Bright Prospects but Slow Progress

Savita V Jayaram looks at the reasons for slow growth in India’s agrichemical manufacturing industry, the impediments to change and the barriers to reducing dependency on Chinese imports.
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India is the fourth largest producer of agrichemicals in the world after the US, Japan and China. While the global agrichemical market is mature and in a consolidation phase, the Indian market has been growing at 12% CAGR in recent years. There is good potential for exports and also for growth in the domestic market.

“India ranks second in the world in terms of farm output,” says Ankit Patel, CEO of Meghmani Organics Ltd. “Comprising 14% of India’s GDP, agriculture continues to be a key element of the Indian economy. Agrichemicals have played a vital role in improving agriculture productivity, necessitated by a growing population base and the demand arising from the need to achieve food sufficiency. These fundamental factors will continue to drive growth in the agrichemicals industry. We are estimating that the Indian agrichemical market will reach US$2.7 billion this year with favourably good monsoons.”

A Religare report on the agrichemicals sector in India states: “Patented products contribute only 20% of the global market, while off-patent products (generics) a significant 80%. Since 25% of the generic space is still marketed by innovators, it is projected that products worth US$6.3 billion are set to go off-patent by 2020, thus favourably placing generic players to scale up their market presence.”

Rajendra Velagala, director of Agricultural Solutions for BASF India, adds that “agricultural exports comprise 10% of the country’s total exports and are the fourth-largest exported principal commodity. Over recent years, multiple factors have contributed towards the growth of the agriculture sector in India. These include a growth in household income and consumption, expansion in the food processing sector and an increase in agricultural exports. Rising private participation in Indian agriculture, growing organic farming and the use of information technology are some of the key trends in the agriculture industry.”

Slow and steady

Agrichemical manufacturing in India is progressing slowly for a variety of reasons. While irrigation facilities for crops are increasing with the demand for consumption of micronutrients and fertilisers on the higher side, the average Indian farmer is still unable to reap great yields because most agrichemicals are imported and there is very little domestic manufacturing.

Because of this, the Government of India recently launched the ‘Make in India’ initiative to attract new players into the agrichemical sector, but this has not been as successful as hoped.“Progress and growth in this segment is coming only from the limited number of existing manufacturing companies,” Patel says. “And not all companies have the required infrastructure capabilities to expand. The ‘Make in India’ scheme was meant to restrict imports and encourage domestic manufacturing in India, but it has not been implemented so far. In fact, imports were largely affected due to the current scenario in China and US dollars appreciation.”

Pradeep Dave, President of the Pesticides Manufacturers and Formulators Association of India (PMFAI), adds: “While the Modi government is providing support to manufacture agrichemicals in India and reduce dependency on Chinese imports, as per the Insecticide Act, if you want to produce any pesticide formulation then you have to register the technical grade pesticide and formulations (in other words, the active ingredient in pesticides and formulations). But the Government of India’s registration policy for import of ready-made formulation has been diluted for the importer to make it easy and hassle-free. Thus, a lot of material is brought from China and all over the world to India. This affects the entire local manufacturing of agrichemicals in India, providing very little opportunity for exports as well. Allowing import of insecticides into the country without registration of technical standards and quality testing is damaging for the Indian pesticide industry. Also, farmers are looted (overcharged) to avail of the imported chemicals.”

Industry is apprehensive on some of the new policies and clauses, believing they impede research for new discoveries and the efforts of the ‘Make in India’ initiative.

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