Seed Report

A Report on

Seed Industry

Institute of Agri Business Management Rajasthan Agricultural University Bikaner, Rajasthan

Submitted to Dr.(Mrs.) Madhu Sharma

Submitted ByHarshit Chittora

Associate Professor

MBA (AB) 1st year

Contents – 1. Introduction 2. Historical perspective 3. Structure of Seed Industry I. Major global players (2004-05) II. World's Top 10 Seed Companies – 2006 III. Key Indian Seed players IV. Major Player in Vegetable Seed 4. Seed Industry in India: Poised for a leap 5. Seed supply chain I. Demand & Supply of Seed in India II. Employment generation III. Seed Replacement Rate 6. Seed Policies and Regulation 7. Context for Research 8. Seed Pricing 9. Seed Industry and GATT/WTO/TRIPS 10. Market Structure and Regulation 11. Relevance and need for biotechnology 12. Need for transgenics 13. Conclusion

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Introduction SEED is the most important input component for productive agriculture. In the significant advances that India made in agriculture in the last four decades, the role of the seed sector has been substantial. The expansion of seed industry has occurred in parallel with growth in agricultural productivity. Given the fact that sustained growth to cope with increasing demand would depend more and more on the pace of development and adoption of innovative technologies, the seed would continue to be a vital component for decades to come. The organized seed industry of the country is just forty years old. Yet, its growth has been phenomenal. India is one of the few countries where the seed sector is already reasonably advanced. The private seed industry is no more confined to just production and marketing of seed. It has as well acquired technological strength to cater to the varietal needs of tomorrow. The Indian seed industry is currently valued around Rs 2500 crores ($ 500 million) and is proposed2 to be around 3750 crores ($ 750 million) by 2002. There are about 150 organized seed companies in India today. Several companies have Government of India (DSIR) recognized research and development departments and have produced

=

and released a large number of varieties and hybrids in several crops. The contribution of private research in terms of value is steadily increasing. The share of research hybrids in total turnover of crops like pearl millet, sorghum-sudan grass, sunflower, maize, sorghum and cotton was about 70% in 1997–98 compared to 46% in 1990–91. Private R&D’s real investment in research has quadrupled between 1986 and 1998. Subsidiaries and joint ventures with multinational companies account for 30% of all private seed industry research3. A study made over nine private seed companies indicates that the amount spent on R&D ranged from 0.78% (0.49 crores) to 15.08% (22.62 crores) (Companies Annual Reports 1998–99). Some of the companies initiated the work on development of transgenic crops. In March 2002 the first transgenic hybrid cotton seed was allowed for commercial cultivation in the farmer’s field. This article provides a historical perspective to the development of seed industry in India, its current statusand future. Besides, some suggestions are also provided for improvement and modification in the regulatory procedures, particularly in case of transgenic crops.

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Historical perspective The National Seed Corporation was established in 1963. The Government of India enacted the Seeds Act in 1966 to regulate the growing seed industry4. The sixties were the most eventful times for Indian agriculture, not only because of introduction of high-yielding cereals, particularly wheat and rice but also for many other positive developments related to seed such as, constitution of Seed Review Team, enactment of Seeds Act, 1966 and formation of National Commission on Agriculture. This was the period, during which the private sector significantly stepped into the seed business. The Seeds Act stipulated that seeds should conform to a minimum stipulated level of physical and genetic purity and assured percentage germination either by compulsory labelling or voluntary certification. Further, the Act provided a system for seed quality control through independent State Seed Certification Agencies which were placed under the control of state departments of agriculture. The eighties witnessed two more important policy developments for the seed industry, viz. granting of permission to MRTP/FERA companies for investment in the seed sector in 1987 and the introduction of ‘New Policy’ on seed development in 1988 (ref. 5). The 1991 Industrial Policy made a radical departure from the earlier policy on foreign investment. Under this policy seed production was identified as a ‘high priority industry’. The New Policy on Seed Development greatly liberalized import of vegetable and flower seeds in general and seeds of other commodities in a restricted manner and also encouraged multinational seed companies to enter the seed business. More than 24 companies initiated research and development activities and have made substantial commitments for investment on research and development in response to this policy initiative. The investments are expected to increase with increasing volumes of seeds of proprietary hybrids and preparedness of farmers to pay higher price for quality seed. A draft Seeds Act 2001 is being finalized on the basis of the recommendations of Seed Policy Review Group. It would replace the existing Seeds Act of 1966 and Seed (Control) Order of 1983. The proposed legislation features establishment of National Seeds Board (NSB) and compulsory registration of any seed with the board before sowing or planting could be done for commercial purposes.

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Structure of Seed Industry The most important characteristic, if it can be called that, of the seed industry is its heterogeneity in many dimensions. The product segments correspond to all the major field crops and vegetables. With respect to product type, a major distinction is between hybrids and open-pollinated varieties. Seeds of varieties can be reproduced for many generations with little deterioration in quality. As a result, beyond the initial purchase, farmers can multiply their own seed. This is not a viable strategy with hybrids because they suffer noticeable declines in yields in subsequent generations. As a result, hybrid seed tend to be repeatedly purchased. The major cereals of rice and wheat are principally open-pollinated varieties.5 Hybrids dominate in coarse cereals consisting of sorghum, pearl millet and maize. Hybrids are also important in cotton and oilseeds. In terms of organization, the seed industry consists of a large public sector and a growing private sector. The public sector consists of the National Seed Corporation, the State Farm Corporation of India and 13 State Seed Corporations. These corporations multiply and market varieties bred by the public sector institutions, i.e., the research institutes financed by the Indian Council for Agricultural Research (ICAR) and the State Agricultural Universities. There are no firm estimates of the number of private seed firms. Estimates vary from 200 to 500. Private seed firms are heterogeneous with respect to size, research capacity and product segments. Plant breeding research is found in the larger firms. Unlike the public sector, where research is separate from seed production and marketing, these functions are integrated in the private firms. The other striking difference is in product types. The private sector focuses largely on hybrid seed. It is therefore unimportant in the product segments of wheat and rice except as a seller of public varieties and hybrids.6 On the other hand, the private sector is a major player in the hybrid seed markets of vegetables, sorghum, oilseeds (e.g., sunflower), maize, cotton and pearl millet. In terms of ownership, private firms are closely held and not listed in the stock exchanges although some of the large firms have sold equity to foreign seed companies. Foreign firms maintain a presence through equity stakes in Indian firms, technical alliances or through wholly owned subsidiaries. Seed firms, whether in the private or public sector, outsource the production of seeds to contract growers. These growers are supplied with the foundation seed that is used

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to produce commercial seed. The seed industry is one of the earliest examples of contract farming in India. For the cereal crops of rice and wheat, the principal source of seeds is not the seed industry whether private or public but the farmers themselves. Seed saved from the preceding crop supplies nearly 90% of requirements in these crops.7 In some cases, a large farmer or groups of farmers specialize in growing seeds and supply to neighbouring areas. In the case of sorghum, maize and sunflower, the proportions of seed supplied by the commercial seed industry ranges between 25% and 43% (see the estimates of Chopra and Thimmaiah quoted in Shiva and Crompton, 1998). The value of the seed market is estimated to be close to $ 1 billion (www.worldseed2003.com/invitation.htm). The seed industry was probably half this size in the early part of the 1990s (Shiva and Crompton, 1998). It has therefore grown rapidly in the last decade. Estimates of the share of the private sector range from 60% to 70% (Shiva and Crompton, 1998). Because the private sector sells high value hybrids, their share in value is greater than their share in volumes.

Major global players (2004-05)

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The World's Top 10 Seed Companies - 2006 Based on 2006 Seed Revenues 2006 seed sales US $ millions 1. Monsanto (US) $4,028 2. Dupont (US) $2,781 3. Syngenta (Switzerland) $1,743 4. Groupe Limagrain (France) $1,035 5. Land O' Lakes (US) $756 6. KWS AG (Germany) $615 7. Bayer Crop Science (Germany) $430 8. Delta & Pine Land (US) (acquisition by Monsanto pending) $418 9. Sakata (Japan) $401 10. DLF-Trifolium (Denmark) $352 Company

Source: ETC Group Based on 2006 revenues, the top 10 seed corporations account for 55% of the commercial seed market worldwide.

Key Indian Seed players

7

Major Player in Vegetable Seed Percentage

Indo American Mahyco

16% 36%

11%

Namdhari Novartis Century

7% 4% 5%

7%

7%

7%

Pahuja Sungrow Nath Others

Concentration Trend Continues: According to estimates provided by industry analysts, Context Network, the value of the overall commercial seed market was $22,900 million in 2006 (includes seeds purchased from public breeding programs).1 By contrast, just two years ago, ETC Group reported that the top 10 accounted for 49% of the worldwide market. In 1996 - one decade ago - the top 10 seed companies accounted for 37% of the worldwide market - and Monsanto did not even appear on the list. The market share of the top 10 seed companies is even greater when looking at the proprietary (patented?) seed market. According to Context Network, the global proprietary seed market was worth $19,600 million in 2006. •

In 2006, the top 10 companies account for $12,559 million - or 64% of the total proprietary seed market.

•

Monsanto - the world's largest seed company - accounts for more than onefifth of the global proprietary seed market.

8

•

The top 3 companies - Monsanto, Dupont and Syngenta - account for $8,552 million - or 44% of the total proprietary seed market.

•

The top 4 companies account for $9,587 million - or almost half (49%) - of the total proprietary seed market.

Seed Industry in India: Poised for a leap Seeds form the fundamental and crucial input for sustained growth in farm production, often stimulating the use of new methods, machinery and yield-enhancing agro-inputs. The role of the seed sector is not only to ensure adequacy in seed quality but also to ensure varietal diversity. Today, the Indian seed programme boasts one of the biggest seed markets in the world, with annual sales at around US $920 million. Of this, domestic off take accounts for US $900 million and sales in the global market account for the remaining US $20 million. The New Policy on Seed Development (NPSD), established in 1988 with the objective of augmenting productivity and output quality, stimulated major growth in the industry as it attracted a lot of investment in seed business from major domestic seed companies. Given the growth of the seed sector in recent years, India has the potential to become the foremost player in the seed export business in the developing world with prospective markets in Asia, Africa and South America. Public Sector: Like many agriculturally developed Asian nations, India has sizeable public and private sector seed businesses. Giant public sector players include the National Seeds Corporation (NSC), the State Farms Corporation of India (SFCI) and the thirteen State Seed Corporations (SSCs). NSC was the first public sector organization, established in 1963, and remained virtually the only agency for seed production for around 13 years. Its role extended to several developmental programmes including training, quality control and extension activities in seeds. This was followed by the setting up of the SSCs under two consecutive plan periods, supported by the World Bank, and these largely adopted the role of the NSC in the Indian States. These corporations engage principally in production and marketing of seeds of high yielding and hybrid varieties developed by the public sector. Private Sector: Although private seed companies such as Poacha and Sutton have been established since the pre-independence era, accelerated growth of the private sector began only after the introduction of the new seed policy in 1988 which ushered in a liberal business climate. Currently there are over 200 private seed companies, 9

together with a few multinational companies, and these tend to focus on low volume, high value crops with the principal effort being placed on creating hybrids for oilseeds, maize, cotton and vegetable crops. The private sector accounts for 70% of the market in terms of market turnover whereas the public sector has the greater share in terms of volume sales. Global Initiatives: India today has a critical mass and level of growth that it could use not only to cater to the growing domestic requirement but also to make a concerted effort for global trade under provisions of GATT and WTO. Furthermore, India is endowed with second largest area of farmland, and the largest area of irrigated land, in the world and, with its huge germplasm diversity, its seed industry is well placed to serve both domestic and international markets.

Public v/s Private ownership

13% 13%

41%

public sector large medium small medium unorganized

33%

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Seed supply chain

ICAR Inst. SAU, etc

Lifting Allo t Pro ment duc for tion

Allocation for Production

Govt. of India In Bre dent o ede f r se ed

Pro d Bre uction ede r Se of ed

Production of Breeder Seed

ICAR

Allo Bre tment ede o r se f ed

seed Certified n Distributio

SSC, NSC, SFCI SAI, etc. d see tion n nda o Fou roducti P

Certified seed Production

Agencies

Distributor

Agencies Foundation seed to Certified seed

Demand & Supply of Seed in India  Meet only 12% of the total seed used for sowing each year.  Large area is sown with the farmers' save seed.  SRR (Seed Replacement Rate) is very low.  Certified production was 0.298 LT in 1981-82 and in 2002-03, it was 9.3 lakh quintal  There is almost a plateau in seed production and distribution in India and they grew with insignificant growth rate of less than 1% per annum during nineties.  India is Ist in the world to develop hybrids in many crops but area coverage under hybrids is low due to seed supply deficit e.g. cotton (3.45%), maize (7.90%), sunflower (8.54%), sorghum (17.81%), pearlmillet (26.79%).

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 Share of hybrids in total seed produced in the country is not encouraging e.g. cotton (23%), maize (59.6%), sorghum (77.6%), castor (75%), pearlmillet (60.6%) and sunflower (29.6%).

Employment generation CROP

Hybrid seed production

(hybrid)

Area

Man days

Crop Duration %

(Acres)

(days/acre)

(Days)

Contribution

(Tons) Cotton

6000

20000

1200

200

82.56

Maize

65000

36000

40

110

4.95

Millet

18000

35000

40

110

4.82

Sunflower

6000

13933

60

110

2.72

Sorghum

18000

20,000

40

110

2.75

Paddy

4000

8000

80

135

2.20

Seed Replacement Rate Crops

Seed Replacement Rate

Wheat

: 13%

Paddy

: 19.16%

Maize

: 24.41%

Jowar

: 26.71%

Bajra

: 51.02%

Gram

: 7.09%

Urd

: 20.48%

Moong

: 19.48%

Arhar

: 13.60%

Groundnut

: 5.5%

Rapeseed and mustard: 66.96%

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Soybean

: 5.58%

Sunflower

: 19.61%

Cotton

: 37.25%

Jute

: 68.49%

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Presently Indian seed industry is governed by the following Acts: - Seed Act

1966

- Seed Rules 1968 - Seed Control Order 1983 - Essential Commodities Act 1955 - Package Commodities order 1975 - Standrads of Weights and Measures Act 1976 - Consumer Protection Act 1986 - Export Regulations and Quarantine - Plants, Fruits and Seeds (Regulation of import into India) Order 1989 - Urban Land Ceiling Act 1976 - State Acts of land acquisition/land use - State Acts for the control/movement of crops and seeds

Seed Policies and Regulation The government regulates the seed industry and the seed trade in various respects. The Seed Act of 1966, the Seeds Control Order of 1983, and the Seeds Policy of 1988 are the major components of policy specific to the industry. The seed industry has also been subject to policies relating to industrial licensing and direct foreign investment that are applicable to all industry. There have been two recent developments. In September 2001, the Plant Variety Protection and Farmer’s Rights Act came into being. In June 2002, the government announced a new seeds policy that significantly alters the framework of regulation. The Seed Act of 1966 and the Seeds Control Order of 1983 provide statutory backing to the system of variety release, seed certification and seed testing. Varieties are released after evaluation at multi-location trials for a minimum of three years. Varieties approved are “notified” which is a prerequisite for certification. While all public sector varieties go through this process, it is not mandatory for private varieties.

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Certification is a process that certifies that seed is of a specified variety and is of acceptable genetic purity. Usually, seeds are also tested for physical characteristics such as germination capacity, analytical purity and pathogen levels. Certification requires that that the certifying agency has access to the parent lines of the variety. In India, while all public sector varieties are certified, the process is voluntary for private varieties. Often private seed firms do not submit their varieties for certification either because they do not wish to go through the time consuming process of notification or because they have their own quality control processes. However, uncertified seeds are required to be truthfully labeled listing quality attributes on the label. The seed control order brings seeds within the scope of the Essential Commodities Act that regulates the marketing of essential items. All seed sales outlets have to be licensed and must observe certain marketing practices such as public display of stocks and prices. Major changes in this system of regulation are proposed in the National Seeds Policy of 2002. Variety registration (i.e., notification) will now be mandatory for all varieties, new and extant. The evaluation will be done over three seasons of field trials. However, certification will continue to be voluntary. The emphasis on registration in the new seeds policy ties in with the demands of the Plant Variety Protection and Farmer’s Rights Act passed in 2001. This Act provides for plant breeder’s rights, which requires extant and new plant varieties to be registered on the basis of characteristics relating to novelty, distinctiveness, uniformity and stability. Besides regulating quality, the government has also controlled imports and exports of seed. The Seed Policy of 1988 allowed limited imports of commercial seed. Curbs were removed from imports of seeds of vegetables, flowers and ornamental plants. Seeds of coarse cereals, pulses and oilseeds could be imported for upto two years provided this finally led to technology transfer in the form of parental lines/breeder seed. The new policy of 2002 allows imports and exports of seeds of all crops. However, all imported seed is also required to go through the process of registration. Prior to 1991, the seed industry was also subject to the policies on industrial licensing and foreign direct investment that applied generally. The seed sector was reserved for the small-scale sector and the entry of foreign firms was tightly regulated. These controls have fallen by the wayside as a consequence of the economy wide reforms of 1991.

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While the system of mandatory registration will irk private seed firms because of its time consuming process as well as the requirement to trust the registry with their proprietary breeding material, the overall emphasis of the new seed policy seems more favourable to the private sector than in the past. The goal seems to be to facilitate private enterprise rather than to control it.

Corporate Profile and Objectives NSC was established to organise the development of a sound seed industry in India and a first step towards that direction, to function as a foundation seed production, stocking and supply organisation. The main objectives set before it, inter alia, were :

(i)

To carry on in India the production, processing, drying, storing, distribution and transportation of agricultural seeds. To enter into agreement with individuals, co-operative socieities, corporation

(ii) and government agencies in the growing processing, storing, distribution, transporting and selling of agricultural seeds. To undertake by inspection and any other means, seed quality control (iii) measures in all facets of seed business carried on behalf of or in co-operation

(iv)

with the Corporation. To store and stock pile reserve supply of any seed needed for improvement of agriculture in India.

Objectives of National Seeds Corporation 1. Monitoring availability of breeder, foundation & certified seeds of all Indian varieties and ensuring timely availability there of. 2. Setting up adequate processing facility to ensure timely processing of seeds. 3. Setting up conditioned as well as proper storing facilities to ensure proper storing of raw & processed seeds as well as reserve stock. 4. Undertaking field inspections, periodical quality control checks as well as continuous testing of seeds to ensure quality of seeds. 5. Developing seed dealers network with emphasis on co-operatives as far as possible to distribute seeds through out the country. 6. Making available seeds to deficit states in time and in sufficient quantities.

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7. Imparting training to personnel engaged in various activities of seed industry.

NSC seeds for Farmers Prosperity 1. Produced under suitable agro-climatic conditions in selected seed production areas. 2. Quality control at all stages of production under the care of experts. 3. Treatment with appropriate chemicals assuring protection in storage and during emergency in the field. 4. Healthy & vigorous seeds for high germination and field standards. 5. Scientific processing ensures removal of weed seeds, other crop seeds under sized, non-viable seeds and inert matter. 6. NSC seeds are suitable for sowing under varying climatic conditions. 7. Sold in handy sealed packets or bags with tags containing all relevant information. 8. NSC seeds are available from thousands of retail outlets at short bullock cart distance.

Context for Research In the past, the public sector was the principal vehicle for the development and diffusion of new seeds. Indeed, the seed industry in India had its beginnings in the early 1960s with the establishment of the public sector National Seeds Corporation. The NSC provided foundation seed, training and technical assistance to state governments and private companies. This was followed in 1969 by the Terai Seed Development Corporation that became the model for state seed corporations established in the 1970s and 1980s. The primary purpose of these and related public sector organizations (such as the state seed certification agencies) were to produce, certify and distribute high quality seeds that were the product of public research. But they also stimulated private sector activity in direct (through distribution of foundation seed) and indirect ways (through the creation of expertise in seed technology, processing and distribution) (Candler, 1995). As the import of commercial seeds was prohibited and since foreign direct investment was not permitted, private sector activity depended on home grown firms. Consequently, it grew in incremental steps focusing first on vegetables and later moving on to sorghum and pearl millet.

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The obstacles to private industry were not just their lack of capabilities whether in research or access to capital and technology. There was also lack of confidence, on the part of the government, about leaving these activities to the forces of market. Probably, the most important of all is the fact that with certain kinds of varietal development, the innovator cannot appropriate a significant enough share of the gains leaving little incentives for private effort. This is certainly true for seeds of openpollinated varieties (which includes rice and wheat) that can be reproduced by farmers for their own use or sale to other farmers. On the other hand, this scenario is ideal for public intervention. Not only does public plant breeding fill this gap, the ease of reproduction aids rapid diffusion and adoption. As a result, even in cross-pollinated crops, public sector research emphasized variety development rather than hybrids. Although hybrids, wherever technologically feasible, offer a route for private sector development, they were not always regarded with much promise in the initial years. It was thought that the technology does not offer much to small farmers as hybrid seed would be high priced and would have to be repeatedly purchased. As a result, government policy focused principally on public sector seed provision and neglected private industry. In recent years, however, the private seed industry has grown to be a sizeable presence in many crops. In the last decade, regulatory reforms have eased the restrictions on the entry of large and foreign owned private firms into this industry. It is also expected that the strengthening of intellectual property rights and the new technologies of genetic selection offered by biotechnology would make this sector even more attractive for private investment. These developments have affected the structure of the seed industry worldwide. In the United States, private spending for food and agricultural research tripled in real terms between 1960 and 1982. As a result, the private sector invests considerably more in food and agricultural R&D than the government. Furthermore, private research has expanded its range of activities. While earlier most private research in the U.S. was for farm machinery, new food products and processing methods, the private sector has since developed research capabilities in plant breeding that was once a traditional area of public sector research (Fuglie et.al, 1996). In India too, private sector spending on seed R&D is rapidly growing. According to one estimate, R&D effort (measured by rupee investments, technical personnel, size of experiment stations) in the private sector tripled within a short span of about 8 18

years from 1988 to 1996. This period was associated with changes in government policy towards the seed industry as well as the industry wide economic reforms. The same study concludes that about 50% of the observed increase in R&D was attributable to the liberalization in government policies that allowed entry into the seed industry by large domestic firms as well as foreign firms (Pray, Ramaswami and Kelley, 2001). The growing importance of the private seed industry has prompted new policy concerns. Broadly speaking, there are three inter-related issues. First, is the issue of efficiency. Since the entry of private players is possibly only because of greater appropriability (of the gains from higher productivity), does the exercise of resulting monopoly power reduce social gains and in particular, the benefits to farmers and consumers? The earlier literature that estimated the gains to agricultural research typically assumed competitive markets and therefore does not address the new situation. This question is important because some of the regulatory reform, like the New Seed Policy of 1988, was explicitly motivated by the objective of facilitating rapid technology transfer from the private sector (and in particular, the multinational seed firms) to farmers. The Seed Policy of 2002 is even more direct in its goal of fostering the growth of a private seed industry. The last decade has seen the entry of major international seed firms into the Indian market. However, it has also been accompanied by consolidation of the industry through mergers and acquisitions. The entry of large firms, backed presumably by formidable marketing and technological prowess, has also raised fears about the viability of smaller seed firms. Second is the issue of equity. Would the products of private technology suppliers be so high priced that small farmers would not be able to afford it? Note that such issues are not exclusive to private research; they were debated vigorously in the context of the Green Revolution technologies as well although the concerns there were not with the price of seed but with the cost of complementary inputs. Third, do these developments call for a redefinition of the priorities of the public sector whether in terms of research, seed production, certification and environment regulation? On the one hand, there is now considerable expertise outside the public sector that is capable of applied plant breeding, seed production, seed certification and testing. On the other hand, the public sector constitutes a countervailing power in the marketplace. Furthermore, it is still the major supplier of seeds of open-pollinated varieties. 19

Seed pricing The importance of price Price has different meanings for different groups of people: A. To the buyer price is a cost which is used as a measure of value; the buyer valuates one variety or source of seed against the alternatives. B. To the seller price is revenue and therefore a key element in the marketing mix; setting the right price is an important tactical decision and is a key factor influencing revenue and profit. C. To a government price may mean popularity and votes and is therefore a sensitive political issue; governments may therefore seek to influence and control seed pricing. The importance of price varies from one market to another and between different segments in the same market. For example, non hybrid seed, which the farmer can save, will be more price sensitive than hybrid seed. Price will be a more critical factor in marginal farming areas, where spending power is low, but less important where high yields can be obtained and farm produce can be sold profitably. Providing the benefits of the seed are understood, it is other factors, such as the availability of fertilizer and confidence in the produce market, rather than price that dominate the farmer's decision to purchase. THE COST OF SEED Cost is a major factor in any discussion about price. Thus the costs involved in putting a bag of seed on the farm must be recorded, analyzed and known to management. These costs will include the cost of the processed and packaged seed and the marketing costs associated with selling and distribution. Costs may be grouped according to the activities involved notably: 1. Seed production, involving procurement, processing and storage, quality control and certification. 2. Seed marketing, taking into account marketing, market research, advertising and promotion, sales and distribution. 3. Administration and finance.

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For a company planning a seed production programme the working capital needed to procure and process seed has to be assured. If it is not to be financed out of existing resources then short-term loans are required to ensure that there is sufficient working capital. Seed held in stock at the various stages of processing also has to be financed. This is a significant cost item and there may be serious financial consequences for a business that has high stock levels.

Seed Industry and GATT/WTO/TRIPS  GATT has a number of implications for the seed trade in Asia Pacific region including India.  The Uruguay round of GATT sought to expand the scope of the organization by including service investment and Intellectual Property Agreement provided for setting up WTO.  Four major forms of intellectual property rights can be applied to agricultural plants •

Patents

•

Plant Breeders’ Rights

•

Trade Secrets

•

Trade Markets

 Article 27.3 b of the TRIPs states that “ Parties shall provide for the protection of plant variation either by patents or by on effective Sui generic systems or by combination thereof.”  India is balance to meet this requirement through a Sui generic systems for the protection of plant breeders’ rights, the proposed legislation also seek to safeguarded farmers and researcher’s rights. Framers’ right to use farm saved seed are projected.  In USA, plant varieties are protected either by plant or Plant Breeder Rights  In India, it is protected by the Plant Variety Protection and Farmer’s Rights Act, 2001.  For satisfying the TRIPs GOI, amendments were made in the Indian Patent Act (1970) for the third time on 26th December 2004. In this act, medicines, foods, biotechnology aspects have been included. 21

Indian Patent Act of 1970/TRIPS Only process not product patents inProcess and product patents in almost food, medicines, chemicals Term of patents 14 years; 5-7 in

all fields of technology Term of patents 20 years

chemicals, drugs Compulsory licensing and license of

Limited

compulsory

licensing,

no

right license of right Several areas excluded from patentsAlmost all fields of technology (method of agriculture, any processpatentable. Only area conclusively for

medicinal

treatment

of

surgical humans,

or or

otherexcluded from patentability is plant similarvarieties; debate regarding some

treatment of animals and plants toareas in agriculture and render

them

free

of

disease

orbiotechnology

increase economic value of products) Government allowed to use patented Very limited scope for governments to invention to prevent scarcity

use patented inventions

The Protection of Plant Varieties and Farmers’ Rights Act  Rights Act was passed by the Indian Government in 2001.  The Sui generis system for protection of plant varieties was developed integrating the rights of breeders, farmers and village communities, and taking care of the concerns for equitable sharing of benefits.

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Comparison of India's Plant Variety Act to the UPOV Acts of 1978 and 1991

Scope of

UPOV 1978 Act UPOV 1991 Act

India's Plant Variety Act

Production and Production,

Production, marketing,

breeders' rights marketing of

marketing,

exporting and importing

propagating

exporting, and

of propagating of

material

stocking of

propagating material

propagating material Extent of

Min. 24 species 15 species

All species

Min. 15 years

Min. 20 years

15 years

Farmers'

Farmers' privilege

Farmers' rights

rights

privilege in

optional and under specifically recognized

Compulsory

practice conditions In case of public In case of public

In case of public

licensing

interest (not

interest(not

interest, defined as

defined)

defined)

reasonable availability

coverage Term of protection Exception to

of seeds, and supply of export markets

Market Structure and Regulation In the global seed industry, the seed business is usually a part of a larger agricultural business consisting most often of agro-chemicals. In the last decade or so, there was a further wave of consolidation involving pharmaceutical and agricultural businesses. However, in recent years, this trend has weakened and even reversed as these “life sciences” firms have spun off their agricultural business primarily because investors perceived the earnings from agriculture to be more volatile on account of the controversies over GMO food. Monsanto (which has acquired DeKalb Plant Genetics, the international seed business of Cargill and Plant Breeding International and many other smaller firms), Aventis Crop Science (now taken over by Bayer), Syngenta (the agriculture arm of the merger between Novartis and AstraZeneca), Dow Agro

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Sciences (which acquired Cargill Hybrids) and DuPont (which acquired Pioneer HiBred) are some of major input supplying agricultural businesses today. The consolidation in the global seed industry is attributed to the rising cost of research, the patenting of life forms and the scramble to control access to elite germplasm. The impact of these changes in India has so far been limited to changes in ownership rather than a dramatic reduction in seed companies. But they have raised fears of corporate control of agriculture. In the United States, corporate control is seen to be most prominent in the livestock sectors where producers are contractually tied to agri-businesses in the supply of inputs as well as in marketing. It is not clear whether smallholder agriculture offers greater or lesser opportunities for corporate control. As issues of market structure have traditionally been analyzed by looking at the market shares of the leading seed firms, there has not been much research on the market structure at the micro level. How do firms compete at the retail level? What choices do farmers exercise? According to Shiva and Crompton (1998), the marketing strategies of seed firms aim at persuading farmers to switch to hybrids from open-pollinated varieties. Some of these strategies are organization of field days and demonstration plots, using field assistants to visit farmers, farmer advocacy by the selection of model farmers, customer contact programmes, free distribution of farmer’s handbook and free distribution of small packets of seeds. Yet, the same study points out, the hybrid seed market is fickle and farmers’ preferences for particular brands of seed change rapidly reflecting the specific marketing success of individual company. This suggests that seed firms in India have not yet built successful brands that could be leveraged into some degree of monopoly power. At the same time, it has also been observed that public hybrids sold under private brand names are sometimes sold at premiums reflecting the farmers’ perceptions of quality. Tripp and Pal (2000) studied the information flow between seed firms and farmers in the pearl millet market of eastern Rajasthan. They found that even in areas where the use of private hybrids is extensive, while farmers can recall the brand or the company that produced their seed they cannot often distinguish between a company’s hybrids. This is possibly because companies invest resources in advertising company brands rather than in communicating information about the varieties. As established seed companies have reputations to protect, branding is a convenient short-cut for communicating product quality. 24

Branding is also an entry barrier to small and new firms that cannot afford advertising or do not have past reputations to build on. Ideally, seed certification should provide the route for small firms to convey signals about their product quality. However, Tripp and Pal find that such information is not used by farmers. The farmers in the survey could not explain the difference between certified and truthfully labeled seed. Thus, in the absence of farmer education, quality regulation fails to protect farmers and neither does it reduce barriers to entry that are created by branding.

Relevance and need for biotechnology At the current pace of growth, meeting the future food grain demand would be an uphill task. The new technologies for increasing yield should also be sustainable in the long run. The high-yielding technology that heralded the Green Revolution has, no doubt, rescued the country from chronic food deficiency and starvation but it has had its adverse effects too. The high input cultivation of rice and wheat has led to excessive water use and eroded soil quality; indiscriminate use of chemical pesticides has led to pesticide resistance making pest management increasingly difficult11. Any scope for pest control through host plant resistance is becoming limited on account of shrinking sources of resistance. Weed infestation causes heavy crop losses, if not controlled in time. The estimates of losses caused due to pests and weeds range between 10% and 40% but in some cases the losses could be much more12. Beyond herbicides, which are weed specific, there are no means to manage the wide weed spectrum. Limited variability for yield-related traits is slowing down the progress in yield enhancement. Hybrid technology, though a potential technological option, has not yet become a reality in several crop plants for want of stable cytoplasmic male sterility–fertility restoration system, as is found and exploited in sorghum, pearlmillet, sunflower and rice. In crops like wheat, heterosis is being commercially exploited in India from this year. In crops like Indian mustard and in pulses likepigeonpea and safflower though exploitable hybrid vigour is quite sizeable, for want of stable male sterility/ restorer systems and lack of economic hybrid seed production technology, the scope for increasing yield has been limited. Many of our staple food are characterized by deficiency of one or the other nutrients and excessive dependence on the same has led to nutrition deficiency related health disorders.

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Need for transgenics Plant breeders can rectify problems in a crop only when there is variability available for the desired character within the compatible species complex. Transfer of useful traits from distantly related species which do not sexually cross with the crop plant is not possible through conventional recombination breeding procedures. Considering that many problems still remain unsolved and that the currently available technologies are inadequate to solve them, there is need for alternate technologies. Recombinant DNA technology that enables movement of genes of interest across sexual incompatibility barriers is one approach plant scientists are relying upon worldwide today to find genetic solutions to specific problems13,14. Recognizing the potential of genetic engineering and biotechnology and its relevance to India, the Ministry of Science and Technology established the Department of Biotechnology (DBT) in 1986, exclusively to develop and apply biotechnological approaches in agriculture, animal science and human health15. The Ninth Plan outlay of DBT was around at Rs 1026 crores, more than double that in the Eighth Plan (Rs 427 crores)16. The first transgenic Bt cotton underwent field-testing in 1995. Today 185 institutions, which include both public research institutions and private research laboratories, are engaged in transgenic research. Currently, transgenic research is being done on several field crops, viz. cotton, Indian mustard, corn, potato, tobacco and rice and in vegetable crops namely tomato, brinjal, cauliflower, cabbage, chillies and bell pepper. The problems receiving priority attention include insect pest control, hybridization systems and nutrition improvement11. Genetically engineered hybrids and hybrids with unique characteristics such as pest resistance are of special interest to the private sector institutions, as they provide a degree of certainty, offsetting the risks to their investments in biotechnology1. Two transgenics now under field-testing, viz. Bt cotton hybrids against bollworm complex and Indian mustard (Brassica juncea) for exploitation of hybrid vigour are of this kind. Several large and medium-seed companies with turnovers ranging from Rs 35 crores to 100 crores are intensively pursuing full-fledged in-house agro-biotech research and development either on their own or through joint ventures with foreign companies. The fact that 23private sector institutions have today their own Institutional Biosafety Committee (IBSC), which is

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mandatory under the guidelines for institutes engaged in genetic engineering research, is indicative that private companies are as serious and interested as public institutions in pursuing transgenic research17. Transgenics will have a major impact on seed business. For instance, as new varieties with improved performance enter the market, shares of individual varieties will shift quickly. Dramatic increase in the annual research expenditures of private companies engaged in biotechnology research is yet another indicator to the increasing involvement of private sector in biotechnology research.

Conclusions The Indian seed industry is currently valued at more than Rs 2500 crores with about 150 organized seed companies. The seed industry has grown steadily in the last four decades. There is seed legislation in place and a Draft Seeds Act of 2001 is being finalized on the basis of the recommendations of Seed Policy Review Group. It will replace the existing Seeds Act of 1966 and Seed (Control) Order of 1983. The proposed legislation features establishment of National Seeds Board and compulsory registration with the Board of any seed for the purpose of sowing or planting. The seed industry has Government of India (DSIR) recognized research and development departments which have resulted in a large number of private research varieties and hybrids. A study based on the 1998–99 annual report of nine seed companies has indicated that 0.78% (0.49 crores) to 15.08% (22.62 crores) of the total turnover of the companies is spent on R&D. The availability of data for analysis of the Indian private sector is problematic because it is often inaccessible and considered strictly confidential. Therefore recognized National Seeds Associations have an important role to play. The first transgenic crop, cotton hybrids with Bt gene, have been cleared for commercial cultivation. The current regulatory system requires coordination among 3 to 4 ministries. A singlewindow clearance is recommended for faster release of useful transgenic crops. The speedy implementation of the Enactment of the Protection of Plant Varieties and Farmers’ Rights Act is urged. There is a need for promoting joint venture collaborations between industry and national and international institutions. The need for creation of awareness among farmers and general public on the benefits and risks associated with transgenic crops is also very important.

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Reference •

www.manage.gov.in

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www.indiaseed.com

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www.agricoop.nic.in

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www.seednet.gov.in

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www.indianagronet.com

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www.indiabudget.nic.in

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www.apsaseed.org

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www.seedassociationofindia.com

• Agriculture Today • Indian Food Industry

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