MUMBAI/NEW DELHI (Reuters) - Monsanto’s victory this week in a patent case in India regarding genetically modified (GM) cotton seeds has raised hopes among farmers that the company will now launch its next-generation seeds.

FILE PHOTO: Monsanto is displayed on a screen where the stock is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. on May 9, 2016. REUTERS/Brendan McDermid/File Photo

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 fiber. 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 unauthorized 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 gray 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.”

India’s Supreme Court ruled on Tuesday that Monsanto can claim patents on its GM cotton seeds, after the company appealed an earlier ruling by the Delhi High Court that the world’s biggest seed maker could not claim such patents.

Monsanto owner Bayer BAYGn.DE welcomed the Supreme Court's decision. It said in a statement to Reuters on Friday that it was confident of "defending any challenge to our patent by presenting solid scientific evidence", and that the company would seek a ruling on "infringement of the patent" in India.

Asked about plans to launch new products in India, Bayer said: “Protection of intellectual property encourages innovation that is essential to providing India’s farmers with access to breakthrough technologies”.

But two industry sources aware of the company’s plans said that a dispute over royalties paid by local companies that license 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 authorized to speak to 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.

“SELF-RELIANCE” GROUP

The court ruling has been criticized by a nationalist group that has links to the ruling Bharatiya Janata Party and favors 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 SYENF.PK.

“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 DWDP.N, 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.