March 13, 2018 / 7:18 AM / in 3 months

India cuts Monsanto's GM cotton seed royalty, may trigger another row

NEW DELHI (Reuters) - India has cut royalties that local seed companies pay to Monsanto Co for the second time in two years, potentially fuelling another row with the U.S. company that threatened to leave the South Asian country in 2016.

FILE PHOTO: Farmers harvest cotton in a field in Nana Viramgam village in the western Indian state of Gujarat February 9, 2015. REUTERS/Amit Dave/File Photo

India’s farm ministry has decided to reduce royalties paid by Indian seed companies to Monsanto for its genetically modified (GM) cotton by 20.4 percent, said a government order released on Tuesday.

In 2016 the farm ministry cut Monsanto’s royalties by more than 70 percent, triggering a long-running feud that drew in the Indian and U.S. governments.

“It is unfortunate that today’s order further erodes trait fees (royalties), which are now less than 0.5 percent of the cost of cultivation, while the technology continues to provide value to farmers across India,” said a spokesman for Monsanto’s India joint venture, Mahyco Monsanto Biotech (India)(MMB).

Cotton has been a success story for Indian agriculture with a sharp jump in both output and exports, the MMB spokesman said, but noted that the sector needed a predictable business environment to attract investment.

As well as cutting Monsanto’s royalties, the government also lowered the prices of GM cotton seeds by 7.5 percent to 740 rupees ($11.39) for a packet of 450 grams to help farmers who are struggling with pest infestations.

Reuters last week reported the government plan to cut Monsanto’s royalties and lower the prices of GM cotton seeds.

Farmers buy GM cotton seeds from Indian seedmakers who pay to use Monsanto’s proprietary technology to produce them.

Producers body, the National Seed Association of India (NSAI), last week threatened to halt supplies to 8 million cotton farmers to protest the planned move to reduce seed prices.

“The new, low price would definitely impact seed supply and seed availability this year. And also next year’s seed production. NSAI may even file a writ petition against the government decision,” Kalyan Goswami, director general of NSAI, told Reuters.

Seed prices have fallen since 2011 but fuel, labor and other supply chain costs have risen, Goswami said.

“NSAI advocated for an increase in cotton seed prices to at least 150 rupees a packet. But the idea was ignored,” he said.

Last year the government kept both the royalties and the retail prices of GM cotton seeds unchanged.

More than 90 percent of India’s cotton crop is genetically modified. In 2017/18 India’s cotton output is set to rise by 9.3 percent but still short of the record high predicted by industry analysts because boll worm caused damage in some regions.

($1 = 64.9600 Indian rupees)

Reporting by Mayank Bhardwaj; editing by Richard Pullin

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