his licensees. Stewardship helps us to get the best out of technology and to avoid its misuse. In a free-licensing scenario, who will be responsible for technology stewardship?

The Indian seed industry is fragmented and there are hundreds of companies of varying capability levels. The technology provider has to take into account many aspects, in addition to the quality testing facilities prescribed in the government order, such as the financial and ethical standing of the seed company, and possible misuse of technology.

If the technology developer invests money in developing a trait and deregulating it and if he has no control on the use of the trait, why would he invest in it? Also, there is no clarity on whether these guidelines are applicable to other crops as well.

The order talks of monopoly and seed companies being prevented from accessing Bt technology in cotton. When more than 40 seed companies are licensed to use the current Bt technology, it is not logical to say that access was restricted to a few companies. The very fact that 98 per cent of the current cotton area in India is under Bt technology shows that seed companies and farmers have had free access to the technology.

Take them into confidence

Regulatory paralysis has seriously impeded biotech traits development in India since 2010. There were hopes that this Government would facilitate smoother functioning of the regulatory system. No new GM traits are expected to come soon because of the regulatory logjam. This order may at best help someone to access Bt cotton technology. But with 98-per cent coverage already in existence, this move seems uncalled for.

Such short-sighted policies can damage the country’s reputation and derail our agricultural renovation in a very big way. Major cotton seed companies expanded their business and made good money by using the GM cotton technology particularly in the last ten years. If technology flow stops because of such orders, their interests will be hit. We need a more matured and well calibrated policy framework for biotech trait development and deployment in India.

It is a technology that can help us tremendously in areas where the traditional plant breeding may not have ready answers. Respecting and rewarding IP is an important element of this policy without compromising the interests of any of the stakeholders. Multi-stakeholder consultations should be the basis for the development of such a policy framework.

The writer is a management consultant

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Published on June 16, 2016
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