PPP Special 08 - Institut für Entwicklungs- und Agrarökonomik

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Summary
This study on the economics of Bt cotton in the state of Karnataka was
conducted during the first year of commercial introduction of Bt cotton in India.
It is based on a survey of 100 farmers in the 2002/2003 cropping season that
included farmers that had purchased Bt cotton and others who planted
conventional, non-transgenic varieties. Simple statistical and economic
analyses have been carried out in order to derive baseline information for an
early impact assessment of Bt crops in developing countries. Comparisons
were made across farms for farmers who planted Bt and those who planted
non-Bt cotton varieties. In addition, pair wise on-farm comparisons were made
of farmers who had planted both types of cotton.
Although the sample size was small and in this very early phase the access to
Bt seed was still limited, a number of important observations can be made.
Firstly, there seemed to have been a lack of knowledge regarding the true
biological characteristics of Bt cotton among farmers and extension agents.
Many farmers simply assumed that Bt cotton was a high yielding variety that
would not need any pesticides. Secondly, farmers listed the high costs of seed
as a major disadvantage. Seed company agents, which were found to be the
major source of information justified high Bt seed costs with high yield
promises. Thirdly, the economic analysis showed that the economic advantage
of Bt cotton depends on the agronomic conditions. While the gross margin for
Bt was higher although not statistically significant if farmers had good access
to irrigation the opposite was true for cotton production under rain fed
conditions. Fourthly, pesticide costs were not the major cost item and the
difference in seed cost between Bt and non-Bt was higher than the difference
in pesticide cost. Hence, during years with low bollworm attack planting of
Bt varieties can be a costly prophylactic pest control treatment that can reduce
farmer’s ability to cope with different pests later in the season.
The conclusion of the study is that Bt is an additional option of cotton pest
management also for developing countries. The benefits of the technology
depend on the institutional and ecological conditions of the adopters. While
some prospects seem to exist for irrigated areas, under rain fed conditions,
which is about two thirds of the cotton area in India, Bt can be an expensive
and inflexible pest management tool. Given the constraints that were found in
the state of Karnataka one should perhaps not be too optimistic on the
potential of Bt crops to sustainably solve pest management problems in cotton
especially in developing countries. Yield differences do not always
translate into differences in profit and the actual reduction in pesticide