Monday, March 08, 2010

Entrepreneurs and Eggplant , The Wall Street Journal

OPINION ASIA MARCH 8, 2010, 2:06 P.M. ET

Entrepreneurs and Eggplant
A case study in how India's government is the main obstacle to economic progress.
New Delhi

Risk is built into capitalism because the rewards of investment arrive in the future. Risk usually comes from the unknown responses of customers and competitors in the marketplace. But in India, the greatest uncertainty still emanates from government and its overweening regulators, despite 18 years of economic reform. If anything holds India back from realizing its true potential, it is weak institutions of governance.

Nowhere is this heartbreaking truth clearer than in the tale of Maharashtra Hybrid Seeds Company. Founded in 1964 by Badrinarayan Ramulal Barwale (who received the World Food Prize in 1998) Mahyco, as it is known, has done pioneering work in hybrid seeds. Today Monsanto holds a 26% stake in the company. Having produced hybrids of cotton, sorghum, sunflower and wheat, it is currently researching improvements to more than 30 crops.
The development of genetically modified eggplant, known locally as Bt Brinjal, was the latest in this string of innovations. Mahyco's scientists toiled for years to figure out how to kill the pest, Brinjal Fruit and Shoot Borer, which wipes out 30% to 40% of India's annual crop. Mahyco conducted 25 environmental biosafety studies supervised by independent and government agencies to ensure that its product had the same nutritional value and is compositionally identical to regular eggplant; finally, it did rigorous field trials in collaboration with two Indian agricultural universities.

In October 2009, after nine years of trials, their invention was approved by the government's Genetic Engineering Approval Committee, which stated Mahyco's product is "effective in controlling target pests, safe to the environment, non-toxic as determined by toxicity and animal feeding tests, nonallergenic and has potential to benefit the farmers." Top Indian and international scientists hailed the innovation, hoping that it would open the door for further research and trials on the more popular foods like rice and wheat.

Yet on Feb. 9, Environment and Forests Minister Jairam Ramesh stopped the seed's introduction. He privileged the concerns of environmental groups, who had opposed Bt Brinjal on grounds of potential human and animal health and biodiversity. In placing an indefinite "moratorium" on the product, Mr. Ramesh adopted the precautionary principle, citing the need for more safety data and an absence of any "overriding urgency." He ignored the government's own regulatory process, the committee of distinguished scientists who had approved Bt Brinjal after nine years of intensive trials, and he undermined the trust between the citizen and the state.

It is a testimony to our argumentative democracy that the story did not end there. Mr. Ramesh's decision led to a huge outcry among India's scientists and farmers. Last month, Agricultural Minister Sharad Pawar wrote to the prime minister that biotech innovations that withstood regulatory scrutiny "should be vigorously encouraged." Any hesitation, he wrote, could hamper research in India on transgenic varieties of potato, rice, mustard, tomato, groundnut, chickpea and pigeon pea currently underway. He added: "Absence of clarity on some of these issues could jeopardize R&D not only by the private seed companies but also by public institutions."

In other words, India cannot attract investment if entrepreneurs cannot predict how the government will react. The telecommunications ministry has wavered for years on whether or not to sell 3G spectrum, and how to do it. Equally disheartening is the recent experience of private entrepreneurs in dealing with the railways ministry. Encouraged to invest in freight movement on the promise of a level playing field, they have discovered formidable hurdles placed in their way by the government's monopoly railway company. Similar stories abound in the airline industry, financial services and retail, too.

Entrepreneurs are used to risk—in fact, they seem to thrive on it. What really throws a spanner in the works of capitalism, however, is uncertainty. What's the difference? As the late great economist Frank Knight wrote in "Risk, Uncertainty and Profit," risk can be quantified using statistical analysis, yielding probabilities that guide efficient decision-making. Uncertainty, on the other hand, cannot be measured and therefore presents a true barrier to business. The capricious decisions coming out of Delhi are creating uncertainty.

Indian civilization has long understood the role of government in mitigating risk. The theme of risk even appears as far back as 2,000 years ago in the ancient Indian epic the Mahabharata, where a famous game of dice is the metaphor for the uncertain, vulnerable human life. The epic looks to the ruler and his dharma to bring predictability in the lives of human beings.
In the same way, it is the duty of governments to bring predictability into the uncertain lives of investors and business people. Entrepreneurs face more than enough insecurity in the marketplace. If India's government does not ensure a reliable regulatory environment or if allows ministers to interfere in established institutional mechanisms, who will take courageous, long-term risks? Who will invent the seed that sparks a second green revolution? No wonder investors continue to believe that authoritarian China is more investor friendly than democratic India.

Mr. Das, former CEO of Procter & Gamble India, is the author of "The Difficulty of Being Good" (Penguin, 2009) to be published in the U.S. in September by Oxford University Press.


Anonymous said...

Well... that's interessting but to be honest i have a hard time figuring it... I'm wondering what others have to say....

Suman Thota said...

"He undermined the trust between the citizen and the state" 200% correct.
Jairam Ramesh shouldn't have been going here and there politicising Bt Brinjal. Instead should have said ok, and let people take a call. Also should have made the trails and research be published for the people to analyse.

I hope similarly the clinical trails on various medicines be revieled by the Pharma companies too.

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ms said...

gurcharanji, to quote a popular film song: 'baingan kya jaane uski life mein kya hoga, pakora banega ya bhartey jaise fry hoga'.
why do indians balk at getting something bigger and better just because it is an import? we are using technology, foods, cloth, fashion, music, entertainment, foreign interference in domestic and foreign policies, imported terrorism etc. why drag the humble baingan into this irksome debate? the local producers are screamimg about dependence on foreign seeds etc. why? after the first crop, we have our own seeds!! the plants are very adaptable and the second crop will only require local fertilisers and pesticides. our markets are flooded by foreign vegetables like broccoli, zuchini, yellow/red capsicum, romano tomatoes, butternut pumpkin, white/brown onion, large pods of garlic (thank god! all those poor women trying to peel the microscopic garlic pods of yester years!!). then the fruits!! nectarines, ozzie pears, strawberries, kiwi fruit, persimmons, mangoes out of season from israel and far east, the list goes on.
so, bring it on, let us have the BT Brinjal. let us cook it in imported canola oil, with brown/white onions, giant garlic pods and sweet romano tomatoes, and maybe, throw in the yellow and red capsicum for decoration. if the indian can't go to the BT, let the BT come to the indian!!

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Anonymous said...

Reasons for the Bt Brinjal moratorium Many countries, particularly in Europe, have banned GM foods. China’s policy is to be extremely cautious about introduction of GM in food crops, even when it has a very strong publicly-funded programme in GM technology unlike India.

• The current standards by which the GEAC has formulated the decision to approve Bt Brinjal do not match global regulatory norms to which India is a party, specifically, the provisions in the Cartagena Protocol on Biosafety, pertaining to public consultations prior to the release of GM food crops and those governing risk assessment, Article 15 of the Rio Declaration on Environment and Development (1992) which echoes the precautionary principle and Section 45 of Codex Alimentarius containing "Guideline for the Conduct of Food Safety Assessment of Foods Derived from Recombinant-DNA Plants".

• Scientists in the USA, France, Australia, UK and New Zealand have written to the Minister raising very serious doubts on the way tests have been conducted in India for Bt Brinjal. 17 noted scientists from different countries have addressed a joint letter to the Prime Minister on February 8th, 2010 giving scientific reasons against the release of Bt Brinjal.
• Dr. Swaminathan, whose research foundation is working on GM technology, has highlighted concern over chronic toxicity and called for credible independent testing of the chronic effects of consumption of Bt Brinjal. Additionally he sees the need for an independent regulatory system and for conservation and collection of India's existing genetic variability in Brinja

Anonymous said...

Reasons for the Bt Brinjal moratorium
Many countries, particularly in Europe, have banned GM foods. China’s policy is to be extremely cautious about introduction of GM in food crops, even when it has a very strong publicly-funded programme in GM technology unlike India.

Scientists in the USA, France, Australia, UK and New Zealand have written to the Minister raising very serious doubts on the way tests have been conducted in India for Bt Brinjal. 17 noted scientists from different countries have addressed a joint letter to the Prime Minister on February 8th, 2010 giving scientific reasons against the release of Bt Brinjal.
Dr. Swaminathan, whose research foundation is working on GM technology, has highlighted concern over chronic toxicity and called for credible independent testing of the chronic effects of consumption of Bt Brinjal. Additionally he sees the need for an independent regulatory system and for conservation and collection of India's existing genetic variability in Brinjal

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Anonymous said...

Forget the rampant pro-profiteering rant, the writer is also cluless about basics in agriculture. For instance, there are no wheat hybrids developed anywhere in the world.

Anonymous said...

Sir, I really liked your book "difficulty of being good" ... But this article you probably have written without knowledge about the technicalities involved. It seemed too vague and generalized... Also, even though you repeatedly write about the problems of Indian bureaucracy (which is 100% correct) but I seldom find you vocal about the corporate / business who exploit the system rampantly. May be I am not aware of all your blogs, so forgive if I hurt your pride unknowingly....

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Sri said...

Sorry not convincing. Food needless to say is the basis of web of life. I can not accept any government or multinational tinkering with genetics of food, without full realisation of any adverse consequences. Please go to Punjab and Harayana to see the effects of the "Green Revolution", high incidences of cancer and depleting ground water levels.
Our country has poor regulation and testing requirements are so lax and poorly enforced.
Can Mosanto and the scientists who vehemently support Bt Brinjal give enough proof that it will mix or mutate with normal brinjal? As a citizen I have a right to get organic brinjal.

Anonymous said...

Mr. Das

This wasnt expected of you, when you usually talk of Dharma and how democracy is the correct way going forward.

I am not sure whether you are taking the case of BT Brinjal and championing the cause of GM foods or just took it as an example. But supporting BT Brinjal could be lead to remarks on your motives.

If I can draw analogies, BT Brinjal is equivalent to communism (idea developed for centuries, and supported by many revolutionaries who sacrificed their lives for the cause). You cant vehemently argue against one of them and support the other.

Kshitij Choudhary said...


Why don't you write as often as you did before in the Sunday Times ? I miss your articles on Sundays.

Also, why don't you delete the spam comments. Such useless folks who come and scribble non-sense here.

Warm regards.
Kshitij Choudhary

neerajpanjiyara said...

as far as government's attitude & response towards corporate projects are concerned, it is quite discouraging,as seen in the case of posco's orissa and L N mittal's jharkhand ventures. It should be more friendly & cooperatives. In case of GM crops specially consumable products, i also feel somewhat restraint, though technically i don't know much, but, if there is any possibility that organic farming could be utilized for 2nd green revolution, then i would favour it as an alternative, as it is considered good for sustainable development & future.

Prabir said...

well well well!!! i am reading your "India Unbound" - i ruminate what did we do to deserve such poor governance? how could the bureaucracy take this nation for a ride. i disagree with you that the nation is marching ahead; one visit to West Bengal and its industrial policies will dismantle any doubts, should you have. not only are they archaic, they are still in the "inspector raj". they decide what is good for the industry & what is not. the hurdles to get one project sanctioned is a herculean task taking upto 2 years and god forbid if you need some subsidy as well!!!
Dear Gurucharan - help us....

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