By Praachi Kumar, UNU-MERIT (firstname.lastname@example.org)
For Citation: SITE4Society Brief No.8-2018
Country Focus: Developing countries and especially India
SITE Focus: Innovation, Technology, Environment, Innovation and Technology Governance
Sub-Disciplines: Agri-Biotech, Multinational Enterprises, Agriculture, Genetically Modified Varieties, Emerging Economies
Based on: Shyama V. Ramani, Ajay Thutupalli, Mhamed-Ali El-Aroui, Praachi Kumar, (2017), MNE Led New Market Creation in Emerging Countries: The Case of Bt Cotton, in Pervenz N Ghauri, Xiaolan Fu, Juha Väätänen (ed.) Multinational Enterprises and Sustainable Development (International Business and Management, Volume 33) Emerald Publishing Limited, pp.131 – 150
Related to Sustainable Development Goals (SDGs): #SDG2 (Zero Hunger), #SDG9 (Industry Innovation and Infrastructure), #SDG12 (Responsible Consumption and Production), #SDG15 (Life on Land), #SDG17 (Partnerships for the Goals)
Context: Farmers in developing countries are burdened with an ever-pressing need to increase productivity, and hence, they are forced to apply more chemical inputs such as fertilizers and pesticides that ultimately lower soil fertility. Morbidity and death due to imbibing of sprayed chemical pesticides are also major health hazards. Genetically modified plant varieties (or GMVs) with inbuilt traits such as pest resistance, offer a technological solution to these problems. Nevertheless, concerns are being voiced worldwide that scientific uncertainty about the long term impact of GMVs is real, and cultivation of GMVs could engender risks of irremediable problems in the future. Thus, even while new genetically modified plant varieties (GMV) continue to be constantly produced, the diffusion of existing GMV remains limited on a global scale. For instance, 38 countries have simply banned GMV in all their forms. India is not one among them.
In March 2002, the GEAC (Genetic Engineering Approval Committee) of the Ministry of Environment of India approved the commercialization of three varieties of insect-resistant genetically modified Bt cotton hybrids (Mech-12 Bt, Mech-162 Bt and Mech-184 Bt, under the brand name Bollgard® in the central and southern cotton growing zones for the 2002-03 growing season. Bt cotton is so called because it contains the cry1Ac gene transferred from a bacterium called Bacillus Thuringiensis. This gene is responsible for expressing a toxin that kills insect pests popularly known as bollworms, which feed on flowers, buds and leaves. Thus, whenever a pest eats any part of a Bt plant variety – it dies, thereby limiting losses in yields. By switching to Bt cotton hybrids, farmers have the possibility of reducing yield loss due to pest attack, lowering pesticide spraying and saving on labour costs. Over the next decade, Bt cotton became tremendously popular with Indian farmers. Presently, India ranks fifth in the world (after USA, Brazil, Argentina and Canada) in terms of acres devoted to GMVs, in this case Bt cotton.
- What are the drivers of adoption of Bt cotton worldwide?
- What are the outcomes of Bt cotton adoption worldwide? Have any systemic externalities been noted?
- To what extent do these results hold for the Indian context, and what are the inferences therein for India?
Motivation for Research Questions: The Green Revolution saved India from famine, but it turned out to be a poisoned chalice in the long run poisoning the earth with agrochemicals in the very zones where it was most successful, due to its inappropriate implementation by farmers and lack of strong remedial measures taken by public agencies and other systemic actors. The lessons of the Green Revolution cannot be forgotten.
Fruits of the biotechnology revolution, namely GMVs are being pushed worldwide by agri-biotech multinational enterprises like Monsanto, Du Pont, and Syngeta as a technological solution for sustainable development. Multinational enterprises being powerful instruments of change, the world also seems to be yielding. The moratorium against marketing of GM based food products ended in Europe in 2004, but since then a strict and comprehensive system of regulation has been developed to permit complete traceability in terms of cultivation practices, GM organism levels and labelling along retail chains. However, in emerging countries, like India, regulation and compliance measures to ensure human and environmental safety without decreasing the economic returns to the actors along the supply and demand chains are not so effectively enforced.
Thus, there is a crucial need to understand how emerging country systemic actors can address two types of concerns: the economic risks faced by farmers while using existing low yielding conventional seed varieties, in the face of inadequate institutional mechanisms to provide them insurance; and the long term environmental risks and other possible social-economic-ecological externalities engendered by the adoption of GMV.
Methodology: In order to identify the drivers and outcomes of Bt cotton adoption worldwide, a research query with the terms: ‘Bt AND cotton AND adoption’ was applied on SCOPUS, the standard abstract and citation database of peer-reviewed literature. The search was limited to articles, in the social sciences, economics, econometrics and/or finance subject areas. Articles were manually filtered for fit with research query and read. Thereafter, the Indian case study was constructed through a study of a variety of secondary sources, including academic literature, government reports and articles in Indian newspapers.
- Foci of academic literature on Bt cotton: The analysis of the literature revealed five broad themes: economics of farming, non-economic returns to farmers, institutional impact on farmer, systemic economic impact and systemic ecological impact. All articles implicitly or explicitly assumed that farmers are profit-maximizers, as economic agents operating in markets are usually supposed.
- Global drivers of Bt cotton adoption: The main drivers are the higher profits and lower chemical use associated with Bt cotton cultivation. The drive to adopt is independent of farm size, farmer income and farmer experience. Both information seeking and imitative farmers are attracted to it. Indeed, there are no results on which kind of farmer would not benefit from adopting Bt cotton.
- Farmer and systemic impact: Bt cotton farmers enjoy include higher profits, higher household incomes and lower poverty. The higher price of Bt cotton seed, however crowds out some of this surplus. Systemic externalities include health improvements and contamination reduction. Negative externalities observed were the rise of secondary pests, and shrinkage of local varieties.
- Market Penetration Challenges: Even if GMVs can be redesigned without problem for an emerging country via collaboration with local firms, because of their intrinsic nature, as a radical innovation that can trigger systemic ecological externalities, a variety of hurdles can obstruct successful commercialization. Systemic challenges can be triggered if GMV legitimacy is not accepted by key stakeholders. Indeed, Monsanto faced direct challenges in India from public agencies and NGOs due to concerns about the long term impact of Bt cotton on human health and the ecology.
5. Agri-multinational legitimacy creation strategies: Monsanto concentrated on product performance to create a product that would reduce the cost of production of farmers the most. The objective of the innovation design strategy was to maximize the quality improvement of the seed so that it could be sold at the highest possible price to farmers and still displace the available seeds in the market developed by local breeders and public research institutions. Here, the product value was embodied in the benefits to the environment and the health of farmers and it helped to justify a high price of Bt cotton. Further, through an astute mix of strategic patience and compromise with public agencies and NGOs and fruitful collaborations and agreements with local firms, Monsanto was able to successfully commercialize Bt cotton in India.
- Societal confrontation of GMVs has three components: uncertainty, ideology and controversies. It is difficult if not impossible, to ascertain with precision, the long term risks (or even benefits) of GMVs from laboratory or field trial data. Thus, a variety of ideologies or subjective beliefs can prevail. In this turn means that policy makers should focus only on the third factor i.e. resolving controversies or differences between diverse ideologies. Efforts must be made towards consensus building via information sharing and participatory debates.
2. The ideological clashes between agri-biotech MNEs and societal stakeholders are centred on possible ecological externalities as well as loss of sovereignty of farmers over seeds as they are forced to buy seeds from market to have plant varieties with maximum vigour. Partnerships with local seed firms and public laboratories can reduce this anxiety.
3. The agriculture extension service, which is presently in shambles in most developing countries, must be re-invigorated to educate and accompany farmers to maximize their livelihood, while preserving the ecological sustainability of their farm lands to mitigate systemic externalities.
4. Policy makers must also be alert to minimize innovation rent-seeking by agri-biotech multinationals.