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7-Business: Andhra Pradesh (India) government mulls Monopoly Act action against Monsanto

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TITLE:  Govt mulls MRTP clauses against Monsanto
SOURCE: Business Standard, India, by B Dasarath Reddy
DATE:   5 Jul 2005

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Govt mulls MRTP clauses against Monsanto
To curtail exorbitant Bt cotton seed prices

The Andhra Pradesh government is seriously mulling options to curtail the
exorbitant prices of Bt Cotton seeds, which have become a craze among
cotton farmers in the state.

This includes using the provisions of Monopolies and Restrictive Trade
Practices (MRTP) Act against Monsanto company.

The average price of Bt Cotton seed ranges between Rs 1,600 and Rs 1,700
per 450-gram packet in the local market as compared to Rs 350-Rs 450 of
normal hybrid cotton seeds.

In the government's view, the steep prices of Bt Cotton seeds will blunt
the cost competitiveness of local cotton in global markets.

The price of Bt Cotton seed includes the levy of Rs 1,250 as royalty on
each packet by Monsanto, which owns the transgenic technology, towards
the trait value.

The royalty is shared between the sub-licencees, which are the seed
companies, and Mahyco Monsanto Biotech Private Limited (MMBPL), a joint
venture company of Mahyco and Monsanto, USA, in a ratio of 30:70.

As per the clauses of the agreement, MMBPL reserves the right to fix the
trait value every year and all companies are bound to charge the same
trait value uniformly across the country.

The act of regulating the sale price to the consumer by fixing the
royalty fee by Monsanto, therefore, is viewed as illegal as per the
provisions of MRTP Act.

According to state officials, the government can intervene in this regard
by using the provisions of MRTP Act and also of Competition Act of 2002
and can bring down the royalty component to anywhere between Rs 300 and
Rs 400 per packet. This, in turn, will bring down the prices to around Rs
1,000 per packet.

Of the several measures the department of agriculture has chalked out for
bringing down Bt Cotton prices, filing a PIL in the court against the
royalty is also on the cards, official sources told Business Standard.

"If the courts intervene in the matter of royalty and ask the companies
to stop collecting it even as an interim measure, it will bring relief to
farmers," a government representative observed.

According to him, the government is expected to first call for a meeting
with the seed companies on the possibility of reducing the prices before
approaching the Centre on the whole issue.

According to a government note, the total royalty collected by MMBPL up
to 2005, after Mahyco and Monsanto jointly got the technology approved by
the Government of India in 2002, is a whopping Rs 625 crore.

According to an estimate, Monsanto sold 20 lakh packets in the year 2004
and is likely to sell 30 lakh packets this year.

The sales from 2006 onwards are expected to result in total trait value
collections upwards of Rs 1,000 crore every year.

Officials feel that Rs 1,250 per bag royalty charged by Monsanto is
totally irrational as it incurs no extra cost since all the works
including seed production are done by the seed companies or sub-licencees.

Originally, Monsanto offered this technology to Indian Council for
Agriculture Research (ICAR) at a one-time cost of Rs 18 crore ten years ago.

But the government did not accept the offer thinking that the cost was
high and the same technology could be indigenously developed by spending
less amount. But it proved otherwise. Despite the usefulness of Bt
Technology, the cultivation cost has gone up.

On the other hand, it is estimated that the total cotton production in
the country is expected to increase to more than 300 lakh bales a year
from the existing 220 lakh bales in the next three-four years.

Cushioning cotton
- Govt can intervene by using the provisions of MRTP Act and also of
Competition Act, 2002, and can bring down the royalty component to
anywhere between Rs 300 and Rs 400 per packet. This, in turn, will bring
down the prices to around Rs 1,000 per packet
- The department of agriculture plans to file a PIL in the court against
the royalty


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