India cut the royalties paid by local firms for Monsanto's genetically modified cotton seeds by nearly 70 per cent, ignoring a threat by the world's biggest seed company to leave if it did.
The move follows complaints from local seeds companies that Mahyco MonsantoBSE 3.88 % Biotech (India)(MMB), a Monsanto joint venture with India's Mahyco, was charging high royalties.
This prompted agriculture ministry to form a panel to look into the matter, whose recommendation the government has now accepted.
MMB has filed a case in a Delhi court, challenging the authority of the panel to determine the trade fee agreed upon by MMB and a number of Indian seed companies.
As well as cutting the royalties, the government also capped GM cotton seed prices at 800 rupees for a packet of 400 grams after appeals by some state governments and farmers to lower the rate of the Bt variety that commands 90 per cent of the market.
Bt cotton seeds are being sold at between 830 and 1,100 rupees per packet in different parts of the country.
The government's move came after Monsanto threatened on Friday to pull out of the country and hold off new technology if the government forced a big cut in its payments from Indian seed companies.
India's Mahyco and US-based Monsanto launched a GM cotton variety in India in 2002, helping transform the country into the world's top producer and second-largest exporter of the fibre.
Separately, the Competition Commission of India, the antitrust regulator, last month said there were indications that MMB had abused its dominant position in the country and asked its director general to complete an investigation within two months.