Monsanto locks horns with licencee companies over royalty payments

Domestic seed firms allege MNC of charging excess trait fee on Bt cotton technology.

Written by Harish Damodaran | New Delhi | Published:October 16, 2015 1:21 am

In a dispute that could have larger implications for technology licencing agreements involving multinationals, Monsanto has taken nine domestic seed firms to court for non-payment of ‘trait fee’ on use of its proprietary Bollgard-II Bt (BG-II) knowhow in the cotton hybrids sold by them.

The US life sciences giant has claimed that these companies — including Nuziveedu Seeds, Kaveri Seeds, Ajeet Seeds, Ankur Seeds and Rasi Seeds — owe Rs 425-450 crore of trait fees to its 50 per cent-owned subsidiary Mahyco Monsanto Biotech (MMB), the official Indian licencee for BG-II technology. The due amounts are mainly on sales of genetically modified cotton seeds — incorporating the patented technology conferring bollworm pest resistance — during the recent kharif planting season.

According to Monsanto, the technology licencing agreement executed between MMB and the individual companies requires them to pay a trait fee of Rs 163.28 plus applicable taxes on every seed packet attracting a maximum retail price (MRP) of up to Rs 930. The trait value is more in case of higher MRPs.

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The nine defaulting companies account for over 60 per cent of the estimated 5.1-5.2 crore seed packets sold this season.

The licencee firms, in turn, have pleaded inability to pay, citing the price control legislations enacted by the governments in major cotton-growing states. The Maharashtra government, most recently on June 8, slashed the MRP of BG-II seeds from Rs 930 to Rs 830 per packet.

“How can we afford a trait fee of Rs 163.28 on an MRP of Rs 830 on the end product?

We, after all, also incur expenses on breeding, seed production, distribution, marketing and extension, apart from salaries and overheads,” said a domestic industry representative.

The industry has even charged Monsanto of taking advantage of its technology monopoly, so much so that “more than Rs 5,000 crore via trait fee has been collected from farmers and paid to MMB”. Seed companies don’t grudge paying royalty on a technology that has hugely benefitted farmers, “but there has to be some regulation of licencing agreements between technology providers and licencees,” the representative argued. He added that the MRP of Rs 830 fixed by the Maharashtra government factored in a royalty of Rs 20.

A Monsanto spokesperson rubbished these claims. The various state legislations have provisions only for fixation of MRP, not trait value. Besides, the companies were paying the trait value under the technology licencing agreements all these years. The current agreement between MMB and licencees was executed only in April this year. “All of them agreed to pay the trait value then. Now, they are seeking to wriggle out of contractual terms. This is a private contractual dispute and there is no public law or policy involved,” he added.

MMB has already filed an arbitration petition in the Bombay High Court on the matter, which is slated for hearing on Friday.

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