Syngenta Procurement Prices in India

Publication date: 
Monday, July 20, 2015

In December of 2014, DanWatch, a Danish civil society organization that monitors the corporate social responsibility behavior of multinational companies, released the documentary “Seeds of Debt.” The documentary reported instances of exploitative high-interest money lending to farmers in rural Andhra Pradesh, India – a systemic problem in the agriculture sector – and featured testimony from farmers producing seeds for Syngenta, an affiliate of the Fair Labor Association (FLA). Following the release of the documentary, Syngenta requested for the FLA to conduct its own investigation. The FLA appointed an independent research team to conduct a comprehensive assessment of Syngenta’s hybrid seeds supply chain in India including its price model, interest-free cash advances, the role of third-party seed organizers (middlemen, who work with both Syngenta and with farmers, and who appear as money-lenders in the documentary), farmers’ credit requirements, and the common sources of finance.

The investigation found that most of Syngenta's seed suppliers are small farmers who have been working with Syngenta for several years, and may also produce seeds for other buyers or participate in commercial farming.  In addition to cash advances from Syngenta, these farmers depend on a variety of sources of credit, including loans from organizers, from input suppliers, banks and cooperative societies, and from money lenders.  In this study, interest rates charged by seed organizers ranged from 18 to 24 percent, which farmers reported was not considered exploitative in Andhra Pradesh and Karnataka.  Many farmers reported that they preferred seed production for Syngenta to commercial crop production because of Syngenta's announced procurement price ahead of the growing season, and interest-free cash advances, input supply, and technical support from Syngenta.

In addition, the research confirmed what previous FLA assessments have documented: statutory minimum wages are often not paid to farm workers in Syngenta's seed supply chain.  Syngenta does not base the calculation of its procurement prices for seeds on workers' legal minimum wages, but uses instead local prevailing wages, which fall 35 percent and 25 percent below the legal minimum in Karnataka and Andhra Pradesh, respectively.  Payment of wages below the minimum wage remains an issue across the agriculture sector in India, with higher wages in relatively more developed regions and for agricultural tasks such as plowing, spraying pesticides, and applying fertilizers -- activities typically conducted by men.

The FLA recommends that Syngenta should review its production calculation method, and include statutory minimum wages in the calculation of its procurement prices.  The FLA further recommends that Syngenta should bring the production-related activities of its seed organizers under the purview of FLA’s independent external monitoring, among other suggestions detailed in the complete report below.  In the report summary below, the FLA also reports on Syngenta's next steps, including its commitment to a multi-stakeholder consultation in India in late 2015 on fair compensation for farm workers.

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