Photographer: Dhiraj Singh/Bloomberg

India Cuts Monsanto Modified Cotton-Seed Royalty Fees by 70%

  • Government makes move despite opposition from Monsanto venture
  • Venture had said it would `reevaluate' position in India

India cut royalties for genetically-modified cotton seeds, defying Monsanto Co., which has said such a move would cause it to reevaluate its business in the country, the largest grower of the fiber.

The agriculture ministry said Tuesday that so-called trait royalties will be capped at 49 rupees (73 U.S. cents) per 450-gram pack of so-called Bt cotton seeds, a 70 percent reduction from current levels. It also set the maximum sale price at 800 rupees.

St. Louis-based Monsanto sells cotton seed in India via Mahyco Monsanto Biotech, or MMB, a joint venture with Maharashtra Hybrid Seeds Co. The venture licenses Monsanto technology to seed companies and then collects trait fees. MMB said March 4 it would have no choice but to “reevaluate every aspect” of its position in India should the government make a substantial cut to royalties, saying such intervention would override its contracts with seed companies and undermine its operations.

Monsanto had no comment Wednesday as the company is still examining the government notification in detail, spokeswoman Christi Dixon said. Shares of Monsanto India Ltd. climbed 3.5 percent to 1,671.3 rupees in Mumbai on Thursday.

Safeguarding Farmers

The decision to set a uniform price for Bt cotton seeds across the country was taken “to safeguard the interest of the farming community,” India’s Agriculture and Farmers Welfare Minister Radha Mohan Singh said in a statement on Wednesday.

The government action follows a dispute between Monsanto and some licensees over payments. While some Indian states have capped seed prices, licensing fees previously haven’t been controlled. Last month, India’s antitrust regulator recommended an investigation into MMB.

Bt cotton secretes an insecticide and has transformed Indian production of the fiber since the technology’s introduction in 2002. International cotton prices touched a six-year low in February amid a global glut. Futures in New York have dropped 11 percent so far this year.

India’s average per-hectare yield jumped almost 70 percent to 503 kilograms since it allowed farmers to use genetically modified seeds for the first time in 2002, according to the nation’s Cotton Advisory Board. Production will drop 7.4 percent to 35.2 million bales of 170 kilograms each in 2015-16 after the first back-to-back shortfall in monsoon rain in three decades forced farmers to reduce planting, the board estimates. The U.S. Department of Agriculture on Wednesday also cut its estimate for cotton production in India by 1 million bales, partly because pests damaged crops in northern states.

Higher output has boosted exports to countries including China, Pakistan and Bangladesh, with overseas shipments expected to gain 21 percent to 8 million bales in the 12 months through September, board data show.

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