Government Tightens Rules; Caps Royalty Fee on New GM Cotton Seed Variety

In order to regulate cotton seed market, the government has 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. This move could affect market's sole supplier, US-based Monsanto's business in India.

Now, if Monsanto introduces any new, advanced variety of its GM cotton, it would not be able to charge royalties more that 10 percent of the price of seeds, fixed at 800 rupees, for five years from the date of commercialisation. As per the reports, royalty would however reduce by 10 per cent of initial value every year from the sixth year. The technology provider would not be eligible for any royalty if the GM technology loses its efficiency. Ministry of Agriculture has also capped upfront fee for the new GM trait at Rs 25 lakh to be paid in two equal annual instalments.

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.

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

CC Desk