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RSTV IAS UPSC – Pepsico v/s Potato Farmers

  • IASbaba
  • May 13, 2019
  • 0
The Big Picture- RSTV
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Pepsico v/s Potato Farmers

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TOPIC: General studies 2

  • Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
  • Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and bodies constituted for the protection and betterment of these vulnerable sections

In News: A variety of potatoes developed by FMCG giant Pepsico’s India division has triggered a patent-infringement battle in the country.

The snacks and beverages major has sued a few farmers in Gujarat for growing potatoes which the company uses to make its Lay’s chips.

  • The MNC had sought Rs 1 crore each from four farmers for cultivating the FC5 potato variety. The particular potato requires lower moisture content as it is used to make snacks as potato chips.
  • In an Ahmedabad commercial court, the company claimed it is the registered breeder of FC5 under India’s Protection of Plant Varieties and Farmers’ Rights Act.

PepsiCo has been developing and registering a variety of potatoes in India since the production of Lay’s took a hit in 2008. The overall supply of potatoes was hit that year due to crop failure in the states of Maharashtra, Karnataka, and Punjab. The company currently works with 24,000 farmers across the country in states like West Bengal, Maharashtra, Punjab, Gujarat, Uttar Pradesh, Karnataka, Bihar, Haryana, and Chhattisgarh.

The Potato Conundrum

The variety

The patent is for the potato plant variety FL-2027 (commercial name FC-5). Pepsi’s North America subsidiary Frito-Lay has the patent until October 2023. For India, PIH has patented FC-5 until January 2031 under the Protection of Plant Varieties and Farmers’ Rights (PPV&FR) Act, 2001.

The allegation & defence

PIH, which has a buyback agreement with Gujarat farmers, accused the 11 farmers — three of whom earlier had contracts with the company — of illegally growing, producing and selling the variety “without permission of PIH”.

One of the accused farmers had said the agreement was that PIH would collect potatoes of diameter greater than 45 mm, and that farmers had been storing smaller potatoes for sowing next year. Four other farmers, who were slapped with Rs 1.05 crore lawsuits, said they got registered seeds from known groups and farmer communities and had been sowing these for the last four years or so, and had no contractual agreement with anyone. They said they learnt they were growing a registered variety only when they got a court notice on April 11.

Link: https://www.livemint.com/companies/news/pepsi-backs-off-in-row-with-potato-farmers-1556802023315.html

Activists’ view

In the days that followed the lawsuits, activists, farmer unions and other organisations cited Section 39(1)(iv) of the PPV&FR Act in defence of the farmers. The section states: “Notwithstanding Anything contained in this Act — a farmer shall be deemed to be entitled to save, use, sow, resow, exchange, share or sell his farm produce including seed of a variety protected under this Act in the same manner as he was entitled before the coming into the force of this Act, provided that the farmer shall not be entitled to sell branded seed of a variety protected under this Act.”

Organisations said the Act was tailored to give farmers free access to seeds.

Cases & announcement

  • A court in Deesa, Banaskantha, had appointed court commissioners to investigate the premises of two farmers as well as two cold storages.
  • In Aravalli, a court had issued a summons notice to five farmers.
  • In Ahmedabad, the commercial court had extended an ex-parte ad-interim injunction on four Sabarkantha farmers until June 12, barring them from growing or selling FC-5.

On Wednesday, the Gujarat government reportedly held out-of-court settlement talks with the company, which eventually announced the withdrawal of cases. It has withdrawn six cases against nine of the farmers, and its officials will meet state government authorities Friday to discuss an arrangement.

The corporate giant’s offer had two terms. One, farmers should stop growing the registered potato variety and surrender their existing stocks. And if they wished to continue, they must enter PepsiCo’s collaborative farming programme where they buy seeds from the company and sell the produce back to it.

A misguided action?

PepsiCo may be concerned about competitors using its patented potato variety, but targeting the weakest element in the chain, the small farmer, may not be the best remedy.

  • For the first time in India, a group of farmers has been sued over intellectual property rights violation. The stakes are high since it will set a precedent, but to begin with, PepsiCo seems to have filed the case with an inaccurate understanding of existing Indian laws.
  • By seeking damages of over ₹1 crore from each of them—a sum they are unlikely to earn even in a lifetime—it may have committed a cardinal sin, that too in the middle of a general election.
  • To gather evidence, the company carried out a sting operation by hiring detective agencies to pose as buyers who lured growers by offering them a higher price, farmer groups have alleged. According to them, PepsiCo should have collected evidence to nail its competitor, instead of suing farmers. Farm activists have also argued that while the potato variety was introduced in India in 2011, it was only registered five years later in 2016; therefore, it is natural that it spread among farmers who are not under any contractual arrangement with the company.

Conclusion:

  • There should be absolutely no compromise on farmers’ rights and seed sovereignty. The state government should make the Act as the basis of any settlement, if at all, and anything less than that is unacceptable. It would have failed all the farmers in India and not just the sued farmers if it succumbs to corporate lobbying.
  • The government should put into place clear mechanisms to avoid a repetition of this episode in future. For this, all Certificates of Registration should explicitly state that such a Certificate and any rights associated with it are conditional to certain other sections of Protection of Plant Varieties & Farmers Rights (PPV&FR) Act 2001.
  • Loopholes in the PPVFR Act must be plugged. They are being misused by some in the seed industry to avoid paying royalties or to sell seed that is not approved by regulators.
  • Also, it is worth understanding that farmers cannot throw away the undersize potatoes of varieties (including protected ones) which the contract buyers reject. They will save some for own use; the rest they will sell for consumption or as seed. Such sales are kosher, because the contract buyers got the right of first refusal.

Update: PepsiCo withdraws lawsuit against 4 Indian potato farmers

Note:

  • UPOV — International Union for the Protection of New Varieties of Plants — is an organisation that works to promote new plant varieties. India is not a part of this Union because of the conflicting laws in place which protects the interest of breeders as well as farmers under The Protection of Plant Variety and Farmers Right Act, 2001.
  • India had designed a sui generis law in compliance with the WTO’s TRIPS Agreement (Agreement on Trade-Related Aspects of Intellectual Property Rights), which is the PPV&FR Act, 2001. Under this statute, farmers’ apriori rights with regard to seeds and planting material have been clearly protected under Section 39 of the said Act.

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