Low Con­sump­tion Of­fers High Op­por­tu­ni­ties

De­spite im­pres­sive growth, the In­dian Agro­chem­i­cals sec­tor con­tin­ues to face mul­ti­ple bot­tle­necks. Ankur Ag­grawal finds out the pres­sure points and so­lu­tions

Rural & Marketing - - AGROCHEMICALS - Ankur Ag­grawal Man­ag­ing Di­rec­tor, Crys­tal Crop Pro­tec­tion

In re­cent years the agro­chem­i­cal in­dus­try has sig­nif­i­cantly trans­formed the agri­cul­tural land­scape in In­dia, giv­ing farm­ers bet­ter yield and crop pro­tec­tion, year after year. Agro­chem­i­cals largely in­clude in­sec­ti­cides, her­bi­cides, fungi­cide and bio stim­u­lants.

Even though the agro­chem­i­cal in­dus­try in In­dia has made sub­stan­tial progress in re­cent years, is far from reach­ing its full po­ten­tial. The sec­tor is ex­pected to grow at a CAGR of 8 per­cent per an­num to be­come a Rs 180 bil­lion en­tity by 2017-18. De­spite this im­pres­sive growth, it con­tin­ues to face mul­ti­ple bot­tle­necks. For one, the In­dian agro­chem­i­cal mar­ket is highly frag­mented, and in­tense com­pe­ti­tion between or­ga­nized and un­or­gan­ised play­ers en­gaged in man­u­fac­tur­ing th­ese agro­chem­i­cal prod­ucts adds to the chal­lenge.

Prob­lems are many, how­ever, there are sev­eral ways to over­come them.

Overde­pen­dence on generic agro­chem­i­cals

The In­dian crop pro­tec­tion in­dus­try is largely dom­i­nated by in­sec­ti­cides which form about 50 per­cent of share of the in­dus­try. Other seg­ments like her­bi­cides, fungi­cides and other (mi­cro nu­tri­ents & bios­tim­u­lants) form 22 per­cent, 21 per­cent and 7 per­cent, re­spec­tively. Generic prod­ucts ac­count for the bulk of do­mes­tic con­sump­tion, es­pe­cially when it comes to in­sec­ti­cides & her­bi­cides. In the com­ing years, the mar­ket de­mand for generic agro­chem­i­cals is likely to in­crease even more be­cause of the price dif­fer­ence.

An­other rea­son be­hind their pop­u­lar­ity is end-users are usu­ally com­fort­able us­ing man­u­ally tried, off-patented agro­chem­i­cals, and are too much de­pen­dent on them.

Again, strin­gent en­vi­ron­men­tal reg­u­la­tions and reg­is­tra­tion stan­dards across the globe of­ten delay the in­tro­duc­tion of new molec­u­lar for­mu­la­tion and patented prod­ucts in the mar­ket.

The So­lu­tion: In In­dia, MNCs com­pris­ing of both patented and generic mol­e­cules com­pete with a much larger num­ber of do­mes­tic-owned com­pa­nies largely op­er­at­ing in the gener­ics space and serv­ing lo­cal mar­kets. There needs to be a level-play­ing field for all stake­hold­ers in the agro­chem­i­cal and crop pro­tec­tion in­dus­try in In­dia, and the gov­ern­ment needs to en­sure this by eas­ing com­pli­ance and patent reg­is­tra­tion bar­ri­ers and cre­ated uni­form poli­cies for all man­u­fac­tur­ers, al­low­ing them ease of do­ing busi­ness. Do­mes­tic man­u­fac­tur­ers need to en­ter into part­ner­ships and tie-ups with MNCs to has­ten the process of in­ter­na­tional patents.

Lack of aware­ness among farm­ers

With grow­ing pop­u­la­tion and loss of land for in­fras­truc­tural projects, agri­cul­tural hold­ings are di­min­ish­ing in size. Add to this, the lack of aware­ness about new-age pre­ci­sion farm­ing and ju­di­cious use of agro­chem­i­cals which re­sult in sub­stan­tial losses for In­dian farm­ers. Inappropriate dosage and ap­pli­ca­tion fre­quency of­ten causes more harm than good. Agro­chem­i­cals and fer­til­iz­ers are vi­tal to pro­tect crops and max­i­mize yields, but farm­ers in In­dia of­ten lack in­for­ma­tion about what is avail­able in the mar­ket and how best to use them. Again, there is an in­creas­ing mis­in­for­ma­tion cam­paign against agro­chem­i­cals, la­bel­ing them as toxic for en­vi­ron­ment, which is far from the truth.

The So­lu­tion: Pub­lic and pri­vate sec­tors must work in part­ner­ship to in­crease aware­ness lev­els of farm­ers for just-right and timely use of agro­chem­i­cals. Agro­chem­i­cal com­pa­nies must take a lead in or­ga­niz­ing aware­ness pro­grams and reach out to farm­ers even in re­mote ar­eas. Farm­ing com­mu­ni­ties them­selves should seek help from agro-ex­perts and gov­ern­ment ad­vi­sory bod­ies for more in­for­ma­tion on site-spe­cific for­mu­la­tions and ap­pli­ca­tion tech­nique. Aware­ness re­gard­ing spray tech­nol­ogy is to be given im­por­tance.

Com­plex­i­ties in man­ag­ing sup­ply chain

The large num­ber of end users makes it im­por­tant to have a strong and ef­fi­cient dis­tri­bu­tion net­work for crop pro­tec­tion prod­ucts. How­ever, ow­ing to com­plex­i­ties in the sup­ply chain and lo­gis­ti­cal in­ef­fi­cien­cies the post-har­vest losses amount to al­most Rs 92,651 crore per year ac­cord­ing to in­dus­try estimates. Short­age of cold stor­age fa­cil­i­ties and per­ish­able na­ture of the fruit and veg­eta­bles re­sult in big losses along the food value chain.

The So­lu­tion: By build­ing strate­gi­cally placed agro­chem­i­cal units, not only the sup­ply chain and in­ven­tor man­age­ment hic­cups can be avoided, but also the trans­porta­tion costs re­lated to raw ma­te­ri­als can be brought down rel­a­tively. Em­brac­ing emerg­ing new-age tech­nolo­gies such as In­ter­net of Things can help in real-time track­ing of farm to fork and should be used ef­fec­tively by trans­porters.

The agro­chem­i­cals sec­tor is ex­pected to grow at a CAGR of 8 per­cent per an­num to be­come a Rs 180 bil­lion en­tity by 2017-18. De­spite this im­pres­sive growth, it con­tin­ues to face mul­ti­ple bot­tle­necks

Deal­ing with coun­ter­feit

There is a sig­nif­i­cant share of non-gen­uine agro­chem­i­cals in the In­dian mar­ket in­clud­ing coun­ter­feit, spu­ri­ous, and sub­stan­dard prod­ucts. Non-gen­uine prod­ucts are more com­mon in states where farm­ers are less ed­u­cated or rather less de­vel­oped states. It is not wrong to say, Credit drives sales of non gen­uine prod­ucts since they en­joy rel­a­tively higher share in less de­vel­oped states. Also ow­ing to lack of proper aware­ness and in­flu­ence of lo­cal re­tail­ers, farm­ers in re­mote vil­lages are of­ten forced to buy such inappropriate, sub-stan­dard and spu­ri­ous agro­chem­i­cals, which ad­versely im­pact the rev­enues of or­ga­nized sec­tor. Ac­cord­ing to an in­dus­try report, use of spu­ri­ous chem­i­cals ac­counted for loss of 10.6 mil­lion tones food grain pro­duc­tion dur­ing FY 2015.

The So­lu­tion: Even though the prob­lem of coun­ter­feit prod­ucts has plagued the agri­cul­ture sec­tor for decades now, it has re­ceived least at­ten­tion from the gov­ern­ment, which is un­for­tu­nate. Strin­gent reg­u­la­tions need to be put in place to tackle the prob­lem im­me­di­ately. In ad­di­tion, ed­u­cat­ing farm­ers to dif­fer­en­ti­ate between gen­uine and coun­ter­feit prod­ucts one will go a long way in tack­ling the is­sue.

High cost of R&D

Novel us­age of R&D re­quires great deal of cap­i­tal and man­power in­vest­ments. Ac­cord­ing to re­ports, In­dian com­pa­nies spend only 1-2 per­cent of their rev­enues in Re­search and Development as com­pared to global MNCs which in­vest around 8-10 per­cent. For decades, In­dia’s agro­chem­i­cals in­dus­try has thrived on mak­ing generic agro­chem­i­cals which only had short term gains but no fun­da­men­tal long term ben­e­fits for the in­dus­try. The So­lu­tion: In re­cent years, there is an in­creas­ing re­al­iza­tion that the In­dian agro­chem­i­cals in­dus­try is for­sak­ing long term gains by adopt­ing a my­opic view. The need to cre­ate prod­ucts and new mol­e­cules that ben­e­fit the lo­cal farm­ers and suit their agri­cul­tural con­di­tions are now been seen as an in­te­gral part of agri­cul­tural development. Beyond pub­lic in­sti­tu­tions and sci­en­tists, nowa­days multi­na­tion­als, pri­vate sec­tor firms, and agro­chem­i­cals com­pa­nies are also in­vest­ing in re­search on seed-treat­ment agro­chem­i­cals (which will help in en­sure dis­ease re­sis­tance) and cre­at­ing spe­cialty mol­e­cules. The pace of such in­vest­ments needs to be ac­cel­er­ated, and in­cen­tives need to be pro­vided for en­cour­ag­ing bet­ter in­no­va­tion.

The Take-Aways

In­dia is cur­rently the fourth largest man­u­fac­turer of agro­chem­i­cals and one of the big­gest ex­porters, world­wide. The In­dian agro­chem­i­cals mar­ket, to­day, is sup­ported by strong growth drivers. Cur­rent low con­sump­tion of crop pro­tec­tion prod­ucts in In­dia, 0.6 kg/ha com­pared to world av­er­age of 3 kg/ha, of­fers im­mense op­por­tu­ni­ties for fu­ture growth. The sec­tor is also driven by huge op­por­tu­nity for con­tract man­u­fac­tur­ing and re­search for In­dian play­ers due to large avail­abil­ity of tech­ni­cally skilled labour. The gov­ern­ment and in­dus­try play­ers need to work to­gether to keep up the growth mo­men­tum. Large MNCs can look at strate­gic al­liances with In­dian coun­ter­parts to in­crease their mar­ket­ing and dis­tri­bu­tion reach or ex­pand into newer prod­uct cat­e­gories.

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