The Competition Commission of India (CCI) found that Mahyco Monsanto Biotech (MMBL) has abused its dominant position in the country by charging an unfair license fee.
According to a report, MMBL also entered into pricing agreements directly aimed at overcharging farmers who use Bt cotton technology seeds. Bt cotton is a genetically modified organism (GMO) or genetically modified pest-resistant plant cotton variety, which produces an insecticide to bollworm.
An equal joint venture of Maharashtra-based seed company Mahyco and Monsanto, MMBL sells genetically modified seeds to many Indian companies and charges a licensing fee called ‘trait fee’, or technology fee.
“It has been shown that trait fee was linked with the maximum retail price of seed packets by MMBL just to extract surplus as much as possible from the end consumer of Bt cotton seeds i.e. farmers,” said CCI report seen by Economic Times.
It noted that there were multiple instances where MMBL abused its dominant position in the market, most notably by charging higher trait fees from seed producers in Haryana, Punjab and Rajasthan compared with others as there was no price regulation in those states.
“Charging different prices in different geographic locations in the light of local conditions especially when such variation is not related to costs can distort competition and is in the nature of third-degree price discrimination exercised by a monopolist. There is no evidence of welfare enhancement of consumers on account of the price discrimination.”
MMBL also charged a higher trait fee in states such as Maharashtra and Andhra Pradesh where the government had fixed trait fees “on the pretext of pendency of litigation.”
The investigation found that the trait fees charged by MMBL were not based on high costs incurred by MMBL as it is “merely a licensing entity with very limited fixed costs.” The company does not undertake any research and development activity which could push up its costs, said the report.
MMBL, which holds patents for Bt cotton, insisted that partner organizations use proprietary hybrids and not public (government) released varieties. By doing so, the company tried to hold control not only on their technology but also the plants so that farmers cannot reuse them. This made farmers and the local companies perpetually dependent on them,” said GV Ramanjaneyulu, executive director, Centre for Sustainable Agriculture.
US agrochemical giant Monsanto, currently owned by Bayer, has been selling genetically modified cotton seed to India since 1998. Since that time it has established an absolute monopoly over Bt cotton production in the country. Some 90 percent of India’s cotton –11.8 million hectares of cotton fields – now cultivate Bt crops. However, the Indian authorities are trying to push Monsanto out of the market to create more favorable economic conditions for domestic farmers.