Reduction in price of BT cotton seeds: Announcement a blow for global players

Ruchi AgrawalMoneycontrol Research

For the second consecutive year, the government has announced reduction in the price of BT cotton seed (hybrid cotton seeds) packets along with a cut in the trait fee. The move is aimed to provide support to cotton farmers and retain cotton acreages in the upcoming Kharif season. The move will provide respite to cotton farmers who have been hit by pink bollworm attacks in the last season.

The government has announced a marginal price cut on 450 gms BT cotton seeds (Bollgard-2) seeds packets from Rs 740 to Rs 730 per packet. Along with this there would also be a Rs. 19 per packet reduction in the trait fee from Rs 39 to Rs 20 per packet.

The current cut stands to reduce input costs for farmers, help retain cotton acreages and ensure deeper penetration of better quality seeds.

While the price cut would have potentially affected the realisation, a parallel reduction in the trait fee paid by seed companies to seed technology provider Monsanto brings the net impact as a positive of Rs 9 per packet for seed companies. So the current move stands to benefit the seed companies in the coming term.

Over the past few years, there have been disputes about cotton seed prices and royalty payments to seed technology providers. Amid the royalty row and patent infringement, Monsanto had refrained from introducing the latest Bollgard-3 technology in India.

The announcement stands to knock the confidence of global players about the validity of patents in India. Biotech companies may put a hold on their plans of expansion in India owing to such price controls imposed by the government.

While the move is a positive for the Indian agri sector, delay in the introduction of Bollgard-3 technology and skepticism from international player to enter the market might lead to slowdown in the growth and lead to higher pest attacks in the longer run.

Follow @Ruchiagrawal

For more research articles, visit our Moneycontrol Research Page.