Kaveri Seeds - Temporary thread for clarifications

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Hi All,

I am aware we have already had an intense discussion on the issue of Royalty payment in Kaveri Seeds thread and our admin team is currently pruning the thread to ensure forum guidelines are adhered to.

However, this recent article (shared by one of our forum members on the other PF discussion thread) had some key aspects, and if these turn out to be true (or) if these materialize, the dynamics for some of the seed companies including Kaveri could change:

Summary of the article -

  1. On 19th August, Ministry of agriculture has written a note to PM informing that CICR can proceed with domestic varieties of BT Cotton, as Monsanto’s patent on gene Mon 531 or Cry1 had expired in US in 2012.
    Note for new readers: What is Mon 531? - “The Mon 531 Cry 1 is the gene added to cotton seeds to provide protection to the cotton plant from the attack of bollworm, the most commonly found pest on the cotton plant. The presence of this additional gene makes the cotton seed variety a BT or biologically modified variety.”

  2. Since 2012, countries like Pakistan have already developed 31 new varieties of BT Cotton seeds and made it available to farmers.

  3. Agriculture ministry has further asked ICAR(Indian Council of Agricultural Research) to develop BT Cotton variety seeds and provide it to farmers.

  4. Keshav Kranti, Director of CICR(Nagpur) says they have developed 21 varieties of BT Cotton and are gearing up to make these available for farmers by 2017.

  5. These Indian BT cotton varieties can be reused for next year’s sowing in-case the farmer was not able to use it in the current year.

  6. The Indian variety to be made available at 150/kg compared to 2000/kg as charged by Monsanto licensed varieties.

Monsanto’s comments on the above points: (Have copy pasted to ensure I don’t misrepresent anything)

“Monsanto has various intellectual property rights covering its cotton technologies in India. The MON 531 event (BG I) which expresses the Cry1AC gene has not been, in itself, patented in India by Monsanto,” a spokesperson for Mahyco Monsanto Biotech (India) Pve Ltd said in an emailed response. “However, Monsanto does enjoy proprietary rights over the MON531 event pertaining to regulatory data, biological materials, trade secrets, know-how and the like. The technology registrant also has proprietary rights and corresponding obligations over technologies commercialized under its registration/approvals for MON531 granted by regulatory authorities such as GEAC and applicable Indian laws”

“The MON 15985 event has MON 531 as a component to which Cry2Ab has been added, providing additional mode of action, and leading to wider spectrum of insect control. Monsanto has been granted a patent in respect of the MON 15985 event in India. We claim proprietary rights over the MON 531 event by virtue of the various buckets of rights available to us and hence our claim has to be viewed from a holistic perspective rather than a singular patent lens.”

“Further, we receive trait fees in consideration for our technology solutions and services to Hybrid Cotton Seed companies. We believe in the power of innovation and partnerships to help farmers benefit. To this effect, MMB has collaborated extensively with over 45 Indian seed companies to ensure India’s cotton farmers have the widest choice of hybrid Bt cotton seeds while providing the technology to a broad spectrum of cotton see companies,” said the company in its response.

My comments/questions on the above points:

1. On 19th August Ministry of agriculture has written a note to PM informing that CICR can proceed with domestic varieties of BT Cotton, as Monsanto’s patent on gene MON531 or Cry1 had expired in US in 2012.
If the patent had expired in 2012, why did any of our Private/Government organizations not develop Indian BT Cotton seed variety all these years?

2. Since 2012, countries like Pakistan have already developed 31 new varieties of BT Cotton seeds and made it available to farmers.
How effective are these BT cotton seeds compared to the ones sold by Kaveri/other seed companies?

4. Keshav Kranti, Director of CICR(Nagpur) says they have developed 21 varieties of BT Cotton and are gearing up to make these available for farmers by 2017.
Same question as above - 1. Effectiveness? 2. They are talking about launch by 2017. Will CICR have the capacity to meet the overall seeds demand?

5. These Indian BT cotton varieties can be reused for next year’s sowing in-case the farmer was not able to use it in the current year.

6. The Indian variety to be made available at 150/kg compared to 2000/kg as charged by Monsanto licensed varieties.

Do cotton seed companies have the pricing power? I mean lets assume there are 2 varieties available in the market. CICR’s cotton seed priced at 150rs and Monsanto licensed variety(Jadoo, Jackpot,ATM,etc) at 1500-2000rs. Will farmers continue to buy Monsanto licensed version which he has been buying for the last few years? Now the farmer also has the added incentive of the ability to reuse the seed in the NEXT sowing season. will this incentivize him to switch?

More importantly, what is the likelihood that government will pursue this option? This being a politically sensitive issue(read farmer suicide) my feeling is this initiative will have government support.

Having said this, nothing is going to change immediately for Kaveri/anyother seed companies. CICR itself is foreseeing this launch only by 2017. But market discounts future events vs past performance.

Dear Admin team: The intention of this post is to have a discussion on some of the above points. If this post doesn’t adhere to forum guidelines please feel free to do anything that is appropriate.

Thanks,
Ravi S
Disc - Kaveri forms ~7.5% of my PF

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Competition from Indian BT varieties may mean bulk of profits of companies like Kaveri, nuziveedu will evaporate.

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One should raise these queries in AGM which is on 29 Sep 15. Anyone planning to attend it in Hyderabad.Not sure that a govt organization can compete with a private player.Indian farmers take a long time to develop trust in a brand.

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Detailed one

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Times of India article date Jun 08, 2015, has whole history ( copy and pasted)

Disclosure : invested, represents 1.56% in my PF. bought very recently. Post is for information purpose only

Seeds of doubt: Monsanto never had Bt cotton patent
Shishir Arya & Snehlata Shrivastav,TNN | Jun 8, 2015, 02.17 AM IST

READ MORE Vijay Jawandhia|Prakash Javadekar|Monsanto|Keshav Kranthi|Jairam Ramesh
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NAGPUR: Fourteen years after US multinational Monsanto brought the genetically modified (GM) Bt Cotton (Bollgard) to India, there is no clarity on the discovery having ever been patented in the country. Clueless Indian farmers and seed manufacturers have paid crores as royalty to the company from 2002 until 2006, when the company came out with Bollgard 2, which was, incidentally, patented.

Two arms of the central government differ on the patent issue. The Central Institute of Cotton Research (CICR), in an RTI reply to farm activist Vijay Jawandhia, emphatically stated that Monsanto’s ‘cry1ac Mon 531’ gene was never patented in India. However, the ministry of environment and forests (MoEF) wrote to him that the Bt seed developed by University of Agriculture Sciences (Dharwad), which was found to contain the Mon 531 strain, “cannot be launched in the market” due to a “patent violation”. It did not specify who held the patent.

Queries to Monsanto specifically on the patent issue were avoided. “Monsanto has proprietary rights in its regulatory data as well as its biological materials, trade secrets and know-how, which are also protected under Indian law. The Mon 531 is subject to such rights,” said a company spokesperson and never got back on a query seeking the patent number.

A senior official in the ministry of commerce handling intellectual property affairs trashed the proprietary theory. “Either there is a patent or not, there is nothing like a proprietary right. A company can protect its trade secret in other countries but there is no such law in India,” he said.

TOI’s independent search for the patent on the Mon 531 gene also drew a blank. The Patent Information System office, which is the only storehouse of all patented documents in India, is located in Nagpur. For a fee of Rs250 per hour, an assisted search can be conducted for any patent.

The MoEF, which deals with genetically modified crops, seems to have only facilitated Monsanto’s free run in the market by ruling that using Mon 531 requires a no-objection certificate from the multinational.

“The ministry seems to have gone out of its way to help Monsanto market the Bollgard brand, which has the Mon 531 gene,” said Jawandhia. “I brought this to the notice of PM Narendra Modi, environment minister Prakash Javadekar and state CM Devendra Fadnavis too. But there has been no response. Without the active support of ministry officials, it would not have been possible to keep the fact that Monsanto has no patent on Mon 531 under wraps,” he added.

TOI spoke to former environment minister Jairam Ramesh and Javadekar, several senior bureaucrats and research scientists in government institutes. Queries were either stonewalled or inconclusive.

Two events further strengthen the feeling that Monsanto had some kind of backing from the government. First, after scientists in Dharwad developed an Indian Bt - Bikaneri Narma (BnBt) - the MoEF turned down its mass production as it was found to contain the Mon 531 strain. Then, when CICR used the BnBt to develop 21 different varieties through cross breeding, its further dissemination could not progress due to the patent factor brought out by MoEF.

“Since there was no patent, why did MoEF prevent mass production,” asks Jawandhia.

Sources told TOI that CICR scientists briefed the agriculture ministry that there was no patent for Mon 531 and it was free to use. It would have been a game-changer, as India could have gone for mass production without paying royalty to Monsanto.

A 450 gram bag of Bt cotton costs Rs900-950. “With the Monsanto seed offering protection against the most dreaded cotton pest bollworm, farmers went for it. Had the seed been allowed to be manufactured by Indian companies, the price could have come down substantially,” said Jawandhia. The high price of seed is also stated to be one of the reasons for the cotton farmers’ misery.

Monsanto sells its seeds through a joint venture (JV) with Maharashtra Hybrid Company (Mahyco) in the entire country. The JV has further granted sub-licences to Indian firms for producing Bt cotton seeds. These Indian firms too market the hybrid variety at an equally high cost.

From 2006, the US multinational flooded the market with the Bollgard 2 variety of the gene, which provides additional protection. Monsanto has patented it in India and is selling it through the same JV.

“Since the first Bollgard is not patented and is still effective, India should go in for mass production to reduce the burden on cotton farmers,” said Jawandhia.

IN OUR BID TO GET THE COMPLETE PICTURE, TOI SPOKE TO VARIOUS PEOPLE. HERE’S WHAT THEY HAVE TO SAY

Dr Keshav Kranthi, Director of Central Institute of Cotton Research (CICR) The only issue with the Bikaneri narma seed was that it had the Mon 531 gene and this was not mentioned in the regulatory approvals. It is not certain whether Mon 531 was deliberately introduced into Bikaneri narma or it happened simply due to cross pollination which is a common occurrence. Still, without a patent, there should be no restriction on using the Bikaneri narma BNBt seed. We had developed 21 varieties using the Bikaneri Narma seed. The process of commercializing the 21 varieties could not go ahead due to the confusion that followed after it was found that Bikaneri Narma had Monsanto’s gene. It was often discussed that varieties could still be marketed as there was no patent, but there was no decision. In February 2014, the Indian Council for Agricultural Research took cognisance of the matter and it is now seriously considering the way forward. Even as the market is flooded with the Bollard II variety, which has different gene and is patented, Mon531 variety is better suited than the Bt hybrids for rain-fed areas like Vidarbha and Telangana.

Vijay Jawandhia, farm activist from Shetkari Sanghatana The government should wake up to the fact that there is no patent on the Mon 531. Even Pakistan has acknowledged that there is no patent on the Mon531 gene (he was quoting a newspaper report). The MOEF’s reply that it has a patent is misleading. Even the Bikaneri Narma variety can be used despite it having the Monsanto gene.

Monsanto, seed producing company from US

On May 25, company spokesperson Arun Gopalakrishnan sent a mail. It reads: “Monsanto has a robust patent estate covering its cotton technologies in India. Additionally, Monsanto has proprietary rights in its regulatory data as well as its biological materials, trade secrets and know-how, which are also protected under Indian law. The Mon 531 event is subject to such rights. In consideration for sub-licensing of such rights to various seed companies, it receives a fee payable under mutually agreed contracts.” On May 26, TOI sought a specific answer on the patent for Mon-531 gene. He sought two days to get the reply from Monsanto’s US headquarters, but has not reverted despite reminders.

Jairam Ramesh, former minister for environment and forests On May 27, he wrote in a mail: "This was much before my time - between 1998 and 2002 - as minister. Bt cotton commercialization decision was taken in 2002. But I agree with Jawandhia’s demand. We should have had a public sector Bt cotton initiative first.

Prakash Javadekar, current MoEF minister On May 29, the minister said in a telephonic conversation: “I have no idea about the technical details related to Bt cotton, however I will ask my officials to get back.” There has been no communication despite a few reminders.

Rajini Warrier, director of MoEF who signed the RTI reply to Jawandhia On May 28, TOI emailed her the query. On May 29, in a telephonic conversation, she said: “Please ask this question to the Indian Council of Agricultural Research (ICAR).” Warrier was a member of the genetically engineering approval committee (GEAC). The body, now renamed genetically engineering appraisal committee (GEAC), deals with issues related to Bt cotton.

Hem Pande, additional secretary MoEF In response to a mail sent on May 27, his PA said, “The TOI query has been forwarded to Rajini Warrier.”

The ICAR, on why it is not using Mon-531 in its cotton varieties and hybrids since Monsanto does not have a patent. The mail was sent to deputy director general (crop sciences) ICAR on June 1. Mon-531 is a proprietary event of Monsanto. Though, it is reported that Monsanto does not hold a patent in India, it would not be appropriate to use a technology without the concurrence of the technology-developer and without the permissions of the regulatory authorities such as the RCGM (Department of Biotechnology) and GEAC. However, the ICAR is open to the option through complete compliance and adherence to rules and regulations.

TIMELINE

1986: Monsanto develops Bt cotton, with cry1ac gene - Mon 531

1996: US approves commercial cultivation of Mon 531 gene in USA

1995: Mahyco brings 100 gm Monsanto Bt cotton seeds with due permission from MoEF

1997: Monsanto ties up with Mahyco for production and sub-licensing

2002: Bt cotton gets approval in India by the GEAC on April 26

2006: Bollgard-II approved for cultivation in India; BGII has cry1ac and cry2ab Mon15985 gene

2008: Bikaneri Narma, an Indian variety, gets approval by GEAC on May 5, 2008, but later it was found to have the Mon 531 gene

2014: Nearly 92% of the BT cotton area is under Boll-II in India

When India refused Monsanto’s offer

Nagpur: Before commercially launching the Bt cotton seed in India, US multinational Monsanto had offered to sell the technology to the Indian Council for Agriculture Research (ICAR) for Rs4 crore in 2002. But the ICAR found the offer too high.

In the meantime, ICAR planned to develop an indigenous Bt seed at the Central Institute of Cotton Research (CICR) in Nagpur. However, not much progress was made as the CICR got only Rs40 lakh of the Rs1 cr promised.

“Monsanto was ready to sell the entire technology at one go. This could have enabled free use of the technology by public sector units for just Rs4 crore. And even if the government would have further sold the technology to private sector it still would have been a much cheaper deal,” ICAR sources said.

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What I understand is most of the seeds sold (>90% volumes) are BG II version which is “seems” to be patented by Monsanto and most news articles continue to talk only about BG I.

First post article - Copying some text from the news

Quote: Monsanto India’s CEO Shilpa Divekar Nirula says in “assessment less than five percent” of Bt cottonseed used in India has the off-patent gene. The rest is Bollgard II, which “offers a broader spectrum of control” as it has two insecticidal proteins. This ‘event’ was approved for commercial release in 2006. Currently, Mahyco-Monsanto is conducting trials on Bollgard III, which has a combination of three Bt genes, but the one immediately in the pipeline is a seed with both insect resistance (Bt) and herbicide tolerance.

“Labour and the availability of labour at specific times in the crop cycle is becoming increasingly challenging,” says Nirula. Though wages rates have moderated of late and commodity prices have fallen, “they are trending upwards,” she says. Earlier, weeding was done manually but "a lot of times we find farmers leaving weeds in the field."
Labour cost is the biggest component in the cost of cotton cultivation, according to the official national sample survey.
“We spend a lot on weeding and on spraying chemicals,” says Rustam Jamaluddin Turak of village Selsura in Wardha district. “We have to pay Rs 300 a day. Earlier, I used to spray myself but I am 68 years old. I did not engage labourers but now I cannot manage it and my children do not like to work on the farm.”
“We need technology that can deal with pests that curls the leaves, and kills weeds,” says Jayantibhai Gajera of village Biliyara in Rajkot district. “I heard it is going to come,” he adds.
But the attitude of state governments to agricultural biotechnology and private seeds is quite unhelpful. Instead of getting out of the way when not part of the solution, they have become part of the problem.

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The Ministry of Agriculture released the data for Kharif sowing for the week ended 18th September 2015. As per this data, Area sown for non-food crops declined by 1.5 per cent to 35.4 million hectares by 18th September 2015 on a y-o-y basis. This was on account of a fall in area sown for jute & mesta and cotton. While area sown for jute & mesta fell by 4.1 per cent to 0.8 million hectares, area sown for cotton declined by 8.4 per cent to 11.5 million hectares. Area sown for oilseeds rose by 3.1 per cent to 18.2 million hectares.

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Kaveri AGM on 29th Sep.Lets post queries for VPers who may attend it.from mine side

  1. How big is threat from price control from State govt on line of Maha Govt

  2. Whats the status of Monsanto royalty & when n how is it expected to be sorted out?

  3. What are the chance of increase in cotton acreage for next season? Will India remain worlds biggest producer?how big is opp size for cotton clothes & garments & why?

  4. How big is the threat from CICR new BT cotton included seed expected to be available @150 vs 900 .can it be reused next year also?

  5. Will dumping by your competitors stop & steps u rtaking to mitigate it?

  6. How is the threat from new Bayer new seed First Class

7)r u developing new seed which r more drought resistant & how to cope with monsoon vagaries?

  1. how r u reducing dependency on cotton seeds?
    rgds
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Hi Vivek ,

I attended Kaveri AGM .

I was tracking only main thread but happened to see this thread on Kaveri after AGM.

Some of your questions addressed in AGM QA.

Q1.How big is threat from price control from State govt on line of Maha Govt
Less, May be they bring back to the MRP Rs 900.

Q2 Not discussed.

Q3 What are the chance of increase in cotton acreage for next season?

Not discussed. But company is targeting to sell 90L packets for next season.

  1. How big is the threat from CICR new BT cotton included seed expected to be available @150 vs 900 .can it be reused next year also?

Not discussed.

  1. Will dumping by your competitors stop & steps u retaking to mitigate it?

One of the MD was saying this is always there in the market, best seed survives.

  1. How is the threat from new Bayer new seed First Class?

Not discussed.

7)r u developing new seed which r more drought resistant & how to cope with monsoon vagaries?

Company New Hybrid ‘Three-by-One’.

  1. how r u reducing dependency on cotton seeds?

Looking for acquisition in vegetable seed sector and it is the reason that they are holding the cash.
As per company Vegetable seed sector is one of fastest growing market and they are cognizant of the high cash on books.

Q2,Q4,Q6 not covered as part of QA.

(I urge VP admin to unlock the main thread, if they are done with the required
Clean-up/Maintenance).

Other updates

 Company is going to consider Buyback
Toughest Year in career of Chairman(35 yrs exp, comments made on monsoon pattern and two consecutive droughts )
 May not continue with Cash and Carry next season.
 Monsoon was not good in Kaveri strongholds ( Regions :Rayalaseema ,Karnataka) this year. Though some parts 
 are now recovered, it may be helpful only in Rabi crop.
 Company reached saturation of 75% penetration in some regions like AP, Telangana and Karnataka,next leg of  growth can only come from Gujarat and Maharashtra.
Company has around 12-13% market share this year.

I am attaching Chairman’s speech for more details.Kaveri Seeds_Chairman speech.pdf (1.8 MB)

Disclaimer :Invested

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Competitors United

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The key to monitor is the receivables . The stock has tanked based on this factor also. What was Rs 150 cr at the beginning of the year went up to Rs 176 cr by March 15 and Rs 210 cr in June 15.

Is it possible to get the latest update as any delay in recovery or non-recovery will have significant impact on financials.

Rgds

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What will be the impact of the whitefly attack on cotton crops in Northern India on Bt Cotton seed companies like Kaveri Seeds? Looks like there will be some severe short term impact on the sale of Bt Cotton seeds. Not sure, if the company can turn it around over a longer time.

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Excellent article for all those who want to understand the royalty payments issue

Discl - Invested and looking to get out (didn’t understand the risks in this business)

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pretty horrible results for this qtr, high base effect notwithstanding:
http://www.bseindia.com/xml-data/corpfiling/AttachLive/A797E76C_5AE4_40D8_8A00_F4C1CF0E73BE_133208.pdf

disc: invested.

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i think the company turned a loss in a qtr for the first time since 2008.

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The promoter shareholding Q-o-Q has increased from 56.76% in June 2015 to 57.49% in Sept’2015. That’s an increase of more than 5 lac shares in the promoter shareholding.

All the additional shares have been purchased by G.Vanaja Devi.

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Looks, management made a provision now of Rs 64 cr(Royalty-disputed amount) in Q2 and it may be the reason for increment in expenses. How to get Kaveri’s results conference call info.

Thanks
Sreedhar M

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its there at 2 pm .not sure .pl try 011-60001221

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The earnings call is scheduled for tomorrow at 2 PM IST (dial-in # 91 22
3938 1071).

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Hi Sreedhar,
Where did you find this info?I can’t see this in results.