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
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.
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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