Bayer-Monsanto merger far from complete

Investors in India have cheered the merger of Monsanto with Bayer by pushing up both companies’ share prices, but analysts who track the sector say, like elsewhere in the world, approval from the Competition Commission of India (CCI) will not be easy to come by.

Bayer and Monsanto must receive approval from 30 different regulators across the world before they can merge. India may be a small market for Monsanto, but the challenges here are bigger because of the growth potential.

The CCI has found Monsanto in violation of the competition law and has ordered an investigation into complaints filed against it by the agriculture ministry and three other seed companies. The commission might impose a penalty on Monsanto or ask it to compensate farmers who were forced to pay higher prices for its seed.

Monsanto has withdrawn an application to sell a new variety of genetically modified cotton seed in India because of its concerns over the government’s attempts to restrict the biotechnology business.

Monsanto’s BT cotton seed sales are estimated to have declined 5-8 per cent this sowing season because of the falling effectiveness of the BG-S variety. The government also has reduced the royalty payment for Monsanto’s seeds from ~184 per packet of 450 gm to ~49. Monsanto has moved court but is yet to get a stay.

“We estimate the seed industry will grow 10 per cent this year because of a normal monsoon. However, sales of BT cotton seeds are likely to be 5-8 per cent lower because of whitefly attacks in north India and pink bollworm attacks in other states,” says Kalyan Goswami, executive director of the National Seed Association of India.

He says BT cotton sales will revive in the next kharif season but because their share in the revenues of seed companies is around 40 per cent, “in value terms, seed companies’ sales growth may be confined to 6-8 per cent”.

The Indian Council of Agricultural Research is testing 20 indigenously developed BT cotton varieties and these lines are likely to be promoted. “When these varieties are permitted, they will be cheaper than Monsanto’s. The government can be expected to issue licences to more players,” an industry source says.

Farmers are also turning away from BT cotton’s existing variety because of its declining benefits. “Spending on crop seeds has nearly quadrupled since 1996, when Monsanto became the first of the companies to launch biotech varieties. Yet major crop prices have skidded lower for three years, and this year, many farmers stand to lose money,” says a report by the Wall Street Journal.

“India has not permitted GM seeds in food crops. However imported edible oil contains oils made from GM seeds. India should, in the interests of consumers, make labelling of GM compulsory on all food products,” says Vijay Sardana, a commodities expert. He adds labeling will help consumers and help recover biodiversity.

Biodiversity is become a global concern because of the spread of new forms of crop infections. Generic crops and chemicals for their care are regaining favour as a means to ensure cost-effective production.