Modern Biotechnology in LDCs: governing innovation in India's agricultural markets - Part 4: Analysis of global governance and local institutions: the relevance of appropriability

In India, not many firms inbred lines themselves except for the foreign suppliers. In turn, this raises a number of issues and affects the availability of crop variety to farmers as well as what local research laboratories can experiment with and then supply. It can be argued that by supplying only certain types of inbred lines, the combination of these would probably lead to a finite number of possible outcomes and hamper the creation of new varieties. That need not to be necessarily bad, but has consequences on the kind of work, projects and research that emerging nations can implement or carry out on their own.

Presently, about half of the seed sales are by public corporations (Pray & Basant: 2002) and innovative farming methods are normally first introduced by the government's specialised seed agencies (affiliated to the National Seed Corporation), while the private sector takes over only when demand is consolidated. These firms then 'purchase' inbred lines from NARs (National Agricultural Research Centres) and develop new lines based on these. Assume that innovators in agribusiness invest time and resources in order to find cheaper, more efficient and better eco-friendly ways to increase agricultural production. When a breakthrough such as GM seeds is discovered, before commercialisation and distribution takes place, prices are set in such a way that given a certain expected demand, the costs of investment can be recovered as soon as possible in order to make a profit and reinvest. Competition from other innovators reduce the margin that it is possible to gain from the sale and prolong the time it takes to recover the initial investment.

Thus, unless the appropriate patent legislation granting temporary monopoly profits is in place the innovator delays the introduction of its discovery at great social cost. However, the above argument says little about what contributes to the diffusion of innovative technologies and portrays only a side of a wider debate. It is argued that if the benefits resulting from the introduction of an innovative technology can be captured evenly along a spectrum that goes from the innovators to the farmers then there might be better chances that the technology will spread. In other words, that would be the degree of appropriability of the innovation. In the case of LDCs, one would probably expect that the farmers should be able to capture a considerable portion of the benefits. But what is it meant by benefits, and how are these measured? As the argument goes, with the appropriate legislation in place, the degree of appropriability can be defined as the income gained by each party involved (whether the innovators, the farmers or the distributors) after taking into account the price and income differentials of the new method as opposed to the old one, divided by the total income generated by the innovation.

According to Prof. Deodhar (2004) of the Indian Institute of Management, despite the essential regulation to secure appropriate standards for food quality and safety has been in place since the 1940s there are still too many eccentricities in the regulatory system that reduce their effectiveness and such legislation may also be ill-suited to deal with the issues that the introduction of biotechnology in agriculture raises. The usual suspects are found to be among the causes: corruption, unclear rules producing loopholes for the well connected and a Byzantine bureaucratic apparatus. For instance, offence and punishment are considered the same whether the verified adulteration is great or small and there is poor integration among the 6 ministries overseeing the process. This in turn affects the way in which the regulation and setting of acceptable standards of safety (such as the maximum acceptable intake of chemicals and other additives harmful to human health) are decided and the validity of some of the parameters taken into account to conduce experiments and orient public policy. At the time of our study news headlines were reporting the dangers of using 'acceptable standards', while de facto polluted, water in the soft drink industry (see also ).

Unsurprisingly, only recently there has been an effort to set up an institutional framework to deal with research and application of transgenic crops in India. Such attempt is based on the expectation of economic assistance from USAid and unfolds within the auspices of the Collaborative Agricultural Biotech Initiative (CABIO). As a result, institutions like the Department of Biotechnology (DBT), the Indian Council for Agricultural Research (ICAR), the National Centre for Plant Genome Research (NCPGR) and Indo-US Science and Technology Forum will jointly work together for setting up and steering the proposed institutional framework. The reduction of import duties, together with privatisation of some government activities while increasing the use of effective public-private partnerships are among the objectives. However, as it is happening also in other parts of the world, large scale farming is pushing the use of GM to gain efficiencies in production, while smaller farmers are shifting food grains for cash crops to increase their income. This is also producing biases in crop research patterns away from what is considered necessary for nutrition (such as maize or corn) in favor of consumption (such as tobacco and sugar) and there are no serious biotech research investments in the five most important food crops in the semi-arid tropics: sorghum, pearl millet, pigeon pea, chickpea and groundnut (Pray & Naseem, 2003: 2).

Deodhar, (2004) Strategic Food Quality Management: Analysis of Issues and Policy Options.

Pray, C.E. & R. Basant (2002) 'India: Private Investment in Agricultural Research', Economic Research Service, USDA.

Pray, C.E. & A. Naseem (2003) 'Biotechnology R&D: Policy Options to Ensure Access and Benefits for the Poor', ESA Working Paper No. 03-08, Agriculture and Economic Development Analysis Division, Food and Agricultural Organisation.

Link to part 3

(Posted by Daniele Navarra at 5 April, 2004) --- Permalink ---