The commercial seed sector in India grew considerably in the late 1980s and the early 1990s, both in the private as well as in the public sectors. The private sector growth was induced by the policy changes undertaken during the late 1980s.
Much of this growth has stemmed from either foreign investments, or from spin-off from previous companies, with technical and marketing personnel branching off to start their own seed enterprises. For example, one Seed Company alone – Mahyco – has given birth to at least 8 additional companies. At present, there are more than 150 seed firms in India and about 10,000 dealers and distributors of seeds across the country.
Following are the major categories of the seed firms operating in India:
1. Seed Firms without R&D:
Private seed enterprises which only multiply certified seed of superior varieties/hybrids developed by public sector R&D system. These firms usually purchase their foundation seed supplies from the government foundation seed agencies e.g., National Seed Corporation and State Universities.
2. Seed Firms with R&D:
Private seed enterprises which have initiated plant breeding research to involve superior hybrids, through their own R&D programmes, while still primarily engaged in the multiplication of seeds developed by the public sector.
These units obtain their basic breeding material from public plant breeding stations, state agricultural universities, international agricultural research centres, private seed companies and state sponsored research stations in other countries. Many of these seed companies are already marketing hybrids bred by them. The parental lines of these hybrids are not disclosed, resulting in the enterprise’s monopoly over their sale.
3. Seed Firms with Foreign Collaborations:
Private seed enterprises that have created linkages with TNCs, obtains production and marketing rights of their adaptable hybrids. They maintain parent materials, produce and market hybrid seeds. Typically, such enterprises also have R&D facilities and are relatively large.
4. MNC Subsidiaries:
Subsidiaries of multinational seed, chemical and food companies which obtain breeding material from their parent companies, isolate adaptable lines, make crosses and develop superior hybrids, without disclosing their pedigree.
5. Joint Sector Firms:
These firms multiply seeds of only publicly bred hybrids/varieties and the seed enterprises involve both private and public capital.
6. Public Sector Firms:
Government seed enterprises which primarily play the role of developing seed trade, maintain foundation seed stocks for sale, and inter-state marketing. They also engage in seed production, processing and marketing of HYV seeds. These include National Seeds Corporation and various state seed agencies.
The public sector which accounts for 35-40 per cent of total turnover of seed industry, is mostly engaged in production and distribution of seeds of cereals, pulses and oilseed crops. The private sector on the other hand is mainly involved in the business of hybrid seeds of maize, jowar, bajra, cotton, and seeds of high value crops like fruits and vegetables. It accounts for about 60-65 per cent of total turnover of the seed industry.
Within the private sector, there are MNCs and large domestic firms, small seed companies and producer traders accounting for 50 per cent, 30 per cent and 20 per cent of total private seed business respectively. There are state level associations of seed companies in each state, besides one at the national level, to work with government certification agencies and for mutual interaction.
Profitability being the important consideration for private sector firms, they provide only those types of seed for which there is effective demand and which are profitable to produce. This means varieties which need to be replaced by farmers every season and are popular with farmers; and also varieties with high multiplication rates and controlled breeding systems e.g., hybrids.
Thus, private seed companies deal with a limited number of varieties and seed is sold in standard pack sizes and for targeted categories of farmers. These companies also keep changing their markets and product more often than the public sector. The private industry also plays a leading role in the development of planting material through biotechnology and tissue culture. But, still only 25 per cent of the cropped area is under hybrid seeds.
Government Policy:
There have been significant policy initiatives in the seed sector in the recent past, which entail significant implications for the industry as well as the market. Amendment of the Industrial licensing policy in 1987, removed the restrictions that applied to private investment by foreign companies, monopoly houses, and large domestic firms resulting in their participation in the Indian seed market.
Liberalisation of seed laws through the New Seed Policy (NSP) 1988, initiated major change in the imports and exports of seeds. The import of vegetable, flower, and fruit seeds has been put under the Open General Licence (OGL). Imports of seeds of wheat and rice, however, are not allowed under the New Seed Policy.
The import of seeds of oilseeds, pulses and coarse cereals are allowed initially for two years by companies, which have collaborative agreements, provided that the foreign supplier agrees to supply the parent lines/nuclear or breeder seeds/seed technology to its Indian client.
Other incentives for the development and production of new seed varieties, include a huge cut in the import duty on seeds equipment used for seed production from 100 per cent to 15 per cent, income tax rebate on R&D expenditure and availability of easier and cheaper financing sources for the organisations involved in seed research and production. The above policy initiatives has resulted in a boom in the activity of the private sector in the seed industry.
Trade Related Intellectual Property Rights (TRIPs) and Plant Breeder Rights (PBRs) are the other major changes in the seed policy and laws. Consequent to this, it is expected that the developer of new varieties and seeds will have greater rights on the process and product developed, and will have greater control over the subsequent use of the developments.
The major and main impact of this will be that, with the increased protection offered to those who develop new seeds, there will be greater incentive for firms to invest in R&D. They will also actively try to develop new seeds either independently or in collaboration with Research Institutions and Agricultural Universities.
Plans of the Government to bring about changes in the Land Ceiling Act to allow firms to hold larger amounts of land for agricultural purposes will also have a bearing on the industry, as the firms can then have a larger amount of land dedicated to the multiplication and production of seeds.
With the changes introduced related to IPR and the import restrictions, the farmers are likely to have increased choice and access to high quality seeds of different varieties. This will most probably result in an increase in yields.
Since firms now have greater control over the marketing of the varieties which are developed by them, the prices of these seeds are likely to rise and the farmer might view this unfavourably. However, if the increase in seed prices is matched by an increase in yield or the ultimate returns that the farmer obtains, this is not a cause for worry.
Due to the New Economic Policy of opening up and liberalisation, and the New Seed Policy along with the IPR related policies, the general public apprehension is that the Indian seed industry will be overrun by imported seeds and dominated by Transnational Corporations (TNCs) with very little chance for domestic firms to survive.
But this fear does not stand a sound logic, as seeds will be imported only if they result in higher yields and improve the quality of the crop, or are less expensive than the local seed. Furthermore, the imported seeds need to be suited to the various agro-climatic zones of the country, which are quite different from those of the countries from where these seeds are likely to be imported. Taste of the consumers of the agricultural output also acts as a barrier to import the seed.
Therefore, even MNCs must be able to adapt and modify their seeds to the local conditions and environment for which they will need to have domestic R&D set up. To be able to compete with the local industry on cost will also be difficult for the MNCs, if they do not have development and production bases in the country. Local companies will be competitive as long as they devote some energy to R&D.
On the seed production front, the government of India has given approval to the implementation of a pilot scheme on seed crop insurance during 1999-2000. This scheme aims at covering the risk involved in seed production so as to increase the area under breeder, foundation, and certified seed in the country.
The seed growers are not-coming forward to take up seed production due to the risks involved in various stages of seed production from selection of fields to harvesting, transporting, grading, treating and packing. Initially, this scheme will be operational in AP, Gujarat, Haryana, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Punjab and Uttar Pradesh, which are major seed producing states.
The seed crops of Tur, Bajra, Cotton, Gram, Groundnut, Jowar, Maize, Paddy, Soya bean, Sunflower, and Wheat are eligible under the project. The scheme covers all the seed producing entities under government or private control which are involved in the production of notified varieties.
The scheme will cover risks of seed crop failure due to natural fire, storms, cyclones, landslides, drought, dry spell, excessive rain and large-scale incidence of pests and diseases. The compensation would be 40 per cent of the sum insured, if the crop fails within 1.5 months of sowing and 80 per cent if after that period and till harvest.
The minimum area of crop failure should be 0.5 acre. The sum insured would be equivalent to the past 3-5 years average seed yield in the unit area multiplied by sale price of the seed. The scheme will be implemented by the General Insurance Corporation. This policy, if works on sustainable basis, is likely to give a major boost to contractual and independent seed production by growers.