Quarterly Journal of International Agriculture No. 3/05
The cost of biosafety regulations: the Indian experience
Carl E. Pray and Prajakta Bengali
Rutgers, The State University of New Jersey, New Brunswick, NJ, USA,
and
Bharat Ramaswami
Indian Statistical Institute, New Delhi, India
Abstract
This paper presents the costs incurred and estimated by firms and
government research institutes in India to obtain regulatory approval
of genetically modified (GM) crops, specifically Bt cotton. The direct
costs include the costs of research and laboratory trials needed to
fulfill information requests by the regulators and also the
government’s costs of the bureaucracy for implementing the regulatory
rules. The indirect costs or opportunity costs are farmers’ foregone
incomes and the biotech industry’s foregone profits if regulation
prevented the sale of safe and profitable technology. After describing
the Indian regulatory system, we describe its impact on firms’ cost of
compliance. We then describe the spread of Bt cotton and its impact on
the seed industry and farmers. The Bt cotton experience is used to
analyze the impact of regulation on biotech research done by private
firms, the structure of the seed industry, and farmers’ welfare. We
develop alternative policy scenarios that show that the indirect costs
of regulation can be large. Regulatory costs must therefore be taken
into account in designing regulation.
Keywords: transgenic crops, regulatory policies, costs of regulation, seed industry, farmers’ welfare
JEL: Q 160
Vol. 44 (2005), No. 3: 267-289