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Executive Summary

The sheer size of Indian agriculture has attracted virtually every multinational
company from all over the world to come to India and tap its potential. However
despite its huge potential, the actual usage of agrochemical products in India is
lowest in the world. Uneducated farmers with small plots of land, erratic nature
of rainfall, primitive methods of farming, unreasonable land lease, rentals, etc.
have all contributed to the slow progress of the Agrochemicals Industry in India.
Despite this gloomy picture, there are also a large number of rich and prosperous
farmers whose agricultural practices match up with the best anywhere in the
world.
Agrochemicals usage is restricted to only 1/3rd of the cultivated land in India,
which represent the prosperous farms. Hence, despite the low coverage of
agrochemicals products, India is today the 14th largest market estimates at
Rs.2700 crores in the year 1999.
Agrochemicals play an important role in increasing agricultural production as
they protect crops from insects, pests, plant diseases and weeds before harvesting
and post harvesting. Initially manufactured as technical grade products they are
subsequently converted into formulations for agricultural use.
The industry is generic in nature as nearly 70% of the molecules are off patent.
Among off patent products, wide distribution network, strong brand image and
superior product quality act as entry barriers. Environmental concerns have
resulted in high regulation for the agrochemical industry making prior
registration for a large number of products mandatory.
The production process is essentially conversion job with raw materials, power
and labor acting as the major cost elements. The industry is working capital
intensive as the players give long credit periods to the farmers due to their poor
economic status.
Pesticides attract excise duty of 16%whereas other agricultural inputs like seeds
and fertilizers are exempt from levy of duties. Both technical grade pesticides and

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implements are charged a maximum customs duty of 35% rate that makes it
expensive to manufacture pesticides based on imported intermediaries.
The size of the global agrochemical market was placed at US $32.4bn in 1999 and
is likely to grow at 5% per annum. The global consumption is skewed in favour of
herbicides that account for nearly 48% of the pesticides usage. Manufacturers in
developed countries are advocating safer means of pesticides application and
shifting towards biotechnology to increase crop yield.
India is the second largest manufacturer of basic agrochemicals in Asia with 145
pesticides registered in the country. Even though India has a large capacity in
volume terms it accounts for less than 2.5% of the world markets in value terms.
Consumption is also low in India at 600gm compared to 10000gm per hectare in
developed countries. Insecticides account for nearly 76% while herbicides
account for only 10% of the pesticides usage in India.
The Indian agrochemical market is at Rs30bn in 1998-99. The industry has a
total current investment of Rs 15bn comprising 80players in the organized sector
and more than 500 players in the small-scale sector. Nearly 125 producers are
engaged in manufacturing technicals while 500 units are engaged in making
pesticides formulations. In terms of production capabilities, Indian players are
highly integrated and have already made inroads in the export markets.
Multinationals have expressed concerns over launching new products in India
because of insufficient patent protection.
Pesticides demand is expected to improve to90000 MT tonnes in FY2000 from
86600 MT in FY1999. The peculiar feature of this sector is that the consumption
is skewed in favor of a few cash crops. The geographical spread of usage is also
restricted to a few states like Andhra Pradesh, where the consumption profile
matches that of the developed countries.
The agrochemical industry is highly dependent on monsoon and consumption is
skewed in favour of Kharif crops with maximum use of pesticides in July to
September period. In India the industry is almost similar to commodity industry,
therefore the players have little pricing power. In the current year the industry is
suffering from over capacity and poor offtake due to erratic monsoons and lower
acreage. The industry has witnessed intense price competition from unorganized
players that has severely affected the margins of organized players. The last two
years have seen a single digit growth rate compared to 14% growth per annum
recorded earlier.
In future the industry is expected to witness higher consolidation as several
players are trying to exit due to poor profitability and bad market conditions. The
government regulations and ban on certain pesticides has encouraged research
and development to identify new and effective products that are safe for the
environment. Also, new patent regime with emphasis on patent protection and
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emergence of biotechnology will lead to new developments and future growth in


this sector. Generally patent protection enables producers to command higher
prices which is an incentive for R&D, as Indian players usually lack the resources
to invest in R&D.
The outlook for the industry remains dependent on normal monsoons and
increase in farm income. The ease of undertaking research and development
activities and cheap availability of skilled labour force has encouraged Indian
subsidiaries of global giants to make India a sourcing base. The gradual shift
towards higher consumption of herbicides and introduction of new high margin
products is expected to improve the profitability of organized players in the long
run. Besides consolidation among the global players is expected to realign the
market share among the domestic players similarly and will result in greater
research and development products to be introduced in the country.
In future the firms will have to set up integrated world class manufacturing
facilities employing state of the art processes and technologies developed through
in-house research and development to survive in the fiercely competitive market.
Indian companies will have to develop technological capabilities and focus more
on research and development by identifying new and better generation molecules
in order to compete with MNCs.

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Introduction And Definition


Contribution Of Agricultural Sector To The Economy
Agriculture occupies a dominant position in India’s economic structure. The
success of the Green Revolution enabled the country to achieve self–sufficiency in
food grains production. Over the last five decades the industry has expanded with
more than 500 players, making India the second largest manufacturer of basic
crop protection chemicals in Asia in volume terms. In terms of turnover the
industry is worth Rs. 3,600 crores and given the low rate of consumption there is
huge potential for growth waiting to be tapped. There is also another factor that
could bring about a major upsurge in the industry’s fortunes if properly
addressed – exports. With the global generic pesticide market forecast to grow by
54% to $27,000 million by 2005, many MNCs are keen to leverage India’s
strategic location for their Asia Pacific activities. India is also being viewed as a
major contract-manufacturing base by leading global players.

The demand for food grains is expected to increase significantly to 212mn metric
tonnes in FY2001 from the current production of 203mn metric tonnes in FY99.
Record production of food grains has been possible primarily on account of
various inputs used in agriculture namely seeds, fertilizers and pesticides.
Importance Of Agrochemicals
Agrochemicals form the largest and the most diverse group of chemical
compounds. Popularly referred to as pesticides they are mainly used for plant
protection and improving crop yields. Every year nearly 30% of the potential of
food production valued Rs 150bn are lost due to insects, pests, plant pathogens,
weeds, rodents, and birds and in storage. Hence the use of pesticides has become
extremely necessary. Besides given the large growing population and scarcity of
land available for cultivation, pesticides industry has a vital role to play in the
agricultural sector.
Basic Usage And Types
Pesticides are essential inputs used for increasing agricultural production by
preventing loss to crops before harvesting or post harvesting. The different types
of pesticides are insecticides, fungicides, herbicides, rodenticides, nemanticides
etc and are derived from chemicals. Pesticides can be classified into two type
namely technical grades and formulations. Technical grades exist at the first
stage of manufacturing process and generally consist of highly toxic and
hazardous liquids. They’re in technical parlance defined as products with high
chemical purity. Whereas further processing of technicals with emulsifiers and
other agents (sometimes referred to as excipients) result in next stage namely

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formulations. Formulations are tailor-made for diverse applications on insect-


pest spectra, plant diseases, weeds etc.
Broad Categories
Broad Categorization Of The Pesticides Industry
The industry is broadly classified into different segments like insecticides,
fungicides and herbicides and the main products and their use is given below as
follows:

Nature Major Products Purpose


Insecticides Monocrotophos, To kill insects
Phosphamidon,
Parathion,
Endosulphan,Quinalphos
Fungicides Copper Oxychloride, Nickel To eliminate fungus
Chloride, Mancozeb
Herbicides/ Anilphos, To remove unwanted
Weedicides Pendimethalin,Paraquat, plants/ weeds
Naropamide
Nemanticides/ Zinc Phosphide, Aluminum To kill pests in plant roots
Rodenticides/ Phosphide and to eliminate rodents
Fumigants
Consumption pattern of the Indian pesticides industry compared with global
consumption patterns
The consumption of pesticides in international and domestic areas among broad
categories is given below:

Nature Global share (%) Local Share (%)

Insecticides 29 76

Fungicides 17 13

Herbicides 48 10

Others 6 1

Source: Allan Woodburn 1998 for global market share, Pesticides Association of
India

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Technical Classification Based On Usage


The agrochemical compounds can also be classified into organosphosphates,
synthetic pyrethroids, organochlorines and carbamates. Recently bio-pesticides
have been in limelight. Currently organophosphates and synthetic pyrethoids
constitute nearly 70 percent of the pesticides produced in the country.
The following table classifies pesticides usage according to the chemical structure
as follows:

Nature Product classification


Organo-chlorines DDT, BHC
Organo-phosphates Monocrotophos
Synthetic Pytheroids Decis
Bio-pesticides Neem based
The following table classifies pesticides usage according to the chemical structure
in value terms in World and India:

Nature India (%) World (%)


Organo-chlorines 16 6
Organo-phosphates 50 37
Synthetic Pytheroids 19 22
Bio-pesticides and others 15 35

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Global Scenario
The size of the global agrochemical market for year 1999 was about US $32.4bn
and it is expected to grow at the rate of 5% per annum in future.
Within this market the global generics market is worth $24bn accounting for
80% of the total size of the market. The patented product market size is about
$6bn. It is expected that by 2000 the size of the generic agrochemical market will
have increased to $27bn and will account for 70% of the total global agrochemical
market.
The following table shows the usage of agrochemicals among the different regions
across the world:

Regions Market Size (%)

North America 30

Western Europe 25

Far East 23

Latin America 12

Rest 10

Source: Allan Woodburn 1998


The top 20 agrochemical companies worldwide control 85% of global sales
revenues while the top 10 among them command 72% of the market share. The
following table indicates the leading global players and their revenues for the year
1999.

Global agrochemical company Revenues ($bn)

Novartis 5.7

Aventis 5.7

Monsanto 5.6

Du Pont Pioneer 4.5

Bayer 3.9

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The top producers in crop production across different countries in terms of yield
is given below:

Crops Yield Kg /hectares Top producer

Rice 8157 China

Wheat 3151 China

Groundnut 847 India

Soybean 2304 USA

Source: CMIE
International Scenario
Currently developed countries are shifting towards precision agriculture.
Manufacturers in these countries are currently laying emphasis on safer means of
pesticides application to overcome harmful effects on human beings. Besides
many players are shifting to biotechnology to increase crop yield and reduce
usage of crop protection chemicals.

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Evolution And Structure Of The Agrochemicals Market


Pesticides were initially used in India by importing DDT for malaria control and
BHC for locust control in 1948. The first use of pesticides in agriculture began in
1949. Indigenous production of pesticides began with the establishment of DDT
and BHC plant in 1954. By 1958 India was manufacturing five basic pesticides
having production of over 5000 MT. Thereafter the industry has witnessed a
steady progress reaching a production volume of 60000 MT per annum in mid
eighties. Till recently, bulk of the production had been of insecticides but now
production of fungicides and herbicides is also increasing.
Today India is the largest manufacturer of basic pesticide chemicals among the
South Asian and African countries next only to Japan. Currently 145 pesticides
have been registered in the country of which 85 technical grade pesticides are
manufactured in the country.
The total production of technical pesticides for the financial year 98-99 was
estimated at 84700 MT tonnes against the installed capacity of 110.2mn ton by
the Department of chemicals and fertilizers. Even though India has a large
capacity in volume terms it accounts for less than 2.5% of the world markets in
monetary terms. India along with China accounts for more than 10% of the total
world production. However, consumption has been low at 600gm compared to
10,000gmper hectare in the developed world. The low consumption and usage of
pesticides in the country arises on account of poor awareness levels, economic
status of farmers and low proportion of cropped area under irrigation coverage.
India is currently the largest manufacture of pesticides in Asia and is among the
top 10 producers in the world. The Indian agrochemical industry is a Rs30bn
industry with 15-20% of the output being exported. Indian pesticides products
are now exported to USA, France, UK, and CIS besides a number of countries in
South America, Asia, Africa and Australia.
Operating margins of Indian companies are higher than MNCs by 2-3% because
of higher level of integration. Higher administration and interest expenditure
means that net profit margins of players operating in this industry are quite low
at 4% to 5%.

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Industry Characteristics
The agrochemical industry has the following characteristics:
• Monsoon dependent: The Indian agriculture is still dependent on the
monsoon and consequently the prospects of the industry are affected by
the trends in rainfall received in different parts of the country every year.
The maximum demand for pesticides usage takes place in the month of
July to September period. Thus the prospects of the players in the crop
protection business are subject to vagaries of the monsoon and seasonal
demand.
• Crop-wise and State-wise imbalance: The pesticides usage is highly
skewed in favour of kharif crops and certain states. Rice and Cotton
account for nearly 50% of pesticides usage. Among the states Andhra
Pradesh, Karnataka and Punjab account for nearly 60 percent of total
pesticides market.
• Generic nature: Currently more than 70% of molecules are off patent
and hence there is no threat to Indian players with respect to patent
regime. However with the discovery of new proprietary molecules and
entry of multinational players with strong research and development
capabilities, many new patented products will be launched in the country.
• Limited investments in research and development: Since there
have been very few proprietary products and poor patent protection in the
country, this industry has seen low investments in research and
development.
• Environmental regulations: India has comparatively less stringent
environmental protection regulations and has consequently become a
preferred manufacturing base for many multinational players in the Asia
Pacific region. Currently Agrevo (now Aventis) and Bayer (India) act as a
global sourcing base.
• Small scale of operations: There are very few Indian players with a
global scale in terms of size of operations, facilities, laboratories, etc. In
fact the Indian operations are undertaken on a small scale and cater to
generic products compared to MNCs whose operations are on a large scale
with focus on specialty products.
• High working capital: The agrochemical industry requires high
working capital due to its seasonal nature and long credit period given to
farmers. Thus high inventories during off-season period and high
receivables during poor monsoon put further pressure on the working
capital requirements.
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Strengths & Weaknesses


Indian manufacturers have traditionally concentrated on the generic pesticides
market. India is one of the largest producers of pesticides in South East Asia after
China. Though the proportion of generic products as a percentage of global crop
protection in sales has slipped in recent years, it is expected to stabilize to a level
of around 30 %. This represents a growth opportunity for Indian companies who
are poised to capitalize on their strengths in generics. Given the fact that even as
of today, 8 out of 10 active ingredients are off patent, experts are expecting
generic exports to touch Rs.10,000 crores. There are also opportunities from the
patent expiry of a large number of molecules, which were introduced in the 70s.

The industry needs to adopt the innovation route, which has seen a company like
Gharda Chemicals capture market from renowned multinationals like Aventis
and Ciba-Geigy, by making products not only more efficiently and economically
but also by safer methods. Gharda’s innovative approach of producing
isoproturon using urea instead of toxic phosgene has yielded rich dividends for
the company. There is no reason why other manufacturers cannot adopt this
route.

Though manufactures are upbeat about the prospects of exports it needs to be


emphasized that the industry will do well to plan ahead considering the fact that
older chemistries are getting obsolete and it cannot keep on flogging the same
molecules much longer. It is time toxic insecticides are phased out and replaced
by safer, greener alternatives such as botanicals like neem, etc. The pressure to
phase out such environmentally unfriendly products will become more intense in
the WTO regime.

Development in the field of GM (genetically modified) crops has thrown up new


challenges. In many parts of the world the trend is in favour of GM crops, and
indications are that in the next decade GM will gain increasing acceptance in
India. In case of cotton this may come about in the next couple of years at the
most. Considering that cotton is the mainstay of the Indian agrochemical
industry this will impact the industry on a scale unprecedented in the annals of
the Indian agrochemical industry.

A number of MNCs have started looking at ways to strengthen their Indian


presence. Consequently they have indirectly raised the stake in their listed Indian
companies by merging them with wholly owned subsidiaries.

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Critical Success Factors For The Industry


The Indian industry comprises basic manufacturers, formulators, importers,
distributors and dealers both in the public and private sector. The players include
both large-scale multinationals and Indian companies besides medium and
small-scale companies. The total current investment is about Rs15bn.The
following are the critical success factors for the industry:
• Promotion and farmers' education play a big role and are usually carried
out by the players in the industry.
• Marketing has to be very localized, as the country has different production
profile in different parts of the country. Secondly it has to be very
aggressive in some areas compared to others as the penetration levels vary
substantially from area to area.
• Any company has to constantly endeavor to improve its existing products
and develop new ones in tandem with the consumer’s needs, as the crops
develop resistance to the existing pesticides during various cycles. To a
large extent, environmental factors also determine the life cycle of the
products. The industry is increasingly manufacturing high value, low
volume and environmentally friendly niche products.

Manufacturing Process And Technology


Raw material and labor are the major cost elements (constitute about 60%-65%
of sales). Production is manpower intensive and batch processes are employed
for production of the pesticides. Product obsolescence is a common phenomenon
in this industry.
Lack of patent protection in India makes multinationals wary of the Indian
markets. The quality of indigenous pesticides is poor, resulting in the imports of
the next generation of molecules. This has also restricted the presence of the
multinationals to 40% of the market share. Organised players have to incur
significant expenditure on selling and distribution on educating the farmers and
reaching interior parts of the country.

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Regulations Governing The Industry


The pesticides industry in India is regulated by the Insecticides Act 1968 and
Insecticides Rules 1971 framed there under. Presently registration procedure
requires submission of authentic data on chemistry, bio efficacy and residues,
toxicity and packaging and labeling with details on pesticide presence in water,
soil, crop and environment. Besides detailed data on carcinogenecity,
mutagenecity, teratogenacity, neuvotoxicity is also required for submission for
allowing commercial usage. Once the regulatory procedures are complied with,
manufacturing or marketing of pesticides is allowed.
The production and use of Chlordane and Heptachlor has been banned from Sept
’96 along with BHC (formulation) with effect from April 1997. This was done on
consideration of the harmful effect of these pesticides on the soil and other bio-
organisms. However some of these pesticides were later permitted for use on
grounds of public health.
The government constituted a committee in Dec 98 to consider and review usage
of 28 pesticides in the country. The final report of the group will have a great
impact on the pesticides production and consumption in the country.

Excise And Custom Duties


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Excise Duties
Pesticides had remained exempt from excise duty for decades. However in ’94-95
budget a 10 percent excise duty was levied which was further reduced to a
concessional duty of eight per cent in the ’97-98 budget.
Thus Indian pesticides industry had differential rates of excise duties for
technicals and formulations in 1998-99. Technical grade pesticides attracted a
higher 16 per cent duty while formulations were subject to a lower duty of 8 per
cent. Thus there existed disparity, which resulted in technical-grade
manufacturers not able to fully claim modvat credit. This anomaly has now been
rectified with increase in the excise duty on the formulations to 16% in the budget
for FY 2000.
Currently there exists anomalous excise duty structure as excise duty is levied on
pesticides while other agricultural inputs like seeds, fertilizers, micro nutrients
continue to be exempt from levy of any kind of duties.
Custom Duties
Technical grade pesticides currently attract maximum ceiling rate of 35%
advalorem custom duty along with imposition of 10%surcharge. They are also
subject to special additional duty (SAD) of 4% with the result that effective rate of
duty on pesticides works out to 44.9%. Besides pesticides intermediaries also
attract a similar rate of duties. Consequently it is expensive to manufacture
pesticides by importing intermediaries from abroad. Thus most of the domestic
consumption is based on supplies made by local manufacturers.

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Demand & Supply Scenario


In 1992, the government formulated the law, which made it obligatory for
manufacturers of basic bulk agrochemicals, popularly called technicals, to sell
50% of their output to the outside formulation manufacturers. After the law was
repealed these formulators found starved of raw materials, so many of them
began producing technicals on their own. As a result the number of these small
manufacturers went up from 300 in 1992 to more than 500in 1998. Today’s glut
is a result of that capacity addition.
The sector’s fortunes are closely linked to the production of cash crops like
cotton, tobacco, etc that are the main recipients of agrochemicals (cotton-40%).
Over capacities and strong competitive pressures within this sector have affected
profit margins of the players in this industry. Most of the manufacturers have
achieved an average capacity utilization of 65%-70%.
While supply has expanded, demand has not kept pace as it has been hurt by the
climatic factors. In 1996-97 the marketing season of cotton pesticides was
affected when cyclone ravaged Andhra Pradesh. Thus the prices of cotton
pesticides fell and created inventories. The next year saw the repetition of the
same scenario when the cultivation of cotton did not begin in July. The erratic
monsoon trends further affected the crop production in the Kharif season
resulting in lower offtake for the pesticides. Small players panicked when the
demand did not pick up and went for distress sales, which further brought down
the prices.
FY98-99 has been one of the worst for the agrochemical industry due to various
reasons. Poor crop in previous season, reduced acreage's and erratic nature of the
rainfall are the principal reasons for the adverse performance of agrochemical
industry in this year.

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Snapshot Of The Agrochemical Sector In The Nineties


The following table indicates the production and demand for pesticides in the last
nine year as follows:

Production Consumption
Year (000
Tonnes) (000 Tonnes)
1990-91 74 53
1991-92 72 58
1992-93 76 63
1993-94 83 68
1994-95 90 75
1995-96 96 89
1996-97 102 72
1997-98 96 83
1998-99 (P) 98 86

Source: Pesticides Association of India and industry data


The demand for pesticides used in agriculture amounted to 89428 MT in ’95-96
that has decreased to 83183 MT in‘97-98 and is expected to touch 86600 MT in
’98-99.

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Production Of Pesticides In The Country


Domestic agrochemical industry has about 80players in the organized sector and
more than 500 players in the small-scale sector. More than 60 technical grade
pesticides are manufactured indigenously by 125 producers while500 units are
engaged in making pesticides formulations.
Manufacturers in the organized sector are producers of the basic technical grade,
which is used by small-scale formulators to manufacture pesticides. The
penetration levels for pesticides are very low in most parts of the country except
certain states like Andhra Pradesh and Karnataka where the consumption is high
due to higher composition of cash crops.
India is a dominant producer of isoproturon- a weedicide and accounts for nearly
25% of the worldwide production. Besides synthetic pyrethroids, such as
fenvalerate, cypermethrin, endosulphane and a wide range of organophosphates
like Monocrotophos are also manufactured in India.

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Production
Production ('000 MT)

Product Installed 92 - 93 - 94 - 95 - 96 - 97 - 98 -
Capacity 93 94 95 96 97 98 99

Insecticides 81.9 73.4 71.8 75.6 77.7 84.1 60.4 66.0

Fungicides 10.7 5.3 5.5 6.0 6.6 7.3 9.2 8.0

Herbicides 4.8 2.0 1.3 1.5 1.4 1.6 1.9 1.7

Weedicides 10.3 2.2 2.7 5.1 8.5 7.3 7.33 6.7

Rodenticides 0.9 0.27 0.51 0.46 0.40 0.40 0.5 0.5

Fumigants 1.6 1.0 1.5 1.8 1.8 1.9 1.6 1.8

Total 110.2 84.17 83.31 90.46 96.40 102.6 80.9 80.9

Technical grade pesticides have been growing at the rate of 10% in the last few
years.

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Cropwise Consumption of Pesticides

Cotton- Accounts for 45% of all pesticides used in India, making it the single
most important crop market in India. Irrespective of where it’s grown, cotton
attracts several insects throughout its life. On account of severity of insect
pressure virtually every product category finds its use including Organochlorines,
OP’s, Carbamates and Pyrethriods. However, of late pests have developed
resistance to the traditional compounds and farmers have lost heavily on account
of reduced yields. There was a distinct danger of farmers opting of cotton
cultivation due to the pests menace.
Fortunately some multinationals companies introduced new products with
remarkable success such as Imidacloprid, Acetamiprid, Larvin and Avaunt. With
the introduction of these products, cotton cultivation has once again become an
attractive proposition to the farmer.
Such new products, which are patented, are generally expensive as compared to
older generic molecules. Hence the new farmer is judicious combination of old
and new products to maintain its profitability.

Rice- is the second largest consumer of pesticides in India, accounting for 22% of
all pesticides in India. Rice crop needs to be protected from weeds, diseases and a
whole host of insects, which attack the roots, stem, wheat and grain.
Consequently the demand for insecticides, fungicides and herbicides is more
balances in rice as compare to cotton. Of late, certain pests have become
extremely difficult to control such as BPH, leaf roller, sheath blight and blast.
Fortunately recent introduction of new molecules such as Hexaconazole,
Tricyclozole, Validamycin and Imidacloprid helped control this menace and
paddy yields have shown remarkable improvement.

Other crops- India grows over 100 different crops for food and non-food
purposes, and each crop provides a niche market for one specific product or the
other.

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India in the Global Markets

Imports
Developing a new product is an extremely expensive proposition on India and is
confined to large multinationals in India. As and when a new product finds a fit
in controlling a specific pest in India, the concerned multinationals go through
the process of registering and importing the new molecule into India. Hence
products that are imported are generally new sophisticated molecules, which are
not manufactured in India.

Exports
During 1999, Indian exports of agrochemicals reached Rs. 1500 crores, a steep
climb from Rs.64 crores exports during the year 1989. Hence in the field of
agrochemicals trade India has a healthy surplus on account of abundant and easy
availability of high quality and low cost raw materials and intermediates. The
high quality of Indian products such as cypermethrin, chlorpyriphos and
endosulfan gave India a distinct edge over China. On account of the huge
potential for agrochemicals abroad several Indian manufacturers set up large
capacities in India, anticipating that very soon domestic demand would justify
the same. However, the growth was slower than expected.

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Future Demand Projections And Key Drivers For Agrochemical Sector


The pesticides demand is expected to go up to 90000 tonnes in the year 2000. It
is not easy to make accurate demand projections for the pesticides. Increase in
cultivated areas for commercial crops, use of High Yielding Varieties (HYV) seeds
for key crops like cotton, sugarcane and intensive work undertaken by the
government authorities and industry players for encouraging the use of pesticides
makes it difficult to accurately predict pesticides usage for plant protection in
future. The continuous extension of modern agricultural practices by way of
production of new pesticides along with enhanced awareness for plant protection
in terms of cost benefit ratio of pesticides has also added to difficulties in making
future projections.
India has lowest amount of spending on crop protection at US $3 per hectare
compared to double digit figures most for developed nations in the world. The
following table compares the expenditure incurred on crop protection among
different countries in the world.

Country Expenditure on crop protection


(US$ per hectare)

Japan 1113

USA 43

Brazil 26

China 6

India 3

Source: Chemical weekly


The table above clearly indicates that India offers good potential for pesticide
industry mainly on account of large growing population and low expenditure
incurred on crop protection in the world.

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The following table illustrates the decline in the cultivation of land available for a
person in (hectares) as follows:

Year Ha/ per person

1991 0.330

2025 0.200

Source : E M Beyer, BCPC Weeds Brighton 1991


Urbanization and increase in population is reducing the amount of good quality
land available for growing food. Thus farmers will have to increasingly improve
productivity by improving yield per hectare to meet the growing population
needs.
The total irrigated area continues to rise along with improvement in general
standards of living of farmers. Accordingly increase in awareness levels of
farmers and higher purchasing power will result in demand for better quality of
agricultural inputs
There are various other factors that indicate that agrochemicals are likely to
witness better days ahead. Already crop prices have firmed up and corporates are
awaiting guidelines to enter into commercial agriculture. Besides profitable
markets are developing in new commercial crops such as vegetables, fruits,
oilseeds and pulses.

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Agrochemicals
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Outlook For The Indian Agriculture Sector And Linkages With


Agrochemical Sector
Agriculture will drive agrochemical industry performance: Agriculture
sector contributes about 23% of the India’s Gross Domestic Product and is
expected to maintain a similar contribution in future as well. The high growth of
population along with limited availability of land will put pressure on food grain
production. The increase share of cash crops in agriculture and higher irrigated
land under cultivation with greater awareness levels of the rural masses will
result in higher agrochemical usage.
Higher yields to contribute to higher food grains production: With the
area under cultivation being saturated and no increase in acreage for food grains
in the last five years, the increase in food grain production will have to take place
on account of higher food grain production. Besides environmental policies and
state government laws have slowed down the process of de-reserving the land
under forests for cultivation.
Growth in agriculture linked to agrochemicals: The agricultural sector
will grow by 7% to 10% pa in value terms and 2% pa in volume terms in the next
few years. This will result in agrochemical sector growth of at least 10-12% pa in
value terms. This growth in agrochemical sector will be driven by higher usage of
pesticides both before harvesting and post harvesting.
Increased rural income: The country is witnessing an explosive boom in the
consumer goods sector and with an increasing affluent middle class demand for
quality and processed foods is expected to increase. The entry and growth of food
processing industry will create demand for high quality agriculture produce.
New committee to review pesticides usage in country: The government
has recently constituted a group of experts under the chairmanship of Dr R. B.
Singh to undertake a review of 28 pesticides for their continued use or otherwise
in the country such as Malathion, DDT, Trichlor Acetic Acid (TCA), Sodium
Cyanamid, Zinc Phosphide (2,4,D). The government is in the process of banning
2 pesticides with undesirable long-term effects like Monocrotophos and Phorate
to lessen the negative influence of these chemicals on soil and other bio-
organisms. Hence government policy and guidelines will determine the future
growth of the pesticide industry.

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Competitive Positioning Of The Key Players


The Indian pesticides market can be divided into three major groups as follows:
On the one hand there are large Indian companies that produce both technical
grade pesticides and formulations and have a large product portfolio of generic
products. Key players among them are Excel Industries, Rallis Industries.
On the other side there are a large number of subsidiaries of multinational
companies catering to niche segments like specialty products. The chief players
are Monsanto Chemicals, Bayer (India), Novartis (India) and Cyanamid Agro.
Lastly there is presence of a large number of small players engaged in
formulation business.
The local market is characterized by large capacities with low capacity utilization
that has resulted in a steady decline in the selling prices of many generic
products. The uncertain weather conditions coupled with long credit period for
farmers and poor economic status of farmers have resulted in low margins for the
players in the industry.
Many Indian players have very little investments in research and development
activities. Consequently the Indian players own very few proprietary molecules
and product patents. Patent protection is necessary so that producers can invest
in intensive research and development and identify new and more effective but
less harmful products.
The following factors are considered by industry players as critical for the future
growth in this industry:
To have a global reach: There are more than 100 countries particularly high
priced US and European markets, which offer opportunities for the Indian
players to improved sales revenues and improve capacity utilization.
To obtain global registration: It is mandatory for players operating outside
India to comply with various rules and regulations like registration of pesticides
to enable local sales in the country.
To have extensive distribution channels: A strong reach across the country
using a network of wholesalers and retailers spread geographically across cities
and regions will enable the players to consolidate their position with reference to
unorganized players.
To have large product portfolio: Wide range of product portfolio covering
most of the target markets which are experiencing substantial growth.

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In future the firms will have to set up integrated world class manufacturing
facilities employing state of the art process and technologies developed through
in-house research and development to survive in the fiercely competitive market.
Besides companies will have to provide superior quality products at cheaper
prices with complementary services and build a strong customer franchise

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Agrochemicals
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Opportunities For Indian Players


The following table briefly enumerates the opportunities of Indian players in the
industry based on the characteristics of the agrochemical industry as follows:

Characteristics of the agrochemical Opportunities for Indian players


industry

Limited Research and development Exploit the generic business as 70%


activities of molecules are off patent

Seasonal demand Opportunity to tap commercial crops

Environmental regulations Set up manufacturing base for global


players

Small scale of operations Develop niche markets and low


dosage molecules in future

Large unutilized idle capacity Opportunity to develop new markets


and increase awareness levels for
pesticides usage

Marketing of pesticides : Case study on Syngenta Cropscience


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Agrochemicals
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Brief history of Syngenta

Although Syngenta is a brand-new company, it has a long and impressive history.


In fact, their roots trace as far back as 1758 when Johann Rudolf Geigy-Gemuseus
opened a chemical business in Basel, Switzerland.
Syngenta’s heritage is formed from the innovations and skills of Novartis and
Zeneca, two of the leading names in the agribusiness industry, in the year 2000.
Syngenta's depth of experience and knowledge, firmly position us as the new
global leader in providing innovative solutions and brands to growers and the
food and feed chain.

What Syngenta thinks about...


Agriculture has an impact on the lives of everyone, from farmers to consumers.
Syngenta appreciates the importance of its role and responsibilities as a world-
leading agribusiness. We are committed to sustainable agriculture, through
innovative research and technology.

Marketing strategy

The marketing of agrochemicals is done through “rural marketing”. Here the


consumer targeted is the ‘farmer’. The attitudes, lifestyle and consumer
behaviour of the farmers differ from those of the urban consumers. Hence, a
slightly different approach has to be adopted while marketing agrochemicals.

Syngenta has also moulded its strategy to suit the Indian market. Being a MNC it
has to take special measures to cater to its Indian consumers.

We will take a look at the marketing strategy of Syngenta based on the 4 P’s of
marketing, namely, Product, Price, Place (distribution) and Promotion.

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PRODUCT

At Syngenta its their constant endeavour to provide the farmers with the best
product. Their product-line consists of premium-end products the list of which is
given below.

Crop Corn, Wheat and VegetablesCotton, Professional


Treated Sorghum Barley and FruitsPeanuts, Products
and Tobacco and
Soyabeans Rice
Insecticides Ekalux Karate Curacron Curacron Vertimec
5EC 50 EC 50 EC 1.8 EC
Karate Ekalux Karate Nuvacron Icon
5EC 5EC 10 WP
Polytrin C44 Ekalux
EC
Polytrin C44
EC
Nuvan
Kungfu
2.5 EC
Fungicides Apron Tilt Ridomil MZ Cuman L
35 WS 25 EC 72 WP
Topas Apron
10 EC 35 WS
Blue Copper Tilt
50 25 EC
Thiovit
Kavach
Herbicides Dual Topik 15WP Gramaxone Rifit
50 EC 50 EC
Seed Apron Cruiser Cruiser
Treatment 35 WS 70 WS 70 WS
Chemical

Syngenta continuously meets the demand of the farmers by adding new products,
changing existing ones and eliminating others. The ideas for development of new
products or modification in existing products come from the feedback received
from the farmers and also sometimes dealers. Syngenta has a huge network of
field-workers who practically go into the farms to find solutions to recurrent as
well as new problems related to crop protection and collect feedback.

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It has to conduct ongoing research & development activities, as one of the


inherent features of agrochemicals is obsolescence due to the ability of the pests
to gain immunity to these products.

PRICE

The products offered by Syngenta are premium end products and hence are
priced slightly higher. But their product range consists of the best that is there to
be offered in the market due to their immense R&D activities and emphasis on
technology. The farmers too believe in the quality of their products and price
comes secondary to such quality products.

PLACE (PHYSICAL DISTRIBUTION)

Syngenta makes very little use of middlemen as they strongly believe in


“personal selling”. Their general channel of distribution is –

Company Salesperson

Dealer/Retailer

Farmer

They have strict policies when it comes to offering credit to middlemen. Since the
company salespersons are in very close contact with the farmers they can offer
timely supply of their products.

PROMOTION

Since Syngenta is a newly formed company it is currently engaging itself in a lot


of marketing activities. As earlier mentioned Syngenta very strongly believes in
personal selling, that is, creating demand at the grassroot level.

Their target audiences are the farmers and also opinion leaders like village chiefs
or teachers (as they are educated). They also target influencers like the
Department of Agriculture to help promote their product.

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They use media like “direct mailers” to inform the farmers about their
products and schemes, which, helps in creating a good rapport with the farmers
and they distinguish Syngenta from rest of the companies.

Press or print media is used very judiciously since many of the farmers are
not educated. For print advertising popular regional newspapers or trade
journals are used.

For television advertising regional television is used extensively and the most
preferred channel is Doordarshan since the reach of Cable television is
minimal. Programmes like “aamchi maati, aamchi mansa” which are
targeted towards farmers are used for advertising.

Radio is a very essential media since it has a wide reach. Audio advertising is
also done through vehicles, which announce the product and its features by way
of catchy phrases.

Films and slides are another very effective way of marketing. They are
screened at village theatres or at farmer meetings specially organized to inform
them about the product. The films are either educational where only the product
story is told or they may be theme based like a feature film wherein the product
story is told through dramatization of a theme which appeals to the farmer.

Other media used are wall paintings, hoardings and point of purchase
media like posters and danglers.

Another effective way of marketing is “word-of-mouth publicity”. The


company targets influencers like village sarpanch or a very prosperous farmer
who enjoys very good reputation among the farmers. These people inform other
farmers about the company and its products.

Public relations
This element is used to build preferences and awareness among the farmers. This
is done through trade fairs, sponsorship of events, public service activities. For
instance Syngenta is involved in a project called “Project Sahyog” to help
farmers cultivating rice. It also organizes lot of training programmes to create
awareness and train the farmers about modern farming techniques and use of
High Yielding Varieties.

This is in short the marketing strategy of Syngenta Cropscience. Other


agrochemical companies also adopt a similar strategy.

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Conclusion
The end consumer demands more quantity, better quality and wide variety of
products. To deliver the same companies will have to provide better seeds, offer
better farm management techniques using new and greater variety of pesticides
that will enable higher crop production with greater crop protection.
Thus future growth of this industry will be driven by companies providing farm
solutions that will cover the entire gamut of food supply chain management
beginning from crop production till the stage of crop protection. This will
basically involve understanding farmers’ needs by setting up in house
technologies to increase yields. Besides control over major inputs and setting up
efficient distribution services with adoption of international practices relating to
crop management will enable Indian agrochemicals sector companies to meet the
global challenges.

The crop protection chemicals industry in India is at a threshold, which could


lead to new and hitherto unexplored vistas of opportunity. The next couple of
years could well mark the beginning of a new phase of fast track growth provided
the government is willing to go that extra mile in empowering the industry.
Considering the initiatives taken by the government in backing up its promises
there is considerable scope for optimism.

For more Notes, Presentations, Project Reports visit –


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Project on
Agrochemicals