Entrepreneurs and Eggplant


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.

This reminds me of our

This reminds me of our President addressing the nation on the Republic day asking us to get ready for the next green revolution. Like anybody me too believed the importance of the message in the current context of Food crisis But, the power is vested with them for the decisions to make. This may effect the investments to India as one cannot expect what decision will come and more importantly with no time frame for the decisions.

"it is the duty of

"it is the duty of governments to bring predictability into the uncertain lives of investors and business people." True. But then the government itself is run by politicians with uncertain future and prospects of untold gains (money/votes) if they can manipulate certain outcomes. Both BT brinjal and Telecom Spectrum issues were said to be manipulated by powerful lobbies. In case of telecom sector, the government turned a promised monopoly into duopoly and then open market; ruining the market-estimates of the top bidders. The common man would never know the string-pulling that went on behind the scenes.

Nice read. In my opinion,

Nice read.

In my opinion, the current-day Indian psyche is more averse to taking risks than ancient India. For example, after visiting the Museum of Toilets in Delhi, the curator explained to me the inventive nature of ancient India that led to the creation of the modern-day sewer system. Hence, I wonder whether we are getting more modern or simply trying to get back to the level of modernization that created this great nation.

The problem with the Indian leadership is that Entrepreneurship is not scene has a specialized skill. Even in "Ivy" league colleges like FMS, Entrepreneurship is not an elective in the final year of MBA. There needs to be a push from the top and then supporting elements need to align. This is a lot easier in an organization than a country. But, it can be done!

I also hate the fact that someone who has exerted so much energy in inventing something of value has to let go of it, because of what seems like - a whim! I hope he has a Braveheart.

- Rupen
P.S.: I have just started reading "The Difficulty of being Good." It's so far been a learning experience considering I've never read any literature on the Mahabharata...well except the Gita!

Sir, these are issues

Sir, these are issues concerned for entrepreneurs but wht about students like me who are struggling to get a General Seat in some good college, this quota are hindering growth of any individual and filling their vote bank. Recently, 4% quota awarded to Muslims in AP then it will get spread across the country. If India gov will go like these then intellectual crisis will going to happen. there are lots of hidden issues to come up and get trigger bt our great journo people are beating around bush in showcasing few people, we heard some rift between Sonia and Manmohan on approving less subsidy in food bil, Nuclear Liability and Sharam-al-Sheikh issues.The ruling govt will talk a lot but doing doing only for their vote bank.

I agree with author.Really

I agree with author.Really thought provoking.Inspiration.
For an Indian like me who is like me working in Singpaore, these kinds of news really painful. Often,i reading these kind of news in the local newspaper besides regular mention of India & China's leading role in the World in comming years.
Anyway,I have high regard for Minister Ramesh.
Hope,a solution for Bt.Brijal soon.Ofcouse,as well aspiring entrepreneurs as well.
Thanks you for the articel.Keep thinking and writing.

With love and regards,

I agree with Mr. Das that our

I agree with Mr. Das that our government is the biggest obstacle in India's progress but I completely disagree with the example that he has chosen. Monsanto is known for its fraudulent activities for which it has been thrown out of many countries. In a corrupt country like India, it is very easy to manipulate people and institutions for a report or a certificate. Therefore, to rely on such findings and allow the introduction of these seeds could be fatal. Also, there are major problems with the way these seeds are introduced in the market creating monopolies. Moreover, there are many varieties of brinjals available in the market today which do not have any of the problems for which Monsanto apparently spent nine years in research. We must also keep in mind that brinjal is neither a staple nor a very important vegetable for whose seeds we need to pay a monopoly its monopoly price for ever and ever. Considering that Mr. Das is a very important opinion-maker in India, I do hope he will exercise greater caution before writing up something like this.

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