The Indian pesticide industry is heavily dependent on Chinese imports for raw materials, and could be heavily impacted by the COVID-19 outbreak, according to an analysis prepared by the Agriculture Ministry.
The Ministry estimates that domestic inventories may be sufficient for the kharif sowing season, but any further supply disruptions could hurt farmers. Industry insiders and analysts say that a good rabi or winter crop season and the possibility of a locust attack could deplete inventories sooner than expected, raising prices by about 15%.
“Pesticide industry in India heavily depends on import of around 15 technical insecticides from China,” says the analysis submitted to the Finance Ministry last week as part of an overall assessment of the impact of the virus outbreak on Indian industries. Technical insecticides are an intermediate product used in the manufacture of commercial pesticides.
“Out of the 15 pesticides, Acephate, Cartap, Buprofezin, Pretilachlor represent 80-90% trade from China whereas Imidacloprid, Azoxystrobinb, Imzathapyr, Acetamiprid represent 40-50% import from China. Few technical insecticides, which are manufactured in India, also involve the raw material, which is sourced from China,” says the analysis.
“There is a major supply gap, as no container has come from China in the last two months. In fact, it started in early January when factories were shut for their New Year festival, and then, there was the coronavirus,” says Rajesh Aggarwal, MD, Insecticides India.
“We understand they are now back up to about 40% production capacity, which has restarted in March. But there are still barriers on internal movement in China, plus delays in shipping out of China. So, the gap has built up, availability is very tight and now, prices have gone crazy.”
Increase in cost
He estimated that there had been a 10-25% increase in the cost of these inputs from China. According to the Ministry analysis, the impact on farmers may not be immediate. “Functioning of domestic pesticides industries may not be affected immediately by the disruption of supplies from China since the industry in India is having inventories for at least next six months. Hence, for the ongoing kharif season, there may not be any adverse effect on the availability of pesticides to the Indian farmers,” it said.
However, Mr. Aggarwal said inventories are lower than usual for this season because of excellent rains extending the rabi season in parts of the country.
He estimated a 15% rise in the wholesale price of pesticides. Ratings and research agency Crisil also raised some red flags, although it felt that the procurement season for the rabi season is largely over. “In case the manufacturing facilities do not operationalise by end of February, there could be some impact in procuring raw material for the upcoming kharif season,” said an early impact report.
Crisil Research director Hetal Gandhi added that the news of a locust attack in the region could increase demand and deplete stocks.
“May is peak season for stocking, and there may be a 15-20 day delay,” she said, noting that delays in dispatches was the major concern. “The first quarter of the year accounts for 35% of revenue for Indian pesticide companies, so, if the raw material does not reach in time, there could be significant impact.” As India imports only 10% of its urea from China, as well as value-added fertilisers, this could also have a moderate impact on Indian farmers, she said.
Mr. Aggarwal, who is also vice-chairman, Crop Care Federation of India, urged the Centre to issue faster clearances for imports and also facilitate manufacturing licences so that India can become self-sufficient here. “We need to use this opportunity to backward integrate and put up capacity, so that we are not dependent on imports,” he said.
Pesticides Manufacturers & Formulators Association of India president Pradip Dave agreed. “As manufacturing and logistics are paralysed in China, it’s a good time for India to increase its share in global markets. The government must help local manufacturing companies by granting registration from the Central Insecticide Board and manufacturing licences by States,” he said.
“They are being slow and lethargic and we may miss golden opportunities.”