There are inherent risks and dangers if India were to adopt genetically modified crops. Here is an expose about several myths surrounding GM crops. This is the first part of a three-part series
There has been a great deal of publicity of late, particularly by the Agriculture Minister, about the necessity of genetically modified (GM) crops for feeding India’s masses, while dismissing the widespread concerns about them. These concerns cover health, environmental impacts, farmers’ indebtedness, loss of seed diversity and sovereignty. These risks are not activist extremism, but have repeatedly been endorsed by independent investigations—both abroad and in India.
Independent reports on GM: The first serious report in India was in 2010 by former minister of environment Jairam Ramesh, who called for a moratorium on Bt brinjal after inputs at seven public hearings and perusing scientific studies in favour and against its introduction. Then, in 2012 a report by the Parliamentary Standing Committee for Agriculture (PSCA) consisting of 31 members across party lines, unanimously castigated rampant regulatory failures, the exaggerated claims of increases in yield of Bt cotton, the health and environmental risks increasingly being reported across the world, and the stranglehold by large transnational seed corporations, whose expensive patented seeds have to be purchased afresh every year causing economic distress and suicides of farmers. The PSCA called for a complete moratorium on field trials of GM crops until a proper bio-safety regulation based on the best globally available legislation is enacted and regulatory loopholes are plugged. Its report is accessible here as well as a three page press release of it by the Lok Sabha Secretariat.
The most recent report is by a Technical Expert Committee (TEC) appointed by the Supreme Court in a public-Interest Litigation (PIL) on GM (Writ Petition no (Civil) No.260 of 2005). The TEC consisted of six members, of which five submitted a unanimous report calling for the following:
Each of these has been followed by a spate of articles, in some newspapers, attacking the findings of the PSCA, personal denigrations of their authors and fear mongering that without GM, India will be unable to grow the food it needs. GM is one of the most important issues for India as it affects food and seed, vital for us all, and also because the spread of living organisms is irreversible. There is thus the need to sift PR hype from truth.
GM hype and GM truth: The hype is that GM is cutting edge technology in agriculture, that 170 million hectares are under GM crops, and that India will be left behind if it does not adopt this GM technology. The truth is that 170 million hectares constitutes only 3.4% of the world’s total agricultural land, that only six countries account for 91.8 % of all GM area (USA 40.8%, Brazil 21.4%, Argentina 14%, Canada 6.8%, India 6.3%, and China 2.3%) and that most countries in the world are rejecting or restricting it. The first four countries, accounting for 82% of all GM cropland, have average farm sizes of about 300 to 1000 acres and their main GM crops are Herbicide Tolerant (HT) i.e. designed to withstand herbicides, which will kill all plants other than the genetically modified HT crop. This actually results in more irresponsible spraying of herbicides, thereby leading to more toxin consumption. It has also led to unprecedented herbicide resistance in weeds. These pose a major problem to US farmers who cannot eradicate these “super weeds” which have affected 61 million acres of US farmland (Report by Stratus Agri-Marketing). The TEC has rightly recommended that there is no justification for HT GM crops in India, where sizes of Indian farms are only 3 acres on average and manual weeding provides employment to millions of women.
In India, Bt cotton is the only crop permitted so far. Bt crops involve the transfer of a gene from a soil bacterium (Bacillus thuringiensis, or Bt) into the seed, to produce a protein toxic to a targeted pest e.g. the bollworm in cotton. The hype is that Bt cotton yields have made India the second largest exporter of cotton whereas the truth is that very little of this is due to higher yields from Bt cotton. In fact, according to Cotton Advisory Board figures, cotton yield increased by 69% (i.e. from 278 kgs per hectare in 2000-01 to 470 kgs per hectare in 2004-05) when Bt cotton was less than 6% of total cotton area. However, as Bt cotton expanded to over 90% of the cotton area, yield increased by only about 6%, stagnating at around 500 kg per hectare for the past 5 years. India has also become the world’s largest exporter of organic cotton—which does NOT use GM seed. In fact organic cotton exports are now being jeopardised by Bt contamination, as importers of organic cotton do not permit the slightest trace of genetic modification. Moreover, some types of bollworms have developed resistance and, after Bt cotton, there is an unprecedented invasion by other pests—such as sucking pests—which were earlier never a problem with cotton. Farmer risks now include more expensive seeds (5 to 10 times the cost of earlier seeds), pesticide spraying on these secondary pests and crop failures as these seeds need timely irrigation, which 65% of our farmers cannot provide. While some farmers may have benefited, amongst rainfed farmers indebtedness and suicides have not decreased despite wide adoption of Bt cotton. Other possible impacts eg Bt toxin on soil microbes and on animals which consume the plant, allergy in cotton pickers and consumers, and health consequences of Bt cotton seed oil now being liberally mixed into edible oils, need to be monitored through independent and transparent long term studies, which is, unfortunately , not happening.
Stay tuned for part two of the three-part series.
(Dilnavaz Variava has been involved with the environmental movement in India for close to 40 years. She has held many roles, including CEO of WWF-India, Vice-President of the Bombay Natural History Society-BNHS, and on several apex committees of the Govt of India. Since about 10 years, ever since she was asked to Chair the Working Group on the Ecological Foundations for Sustainable Agriculture for a Govt of Maharashtra Expert Group on Agriculture, she has been closely involved with this subject. She is Honorary Convener of the Consumer Group of the Alliance for Sustainable and Holistic Agriculture- ASHA.)
After laying more than 70kms of gas pipeline on farmland, the Tamil Nadu government wants GAIL to reroute the laying process and align it with highways. This entails several risks, that of safety, security and maintenance
State-run GAIL (India) Ltd is the largest gas transmission and marketing company in India, operating for the last 25 years, covering over 30,000kms of gas pipelines, out of which they themselves have laid 10,000kms.
At the moment, work on their Kochi to Mangalore gas pipeline, 310kms of which are projected to pass through Coimbatore, Tirupur, Erode, Namakkal, Salem, Dharmapuri and Krishnagiri in Tamil Nadu, has to be stopped at the request of state government. The Tamil Nadu government alleges that the farmers, in some of these areas, feel that laying gas line will lead to a loss of agricultural production!
GAIL has, in the past, laid network of gas pipelines on farmlands in several states like Karnataka, Punjab, Uttar Pradesh Haryana, Gujarat, Goa and Maharashtra, without any trouble. Experience shows that laying the gas pipeline via the farmland is the safest means of transport of gas, which is practised all over the world. It does not affect the farmer who is adequately compensated, and the pipelines are laid one or two metres below the ground level.
BC Tripathi, chairman and managing director (CMD) of GAIL, in a recent interview, has stated that the so-called unrest, agitation and apprehension in the minds of farmers have been created by vested interests. The work on the pipeline started after initial consultation, mutual discussions and after arriving at an understanding with the Tamil Nadu government and with its cooperation, GAIL has, in fact laid more than 70kms of gas pipeline on farmland.
To appease the farmers, it appears the Tamil Nadu government has now proposed that GAIL must reroute the laying process and align it with the highways. Such a change—laying the gas pipeline along with highways—entails several risks, that of safety, security, maintenance etc. Even the process of laying the pipeline would totally disrupt the movement of goods and services during the construction, besides being costly. In addition, such a move would mean that the gas lines would have to be below the national highways, on which heavy loads of traffic will pass!
GAIL, failing to receive an encouraging response from the Tamil Nadu government, has now resorted to take up the issue through the Madras High Court. GAIL feels there is no other alternative means to resolve the issue, though they are keen to sit across with the state government and find a solution to the problem.
Tamil Nadu government must realise that this gas pipeline will bring in much needed gas to the power starved state. Their own revenue will also come in the form of 4 million standard cubic feet per day (mmscmd) of gas to cover the taxes and other levies.
Readers of Moneylife may recall that Tamil Nadu Government had made objections in regard to the development of CBM (coal bed methane), as the Tamil Nadu Pollution Board (TNPB) had not given clearance to the project, though the work on this has been going on for a couple of years. In this particular case, it will be another 60 days or so before we know the recommendations of a Committee appointed for investigating this matter. Such delays only harm the national progress.
GAIL's work on the gas pipeline is also stuck in the same manner, which has followed the laid down procedure of the government, and this interference by Tamil Nadu government cannot be accepted, as it reflects on its poor ability to sort out the mess created by vested interests.
Hopefully, we expect the Court to direct the Tamil Nadu government to assist GAIL in completing the project on time and to take care of the leaders of the agitators.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
In response to Moneylife campaign for better disclosure of PMS data, a SEBI official has written to us defending the regulator’s stance. Here are the watchdog’s arguments, and our rebuttal
For nearly two years, Moneylife has battled the regulator to get information on the performance of portfolio management services (PMS) through Right to Information (RTI) application. Our effort started with the discovery that one investor has lost a whopping Rs1 crore (Read: Sordid tales) in a single action of gross mis-selling and a doctor couple whose nest egg halved in PMS (Read: Bad experience). The Securities Exchange Board of India (SEBI), which swears by a ‘disclosure’-based regime, thwarted our attempt to collect PMS data at every turn. We filed an RTI request, which was turned down. We appealed to the Central Information Commission (CIC), who ordered SEBI to put PMS information in the public domain (Read: Power of RTI: CIC directs SEBI to disclose all information related to PMS). Even that order has not been followed in spirit.
So we did more work. We struggled to compile the information that was available. We filed another RTI seeking data on a compact disk, as if it is parting with state secrets. SEBI refused. We then conducted a survey to get reactions from PMS investors and compiled it all in our cover story (Read over cover story here : Portfolio Management Schemes: Will Your Portfolio Blow Up?). Finally, SEBI has woken up, but in anger. Amritha S Naik, an assistant manager at the Investment Management Department wrote to us defending SEBI’s position on niggardly disclosure and claiming that it was doing plenty for investors. Read the full letter below.
Incidentally, her predecessor was in touch with us when we started our campaign, but quickly clammed up and refused to respond, like all official channels of SEBI. Ms Naik’s letter too has not been routed through the communications department. We are not even sure whether mid-level SEBI officials are allowed to dash off letters to the media on their own on a selective basis. Here are the some of the main points of Ms Naik’s letter and our rebuttal.
“Minimum investment per client increased from Rs5 lakh to Rs25 lakh so that only sophisticated investors can have access to such services”.
Moneylife: We wonder what is SEBI’s definition of “sophisticated”. The PMS investors that Moneylife has come across and who have lost money are indeed “sophisticated” but not necessarily ‘sophisticated investors’. They are doctor, actors, singers, editors, marketing consultants, advertising gurus and IT experts. Do they understand financial products? No. In fact, they choose the PMS only because they want expert money management and are willing to pay for expertise that keeps their money safe and growing. Yet, a majority of them end up with pathetic returns or even lose a part of their principal. Will Ms Naik explain to us how a “higher networth” is equal to “more sophisticated understanding of products and markets”. Do they mean that a Kareena Kapoor or a Sachin Tendulkar will have a terrific post-retirement career as experts in choosing the right financial products? Many years ago SEBI borrowed terms like “sophisticated” or “discerning” investors from the West and framed appropriately loose regulations for them. As the subsequent experience has shown, this assumption is all bunkum. This is why in UK and US, regulators have woken up to more instrusive regulation rather than hands-off, purely disclosure-based regulation. Maybe SEBI officials need to make a few more foreign trips to get the hang of where the global regulation is headed.
“With regard to PMS investors not having sufficient data to enable them to make an informed choice of a Portfolio Manager, we have tried to provide the available data in the best possible manner and in a way that is as informative as possible. We are also continuously working at making better information available from the perspective of PMS investors.
Moneylife: If SEBI is truly working to part with the data instead of trying to suppress it, why does SEBI continue to thwart our attempts to provide reliable information to hapless investors? SEBI has only started disclosing monthly PMS data after losing in an RTI appeal by Moneylife, and the data is hard to compile. It has also uploaded performance data only from January 2013. It is impossible to obtain data of every PMS given the site is pathetically slow and prevents easy comparison. More importantly, the performance needs to be compared with a benchmark. SEBI provides consolidated data of all schemes of a PMS, which is unusable by an investor. An individual needs to know how each scheme has performed and whether it has beaten its respective benchmark or not. This is available in the disclosure document sent to existing clients and SEBI. This should be made available. Even in the disclosure document, only three years worth of PMS data is available, unlike mutual funds which schemes’ performance is disclosed from inception. Why can’t the same thing be implemented for PMS schemes? But then, SEBI claims that every single PMS is individually customized, more about that later.
“The PMS is expected to individually and independently manage the funds of each client in accordance with the needs of the clients which does not partake the character of a mutual funds”… “One of the main factors hindering this is that the data in respect of PMS is not amenable to straightforward consolidation in view of the fact that PMS is essentially an individual-oriented and customised product rather than a group-oriented product. No units are issued and there is no NAV. Hence the data of various clients at a single PMS provider or across PMS providers is not amenable to consolidation, and thereby easy comparison…Disclosure Documents (DD) of the PMS are meant for the clients of the PMS. The portfolio managers are required to give access to DD to the clients through login id and password so that each client can view its portfolio, performance etc. The clients may not like to expose its portfolio to general public.”
Nice claim, but if this is the case then:
Our research on the PMS data that we could lay our hands on reveals that the schemes of only two PMS companies have done consistently well in a three-year period. Many have performed erratically and some have not even performed at all. This information is only available in disclosure documents and our inquiry shows that no banker, who hawks PMS products, has access to this information or has compiled it for clients before recommending specific schemes. The recommendations are all a part of revenue deals between PMS companies and the banks. This can only be to the disadvantage of investors who are required to make a minimum investment of Rs25 lakh for PMS services, by SEBI’s own diktat.
What is it so hard for SEBI officials to understand that investor can make an informed choice only by comparing the performance of different portfolio managers? Probably because SEBI either does not engage with investors directly or does so selectively. One can see how varied the performance of portfolio mangers can be in our analysis of 26 PMS companies. (Read: PMS Performance: The Good, the Average and the Ugly)
“Performance fees, if charged, shall be mandatorily on the basis of high-water mark principle.” Moneylife: Again, performance fee is only a part of the fees paid to a portfolio manager. The total advisory or performance fee paid to portfolio managers may be a fixed charge on the quantum of the funds being managed (or) charges linked to portfolio return (or) combination of both This is mentioned only in the disclosure document. Our cover story mentioned that the fees are negotiable from client to client. Therefore, an individual with a higher corpus can negotiate a lower fee. However, this is not the only cost; there are other expenses like brokerage and transaction costs, depository fees etc. This could be the highest if the portfolio manager resorts to excessive churning. In our PMS survey (Read the 'Survey Findings' section over here), many investors claimed excessive churning. SEBI has still to issue an order in the case pertaining to the actress-singer Suchitra Krishnamurthi (Read HSBC loots Suchitra Krishnamoorthi after big promises of 24% returns) who suffered enormous losses because of such reckless churning. SEBI has failed to address the issue because it is probably not even aware of it. Or does not want to exercise its brains as regards what it means for investors, like many other issues. We have accessed and examined portfolios where PMS companies have excessively churned stocks as well as mutual fund investments to create losses in the books of investors.
Based on how ill-informed and untenable SEBI’s arguments are, far from an apology, we demand that SEBI come down from its ivory tower, read the comments to our articles on PMS and engage with us in finding out facts, collating information and honestly redress genuine grievances about mis-selling, mismanagement and downright cheating. We would also like it to respond to all our reports on such mis-selling, not selectively. Only then will start justifying its role as a regulator.
Here is the letter we received from Ms Naik…
1. SEBI has taken various measures in the interest of investors of the Portfolio Management Services (PMS). Some of the measures taken by the SEBI in recent past are as under:
i. Minimum investment per client increased from Rs5 lakh to Rs25 lakh so that only sophisticated investors can have access to such services.
ii. Segregation of unlisted securities in individual client accounts.
iii. Raising the minimum net-worth requirement for Portfolio Manager from Rs50 lakh to Rs2 crore excluding minimum capital adequacy/ net -worth requirement for any other activity.
iv. Performance fees, if charged, shall be mandatorily on the basis of high-water mark principle.
v. The PMS is expected to individually and independently manage the funds of each client in accordance with the needs of the clients, which does not partake the character of a mutual funds.
2. You are aware that PMS is in many ways different from Mutual Fund. Some of the major differences are given as under:
i. In contrast to Mutual Funds, in case of PMS no pooling is allowed and no unit is issued
ii. PMS products are meant for investors with higher net-worth, and who are generally understood to be having more sophisticated understanding of the market and products.
iii. The relationship between portfolio manager and the client is contractual in nature and PMS is expected to provide customized service taking into consideration the need of customers, his preferences, risk profiling, suitability etc.
iv. The PMS is expected to individually and independently manage the funds of each client in accordance with the mandate of the client which is rather different from the character of a mutual fund.
v. The performance of the portfolio manager for various clients will be different as investment philosophy, need, preference, risk taking ability, choice of different products, mandate etc. are different for different clients.
vi. Disclosure Documents (DD) of the PMS are meant for the clients of the PMS. The portfolio managers are required to give access to DD to the clients through login id and password so that each client can view its portfolio, performance etc. The clients may not like to expose its portfolio to general public.
3. With regard to PMS investors not having sufficient data to enable them to make an informed choice of a Portfolio Manager, it is stated that we have tried to provide the available data in the best possible manner and in a way that is as informative as possible. We are also continuously working at making better information available from the perspective of PMS investors. One of the main factors hindering this is that the data in respect of PMS is not amenable to straightforward consolidation in view of the fact that PMS is essentially an individual oriented and customised product rather than a group oriented product. No units are issued and there is no NAV. Hence the data of various clients at a single PMS provider or across PMS providers is not amenable to consolidation, and thereby easy comparison.
4. And, finally the language and tone used in your article is unacceptably offensive. Characterising the SEBI staff as "corrupt" is really most unbecoming of your magazine. While constructive suggestions and criticisms are welcome, the use of defamatory expressions should be totally eschewed. The least we expect from you is an unqualified apology and no more repetition of this kind in future.
Amruta S. Naik
Investment Management Department, Division of Funds I