Leisure, Lifestyle & Wellness
GM crops-Part3: The economics of genetically modified food

The vast diversity of seeds developed by farmers over centuries, with special characteristics in drought or flood tolerance, taste and medicinal properties is often lost when corporate control of seed promotes a few varieties in which heavy investments have been made and high profits are to be reaped. This is the concluding part of the three-part series

The World Health Organisation (WHO) defines genetically modified organism (GMO) as “Organisms in which the genetic material (DNA) has been altered in ways that do not occur naturally”. Currently 99% of GM crops have only two GM traits (1) pesticide production within every cell of the plant (e.g. Bt to control bollworm in cotton) (2) herbicide tolerance (HT) to enable spraying of a pesticide to kill weeds but not the crop. Apart from health and environment concerns, what is relevant is whether this technology is driven by real economic benefits, and for whom.

GM and economics: Both yield and income  are the end result of multiple factors : the intrinsic quality  of the seed into which the gene has been inserted, the prevailing soil, water and climatic conditions, the virulence of pest attacks , the  agronomic practices used and the price support mechanisms are some of them. Disaggregating these is difficult and it is not surprising therefore that there have been serious differences in perception even on Bt cotton economics in India. Agriculture Minister Sharad Pawar has stated that net incomes of farmers have increased from Rs7,000 per hectare to Rs16,000 in rainfed areas while the Vidarbha Jan Andolan states that Bt cotton has increased suicides. About 68% of farmer suicides are in Andhra Pradesh, Maharashtra, Karnataka and Madhya Pradesh, which have the highest acreage under rainfed cotton. With about 60% of the total cultivated land being rainfed and with Bt cotton requiring timely irrigation, failure of rains can result in crop failure, unrepayable debts and even suicides. 

Cotton provided a unique opportunity for GM as almost 50% of India’s total insecticide usage was on cotton alone.  With Bt cotton pesticide costs for bollworm have decreased sharply, but in the past five years, secondary pests have appeared and insecticide costs are again rising. Is there an option other than high pesticide use and Bt?

A study by the Central Research Institute for Dryland Agriculture found that non-pesticidal management in Andhra Pradesh using non Bt cotton gave higher net returns than Bt cotton. A study by scientists from the Central Institute for Cotton Research has shown that net income from organic cotton is significantly higher than from conventional cotton, after an initial three-year transition phase to organic. These studies do not find their way into public discourse since they lack the enormous PR budgets used for promoting Bt cotton. The same applies for other crops.

In the US, GM soya, corn and cotton cover 85% to 95% in these crops, and 53% of a $15 billion US farm subsidy in 2011 went to support these three crops only. The National Farmers’ Union of Canada states that  “….these crops have failed to provide significant solutions, and their use is creating problems - agronomic, environmental, economic, social, and (potentially) human health problems”. In the US, the economic costs are yet to be estimated from the unexpected ecological backlash of the many weeds that have now become resistant to the glyphosate herbicide used for HT crops, and which are affecting US farmlands and incomes. Studies show that yields in non-GM Western Europe have been higher than for the same crops grown with GM traits in the US and that the ability to tolerate the recent drought was lower for GM crops. The vast diversity of seeds developed by innovative farmers over centuries, with special characteristics in drought or flood tolerance, taste and medicinal properties is often lost when corporate control of seed promotes a few varieties in which heavy investments have been made and high profits are to be reaped. 

The transgenic seed market is controlled by six large global biotech seed companies. The development of a GM trait is estimated to cost $140 million as compared to $1 million for conventionally bred seed.  Companies must recover these investments. In India, Monsanto controls over 90% of the cotton seed market directly or through its licensees, and they have together made about Rs1,500 crore in royalties and fees in eight years (as reported in Business Standard but not endorsed by Monsanto) .  It is not surprising that after the reports of the Jairam Ramesh Committee, the Parliamentary Standing Committee and the Technical Expert Committee (TEC) of the Supreme Court, there is such intense propaganda for GM and even personal denigration of anyone who recommends caution. What is at stake is the clearance of the 17 crops that are in the GM pipeline. Studies show that patented seeds eventually eliminate a large part of the seed diversity built up by generations of farmers. As seed monopolies develop, this not only impact seed prices, but also a country’s ability to control the most vital part of its food production process. 

Is there a better option than GM? 

The International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD) Report, the world’s largest agricultural study undertaken by more than 400 scientists, commissioned by the World Bank  FAO, WHO and other international organizations,  found that agro-ecological approaches, and not GM, provide a sustainable answer to the world's food crisis. This has recently been further substantiated by the UN Rapporteur on Food that states “To date, agro-ecological projects have shown an average crop yield increase of 80% in 57 developing countries, with an average increase of 116% for all African projects. Recent projects conducted in 20 African countries demonstrated a doubling of crop yields over a period of 3-10 years.” 

In Andhra Pradesh, Community Managed Sustainable Agriculture (CMSA) was started as a small initiative in 2005-06. Supported by the Andhra Pradesh government and the World Bank, the program has led to 10,000 villages, with approximately one million farmers practicing NPM (Non Pesticidal Management) on over 3.5 million acres. Net income increases have been estimated at being Rs10,000 to Rs30,000 per hectare per annum—in addition to meeting the food needs of farming households and providing pesticide free food to consumers. A single village was reported to have saved Rs60 lakh in pesticide use, thereby strengthening the rural economy.

According to the Associated Chambers of Commerce and Industry of India (ASSOCHAM), organic farming is growing at a steady annual rate of about 40% and is likely to be worth Rs10,000 crore by 2015. Their study for an organic West Bengal states that this can lead to wealth accumulation of Rs12,000 crore, generate exports worth Rs550 crore and create nearly 20 lakh employment opportunities during next five years.

GM has a serious impact on exports to many countries that reject any GM contamination. Unlike other technologies, the release of living organisms in an open environment cannot be controlled or reversed. Even field trials cannot be fully controlled. In 2006, despite strict US regulations, an experimental variety of rice from field trials caused losses of over $1 billion to US farmers because of rejection of rice shipments by Europe. In 2013, GM wheat from field trials was found growing in a field years after it was supposed to have been destroyed, and has resulted in cancellation of tenders by Japan. In the former case, Bayer CropScience paid $750 million in settlement to US farmers and in the latter case the full impacts are yet to unfold. In India, there have been multiple illegal trials but no effective deterrent penalties to date. GM contamination can have a serious impact on India’s export potential and there have already been concerns about this in respect of organic cotton.

The BRAI Bill: Regulatory failures in India have been repeatedly castigated by independent Committees. The Biotechnology Regulatory Authority of India (BRAI) Bill recently tabled in Parliament appears, unfortunately, to be a means to speed up the approval of GM crops stalled by these Committees’ findings. It empowers just five persons in the Ministry of Science and Technology (i.e. the Ministry, which promotes this technology) to clear GM crops. Other committees envisaged in the Bill are only advisory. The proposed Bill bypasses the approval presently needed from state governments, and seriously dilutes Right to Information (RTI). The Bill provides for no preliminary assessment of need or of safer alternatives, nor for long term independent testing. It effectively ignores the unanimous recommendation of the Parliamentary Standing Committee on Agriculture, which called for an all- encompassing umbrella legislation on biosafety. It also ignores the Report of the Task Force on Application of Agricultural Biotechnology (2004) which stated “… Transgenic approach should be considered as complimentary and resorted to when other options to achieve the desired objectives are either not available or not feasible”. Other options are indeed both available and feasible and it is time that the recommendations of the IAASTD report, to which India is a signatory, are seriously implemented.

For more information on GM crops you can access following links:

Abstracts of the scientific studies can be accessed over here.

The BRAI bill can be accessed here.

A critique of the bill can be accessed on here

A 16-page booklet for lay persons on genetically modified foods and crops can be accessed here.

Those who wish to keep themselves abreast of GM issues can do so on India GM Info or on GM Watch

The first part of the series can be accessed here: GM crops-Part 1: The truth about genetically modified foods

The second part can be accessed here: GM crops-Part2: The myth about food security

(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)


Syria signs chemical weapons decree, says UN

In their letter to the UN, the Syrian authorities have expressed their commitment to observe the obligations entailed by the convention even before its entry into force for the country

The United Nations on Friday said that it received documents from the Syrian government on joining the Chemical Weapons Convention, which outlaws their production and use.


In a statement, the UN, said, “The Secretary General (Ban Ki-moon) received a letter from the Government of Syria, informing him that President (Bashar) Al-Assad has signed the legislative decree providing for the accession of Syria to the Convention on Prohibition of Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction of 1992”.


In their letter, the Syrian authorities have expressed their commitment to observe the obligations entailed by the convention even before its entry into force for Syria, a spokesperson of the Secretary General said.


Ban welcomed this development, noting that, as a depository of the convention, he has long called for universal accession to the Chemical Weapons Convention.


“Given recent events, he hopes that the current talks in Geneva will lead to speedy agreement on a way forward which will be endorsed and assisted by the international community,” the UN statement said.


The Chemical Weapons Convention requires all parties to declare and destroy all of the chemical weapons they possess.


Syrian President earlier told Russian TV the papers were being sent and that it would submit the weapons data one month after signing.


The US accuses the Syrian regime of carrying out chemical attacks against its own people in which more than 1,400 people were killed.


The Syrian government had denied the allegation and blamed rebels for the attack in the Ghouta area of the capital, Damascus, on 21st August.


The move came as US Secretary of State John Kerry and his Russian counterpart Sergei Lavrov held a comprehensive meeting in Geneva on resolving the Syrian crisis to bring its chemical weapons under international control.


Securitisation Tax Rules: Uncertainty still prevails

In the absence of rules providing for the conditions applicable to securitisation trusts for the Chapter XII-EA, the worst apprehensions of the industry may come true, as the whole Chapter would become inoperative

The securitisation industry, it seems must learn to live with the environment of uncertainty. First the need for pass-through treatment for special purpose vehicles (SPVs) issue, then the service tax issue and more. With great efforts to voice its concerns before the finance ministry, the Finance Act, 2013 came up with special provisions for securitisation trusts. The newly inserted provisions gave immediate relief, but left the industry in doldrums for sometime. Like a pendulum, the industry has been swinging between choosing direct assignments and pass through certificates (PTCs) route.


With the introduction of the special provisions for securitisation trusts, the securitisation industry has been on tenterhooks waiting for the rules “as may be prescribed” to be notified by the authorities sooner than later. While one of the rules was notified on 4 September 2013, the larger issue still remain unaddressed.


Background for rules relating to securitisation trusts

Clause 30 of the Finance Bill, 2013 (now Act) inserted a new Chapter XII-EA consisting of new sections 115TA, 115TB and 115TC in the Income Tax Act with regard to special provisions relating to tax on distributed income by securitisation trusts.


Section 115TA – 115TC (along with the explanations) of the Chapter provided for the Income Tax Authorities to prescribe two set of rules. One, section 115TA sub-section (3) states that –


(3) The person responsible for making payment of the income distributed by the securitisation trust shall, on or before the 15th day of September in each year, furnish to the prescribed income-tax authority, a statement in the prescribed form and verified in the prescribed manner, giving the details of the amount of income distributed to investors during the previous year, the tax paid thereon and such other relevant details, as may be prescribed.

Second, the explanation (d) to the Chapter provided for the meaning to securitisation trusts, as below -

(d) "securitisation trust" means a trust, being a-

(i)    "special purpose distinct entity" as defined in clause (u) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), and the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and regulated under the said regulations ; or

(ii)    "special purpose vehicle" as defined in, and regulated by, the guidelines on securitisation of standard assets issued by the Reserve Bank of India,
which fulfils such conditions, as may be prescribed.'

The first set of rules in relation to the statement providing details of the income distributed and tax paid thereon have been notified by the Department of Revenue (Central Board of Direct Taxes) on 4th September, 2013.


Under Rule 12BA, the statement of income distributed has to be furnished by the securitisation trust in Form 63AA and is to be duly verified by an accountant. Among the basic details required of the securitisation trust, the Form has two very significant details requirement. The form requires the securitisation trust to confirm whether it is regulated by Securities Exchange Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulation, 2008, or whether the securitisation trust is regulated by the Reserve Bank of India guidelines on securitisation of standard assets.


The form requires the securitisation trust to confirm if they are regulated by either of the regulators. The issue here is what if the securitisation trust does not fall under either of the regulations? Will the securitisation trust be still bound by the requirements under the rule or the conclusion is to be drawn that there cannot be a securitisation trust which is not regulated by either of the entities. If one has to take a liberal view on the issue, it only requires the trust to confirm if there is a regulatory body under whose periphery it falls, it does not prohibit a securitisation trust which is not regulated by either of the bodies.


The requirement for furnishing such a statement was on or before 15th September each year, as provided in Chapter XII-EA. Hence the rules were notified timely.


Where are we now?

However, the bigger concern is rules relating to securitisation trust to fulfil certain conditions that were to be later prescribed for the securitisation trusts to fall under the provisions of the Chapter.


What is surprising is that the authorities have not yet come out with these rules which seem the backbone of the very Chapter; without which it can be argued that the machinery itself is not complete. Currently, there are no conditions prescribed for the securitisation trusts to fall under the provisions of this Chapter and applicable rules thereof. On the other hand, it surely cannot be assumed that there shall be no conditions applicable to such securitisation trusts to fall under the periphery of such rules.


These rules have been the much awaited rules, which the department has not yet considered notifying while the Chapter has come into effect from 1 June 2013. In absence of rules providing for the conditions applicable to securitisation trusts for the Chapter to become applicable to ‘such trusts’ the worst apprehensions of the industry may come true as the whole chapter would become inoperative.


Between the rules on the reporting requirement and the operative rules, the latter rules were not only much awaited but also are the base on which the entire Chapter shall function. While the securitisation trusts are continuing to fulfil the requirements of the Chapter in absence of the conditions, the lurking uncertainty has certainly not come to rest as yet. Stuck between Scylla and Charybdis, are we waiting for another roller coaster?

(Nidhi Bothra is executive vice president at Vinod Kothari Consultants Pvt Ltd. She can be contacted at [email protected])


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