Government caps royalty fee on new GM cotton traits at 10%

Posted by BH Accounts on

NEW DELHI: Seeking to further regulate cotton seed market, government today capped royalty for the new genetically modified (GM) traits at 10 per cent of the maximum sale price of BT cotton seeds for the first five years -- a move that could hurt biotech major Monsanto's India business.

After the five year period, royalty would reduce by 10 per cent of initial value every year. If the GM technology loses its efficacy, the technology provider would not be eligible for any royalty.

Issuing a notification on licensing guidelines for GM cotton seeds , the Agriculture Ministry has also capped upfront fee for the new GM trait at Rs 25 lakh to be paid in two equal annual installments.

Prescribing a new format for bilateral agreements, the notification said the existing signed pacts between licensors (technology providers) and licensees (seed firms) would become invalid and they should execute the agreement in new format in next 30 days.

This will impact Monsanto's subsidiary Mahyco Monsanto Biotech Ltd ( MMBL ) which has sub-licensed Bt cotton seed technology since 2002 to 50 domestic seed companies.

The new licensing norms have been issued to ensure that all eligible seed companies get access to the GM technology, while technology providers like Monsanto are adequately rewarded under the "fair, reasonable and non-discriminative mechanism (FRAND mechanism)".

The 'Licensing and Formats for GM Technology Agreement Guidelines, 2016' comes two months after the Centre had fixed the MSP of Bt cotton seed packets at Rs 800 per packet for bollgard (BG)-II version of Bt cotton hybrid, including Rs 49 for the trait value. The seed price was fixed as per the Cotton Seeds Price Control Order issued in December 2015.

According to the notification, "For a new GM trait, commercialised after this notification, the maximum trait value may be upto 10 per cent of MSP of the GM cotton seed as fixed by the central government every year, for the initial period of five years from commercialisation. From the sixth year onwards, it shall taper down every year at 10 per cent of the initial trait value."

Explaining the need for the guidelines, a senior Agriculture Ministry official said, "For the first time, the technology providers would be authorised to get some kind of minimum royalty/trait fee. We have kept the royalty not more than 10 per cent in India, while the global average is 7 per cent."

"If it is below 10 per cent, they can negotiate directly. This gives some legal cover to charge royalty. Right now, it was being done through one sided contracts, essentially not backed by any law," the official added.

To encourage competitiveness in the cotton seed market in the interest of farmers, the new guidelines prescribe that licensors should consider all eligible applications seeking license to obtain new GM technology.


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