* India twice cut royalties that local companies pay to Monsanto
* Farmers, biotechnology companies welcome top court's decision
* Monsanto's GM cotton helped India become world's top producer
By Rajendra Jadhav and Mayank Bhardwaj
MUMBAI/NEW DELHI, Jan 11 (Reuters) - A court ruling in India this week that upheld a Monsanto patent on genetically modified (GM) cotton seeds has raised hopes among farmers that the company would now launch its next-generation seeds, the application for which it pulled two years ago.
India approved Monsanto's GM cotton seed trait in 2002 and an upgraded variety in 2006, helping transform the country into the world's top producer and second-largest exporter of the fibre. But newer traits have not been available since the company withdrew an application in 2016 seeking approval for the latest variety due to a royalty dispute with the government and worries over patent claims. (reut.rs/2jbDq80)
Nevertheless, the new herbicide-tolerant variety seeped into Indian farms and many cotton growers openly sowed them last year, prompting a government investigation that is ongoing. Monsanto has said local seed companies have illegally attempted to "incorporate unauthorised and unapproved herbicide-tolerant technologies into their seeds".
"We don't understand legal issues but we want new technologies," Shrikant Kale, a cotton grower in Yavatmal district in the western state of Maharashtra, said by phone. "If the court verdict helps seed companies in bringing new technology, then it would be good for us as well."
Nearly a dozen other farmers in three Maharashtra districts said they planted the illegal cotton variety in June after buying seeds from the grey market, and that they would be happy to use it legally if Monsanto launched it.
"Illegal sales mean that there's always a risk of buying spurious seeds and we buy such smuggled seeds as there is no alternative," said Vijay Niwal, another cotton farmer in Maharashtra.
"We don't mind paying a few hundred rupees more for seeds if they help us in saving thousands of rupees on managing weeds."
Monsanto owner Bayer welcomed the Supreme Court's decision, saying it "prima facie validates our patent" and that it was confident of "defending any challenge to our patent by presenting solid scientific evidence".
Monsanto did not immediately comment on future plans, including any launch of its new seeds.
But two industry sources aware of the company's plans said that a dispute over royalties paid by local companies that licence its technology remained a hurdle to seeking fresh approval to sell a new variety of cotton seeds. India's agriculture ministry has twice slashed royalties in the past two years, apart from cutting cotton seed prices.
"The government could step in again to decide the rate of royalty, which could be really miniscule in comparison with the cost of developing a really good product," said one of the sources, declining to be named as they were not authorised to speak tto the media.
"Biotechnology research is very expensive and if the government arbitrarily fixes the rate for expensive, cutting-edge technologies then that becomes a major hurdle in launching new products."
The agriculture ministry did not respond to an email seeking comment.
The court ruling has been criticised by a nationalist group that has links to the ruling Bharatiya Janata Party and favours non-GM technologies and "India first" economic policies. The Swadeshi Jagran Manch, which loosely translates to National Forum for Self-Reliance, said the government needs to amend the country's patent law to negate the court verdict.
Industry executives say several foreign agrichemical companies had to scale down projects, fire scientists, or pull applications to sell products in India because of government-mandated cuts in royalties and a lower court's order in April that rejected Monsanto's patent claim.
They said the Supreme Court verdict overturning the lower court order could set a precedent for any future patent dispute and encourage fresh investments in one of the world's biggest farm markets, whose seed industry is worth around $3 billion a year.
"The entire biotechnology space has been liberated," said Ram Kaundinya, director general of the Federation of Seed Industry of India that represents foreign and local seed companies including Monsanto and Syngenta.
"There was uncertainty in this area for the last three to four years, which led to a reduction in investments. There are still some issues regarding price control but those are not as big as validity of patents."
Many biotechnology companies working on corn and other GM crops will now push hard to get government approvals for their seeds, he said, declining to name the companies.
DowDuPont, which in August last year told the Indian government it was putting off trials needed for approval to sell a GM corn variety, did not respond to a call seeking comment.
A public relations firm for Syngenta directed Reuters to Kaundinya for comment.
But permitting GM food crops is a big call for India, which so far only allows genetically modified cotton seeds.
The country spends tens of billions of dollars in importing food, as dated technologies, poor yields, shrinking farms and unreliable weather patterns afflict the country of 1.3 billion people. But opponents of GM crops say they threaten the country's biodiversity and are too expensive for Indian farmers.
Annual sales of GM cotton seeds is estimated at $500 million, and Monsanto-developed seeds now control 90 percent of India's cotton acreage.
$1 = 70.58 rupees Reporting by Mayank Bhardwaj and Rajendra Jadhav; Editing by Krishna N. Das and Raju Gopalakrishnan