Changing Structure of Indian Seed Industry:

Policy Prospects and Emerging Lessons

Sachin Chaturvedi

South Asian Conference on Trade and Development entitled

“Harnessing Gains from Trade: Domestic Challenges and Beyond”

December 20, 2007

The Claridges Hotel, New Delhi

1
 Structure of the Presentation

* Overview of Policy Evolution

* Global Seed Industry Dynamics
* Impact through New Technologies and
IPR Regime
* Implications for Stakeholders
* Which way to go!

2
 Overview of Policy Regime
• In Fifties to Seventies the focus was on improvement
in the quality of inputs for fostering agricultural
production

• Eighties and Nineties issues like productivity

stagnation, nutritional deficiencies, and environmental
implications are being addressed.

• Initially a major policy attention was paid to the

availability of quality seeds in all the crops for which
financial support/subsidies were invoked.

• Since the First Five Year Plan and especially during the
various phases of the National Seed Projects (NSPs)/
WB Projects, a decent seed production system evolved
both in the public sector and in the private domain as
well. 3
 Overview of Policy Regime
• It seemed quality seeds supply stabilised however in late
sixties and early seventies policy went through various
phases and restricted growth of seed market especially of
quality seeds in different crops particularly vegetables, etc.

• As part of this several institutional efforts like NSC, State

Farms Corporation of India (SFCI) and several State Seed
Corporations (SSCs) came up.

• However, the low seed replacement rate in most crops and

the narrow focus of the public sector led to the launching of
the New Policy on Seed Development (NPSD) in 1988.

• Gradually the situation started changing with the use of

hybrid seeds in cotton, and to some extent in corn, millet,
rice, sunflower, and vegetables, which have expanded in a
major way.
4
 Economic Benefits from National Seed Projects

Enhanced Employment Rate of SSC/SS

Value of Return of CA
Output Project

NSP-I US $ 145 3 Mn. farm 65% 800 jobs

M/Year family
NSP-II US $ 17.5 1.35 Mn farm 158% 1250
M/Year family jobs

Source: World Bank, 1978

5
 Global Seed Industry
• Global seed industry benefited from agriculture
biotechnology and introduction of new products which
also led to unprecedented takeovers and acquisitions.

• As a result, firms with comparative advantage in

agriculture biotechnology research such as Monsanto,
DuPont, Syngenta, Bayer, Dow, BASF, etc. have a pre-
dominant share in the global seed market.

• During the 1996-2000 period 75 per cent of over 4200

agriculture biotechnology related patents were owned
by private industry.

• The number of Plant Patents, Plant Variety Protection

Certificates (PVPCs) and Utility Patents issued over the
last 5 years have risen exponentially.
6
 Sale of Seeds by different Companies during the Year 2005,
US $ Million

Taikii (Japan) DLF-Trifolium (Denmark) Delta & Pine Land (US)

3% 3% 3%

Bayer Crop Science (Germany)

4% Monsanto (US)
Sakata (Japan) 26%
4%

Land O’ Lakes (US)

5%

KWS AG (Germany)
6%

DuPont/Pioneer (US)
24%
Groupe Limagrain (France)
10%
Syngenta (Switzerland)
12%

7
 Firm Applications by Patent Authority

Company Australia Canada EPO US

Asgrow 3 2 2 85
Calgene 3 16 17 20
Dekalb 16 12 13 112
DuPont 94 43 75 110
Merck 3 4 4 5
Monsanto 53 44 50 144
Mycogen 17 13 17 27
Novartis 34 29 34 74
Pioneer 176 123 128 463
Source: Chan, H. Phoebe (2006).
8
 Consolidation : Case Study of Monsanto
• Monsanto became world’s largest seed company by taking over

- Seminis for $ 1.5 billion. (World’s largest vegetable seed

company)

- Emergent Genetics for $300 million (3rd largest cotton seed

company US)

• Monsanto typically divides its R&D investment into three categories:

• one-third to drive discovery of new products;

• one-third devoted to improving current products;
• and one-third to providing ongoing support to the company’s
commercial organisation.

• The Company has a focused and integrated approach to R&D.

• Its research team has launched 10 commercial biotechnology trait

products since 1996.
9
 Consolidation in the Global Seed Sector:
Case of Monsanto
Global Share of Monsanto

GM Soybean GM Maize GM Cotton GM Canola

Global Coverage 119.5 47.7 22.2 10.6

(Million Acre)

Area under 109 46.4 14.1 6.3

Monsanto
(Million Acre)

Per cent Share 91% 97% 63.5% 59%

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 Policy Framework
• Majority foreign equity holding upto 51 per
cent equity allowed for trading companies
primarily engaged in export activities.

• Automatic permission was proposed for

foreign technology agreements in high
priority industries.

• The 1991 Industrial Policy also proposed to

amend the MRTP Act to remove the
threshold limits of assets in respect of MRTP
companies and dominant undertakings .
11
 Details of Joint Ventures and FDI in Indian
Seed Industry

Year Technical Financial Total Joint Amount in million

Ventures US $
Total 57 125 182 133.49

• New Destination
• Wave of New Technology
• Moving away from floriculture

12
Major Joint Venture Partners, 1991-1997

Others
5% US
Asia
15%
27%

EU
53%

13
Major Joint Venture Partners, 1998-2005

Others
13% US
34%

Asia
24%

EU
29%

14
 India’s Imports of Seeds, 1991-
2005, (US $ Million)

60
49.96
50 46.34

40 36.05
28.04
30
22.06
18.25
20 14.59
10 7.36

0
1991 1995 1998 2001 2002 2003 2004 2005

15
 India’s Exports of Seeds, 1991-
2005, (US $ Million)

600 567.32
536.31
500

400

300 252.62

200 168.28
129.89 150.13 137.88
100 49.65

0
1991 1995 1998 2001 2002 2003 2004 2005

16
Seed Companies with Institutional Biosafety
Committees (IBCs)

State No. of IBCs

Andhra Pradesh 17
Haryana 3
Karnataka 6
Maharashtra 13
Tamil Nadu 1
Gujarat 4
Delhi 2
Source: DBT, 2006.
17
 Number of Firms and Public Institutes
Importing Research Seeds
Crop Number of Firms Public Institutes
Cereals 1991 1996 2001 2005 1991 1996 2001 2005
Wheat 0 0 0 2 24 10 23 27
Barley 0 0 0 0 4 6 5 5
Rice 1 7 9 23 29 53 36 36
Maize 13 20 49 30 25 13 36 8
Sorghum 8 3 4 0 12 13 3 3
Pearl millet 1 0 1 0 5 3 6 0
Vegetables 5 14 9 7 45 36 31 41
Sunflower 4 6 4 2 11 5 2 2
Oilseeds 1 2 3 2 19 25 21 9
Cotton 6 3 1 6 4 2 1 6
Fruits 0 0 0 0 25 29 13 6
Pulses 3 0 0 0 44 40 17 24
Others(misc.) 7 6 5 0 74 54 18 14
Total 49 61 85 72 321 289 212 181
Source: Based on Personal Communication with NBPGR, 2006 and Khetarpal (2004). 18
 Transgenic Planting Material Imported
(11.12.1997-31.3.2006)
Crops No. of Source
Samples
Brassica spp. 199 Australia, Belgium
Chickpea 34 Australia, Scotland
Cotton 46 China, USA
Maize 50 USA, South Africa
Paddy 6898 Belgium, Germany, The Philippines,
Singapore, Switzerland, UK, USA,
Vietnam
Potato 10 USA
Soybean 359 USA
Tobacco 3 Canada
Wheat 43 Germany

Total no. 7642

Source: Based on Personal Communication with NBPGR, 2006. 19
 Policy Lessons: Seed Clusters

• Growing concentration should be addressed through various

policy mixes.
• In the seed sector it is found that the idea of cluster
formation is too narrowly focused in its geographical coverage.
• Unlike in the industrial sector, in agriculture one should have a
different approach for clusters. Though generally the clusters
come up with a highly localised concentration of specialised
skills and knowledge but over concentration of seed production
would have high costs in terms of environment and the supply
system. It is all the more desirable, given the huge size of
India and its emerging seed requirement.
• As of now 90 per cent of vegetable seed comes from
Rannabennur in Karnataka; 80 per cent of cotton comes from
Nadiad in Andhra Pradesh. Similarly, 90 per cent of pearl
millet comes from Andhra Pradesh again. This is not a very
20
viable situation.
 Policy Lessons

Harmonising Policies across States

• As agriculture is a state subject sometimes seed companies face
completely different policy regime sin different states.
• The variations range from packaging guidelines to the insistence for
signing MoUs for seed replacement in case of dispute with
consumers. In some cases the policy changes are so rapid that the
firm finds it difficult to cope up.
• There is an urgent need to make provisions for adequate protection
of intellectual property so that demands like samples of parental
seeds and hybrids for DNA fingerprinting are not resisted by the
industry as has happened in state of Andhra Pradesh.
• In states like Madhya Pradesh an undertaking is taken for
compensation against under performance of seeds. This practice has
been done away in states like Andhra Pradesh.

21
 Policy Lessons

Raising Entry-Exit Barriers: Industry for Self Regulation

• There are almost no barriers for entry and exit in the seed industry. The
fly-by-night operators exploit farmers and create confusion in the industry
and among the regulatory authorities.
• With the advent of biotechnology, the seed industry is likely to get polarised
on lines of high technology and low technology products.
• Rapidly evolving and costly agricultural biotechnology innovations and still
expensive regulatory regime may pose entry barriers especially for smaller
firms.
• The material transfer agreements and intellectual property rights may also
play respective roles in limiting entry into the agricultural biotechnology
sector. However, these would become effective once the enforcement
related institutional setting up takes a shape.
• In India, the setting up of PVFRA is a rather recent phenomenon. Its counter
part at the state level has yet to come up. Till then IPR violations leading to
the production of spurious seeds may well be imagined. Unlike the pesticide
or fertiliser markets there are no barriers in the seed sector. Though the
Seed policy 2002 proposes to implement some measures but one needs22to
look into their effectiveness and enforcement.
 Policy Lessons: Reorient Seed Subsidies

• There is a need to rechannel the subsidy or assistance being given to

state governments on various counts.
• The support in 1999-2000 was Rs. 1.9 billion. Out of this the key
recipient states were Andhra Pradesh (11 per cent), Gujarat (7 per
cent), Madhya Pradesh (9 per cent), Maharashtra (8 per cent), and
Rajasthan (9 per cent). The others all were below 5 per cent.
• In 2000-01, this amount remained almost same at Rs. 4.3 billion.
• Apart from this assistance, the state governments make available
their own resources as well to support the seed sector.
• The support should be more effective in the sense that producer and
farmers may have a wider choice. This would also help in ensuring
access to high technology products even by farmers who otherwise
find it a constraint.
• Karnataka, has increased the seed subsidy but the farmers may
select the seed company of their choice. 23
 Policy Recommendations

Enhancing Role of Private Sector in Extension

• Information on seeds is disseminated to farmers by
agricultural extension personnel, State Agricultural
Universities, Krishi Vigyan Kendras, etc. through leaflets,
pamphlets, radio and television programmes, articles in
newspapers and periodicals, distribution of seed minikits,
field demonstrations, awareness campaigns, Krishak
Goshthis, Rythu Bazars, Kisan Melas and Agriculture
Exhibitions, etc.

24
 Policy Lessons: Increasing Knowledge
Intensity
• The post Green Revolution R&D system in the agriculture sector is
passing through a phase in which the private sector is delivering many
more products than their counterpart in the public system.
• A viable and strong public private partnership with well-defined public
policy objectives may well help in advancing the technology frontier
but may also facilitate access to technology products by the farmers
of all categories.
• It is important to place inputs such as seeds in the larger context of
the agriculture innovation system in which rising input costs, which
have emerged as a major challenge for the adoption of new
technologies.
• The recent controversy on Bt cotton seeds, in India, is a case in point.
Since greater R&D resources are required for high technology
products coupled with a strong IPR regime, it is not difficult to
imagine the entry of higher priced products in market.
25
 Overview of Policy Regime
• New Industrial Policy (NIP) facilitated the growth of
Indian private seed industry.

• No accurate data but the share of private sector

expanded and that of the public sector declined in
several crops.

• Public sector seed companies confined to certified

seeds of high volume, low value segment.

• Policy regime in the Nineties increased foreign

investment and the entry of major TNCs in terrains
hitherto unknown to them.

• With new technology the private sector has entered

in large volume low value crops as well. 26