Government’s Proposal To Ban 27 Pesticides Will Hurt Agrochemical Firms And Farmers, Analysts Say
May. 25, 2020
Almost 70 percent of the total agrochemicals produced in India are covered under the proposed list of banned products, according to rating agency ICRA Ltd. The Ministry of Agriculture has published a draft notification seeking suggestions and objections for its plan to ban the 27 commonly-used pesticides, weedicides and fungicides due to their bio-hazards.
If the proposal gets implemented in the current form, it will have a significant negative impact on the agrochemical industry's sales and profits, K Ravichandran, group head and senior vice president of ICRA wrote in a note. "In a scenario when several pesticides were coming off patent, and Indian players were expected to invest in manufacturing these products, the loss of revenue on account of the ban could seriously hamper the ability of the domestic industry to offer new products in the Indian market."
ICRA also warned that farmers would be exposed to fresh pest attacks as the pesticides on the proposed ban list constitute a significant portion of such products used in the country.
The order is unlikely to get fully implemented, especially all at once, since all key stakeholders will end up on the losing side, according to the brokerage Prabhudas Lilladher. Farmers may object unless substitute products are available at affordable prices, Emkay Global analysts wrote in a report.
Jai Shroff, the global chief executive officer of UPL Ltd. said in a conference call that 25 out of the 27 generic products are widely accepted and that he is hopeful that the government will reverse the ban on most of them.
Here are the other highlights from what brokerages have to say:
- Some of the red triangle (most hazardous) products in the list may get phased out along with molecules that have less demand in India.
- The proposed ban is economically unviable and politically risky.
- Disallowing manufacturing would not only impact India’s exports market share but may also cause shortages of these products in global markets.
- The move may encourage multinational companies to import more patented products into India, giving them an advantage over domestic players.
- The industry will appeal for a review for most insecticides barring three, which fall under the red triangle category.
- Some molecules, which are banned for lack of relevant data submissions and not banned by many countries, can be salvaged by following up with submissions.
- Don't expect an immediate impact; the final ban will be in phases, spanning over four years.
- Dhanuka Agritech Ltd. and Rallis India Ltd., which have large number of generic products, will be severely impacted.
- Long-term multinational players with access to new-age products, including Bayer and Sumitomo, could benefit.
- Domestic companies with strong connections with global innovators like PI Industries Ltd. and Dhanuka Agritech could also benefit.
- The industry is gearing up to provide data and secure products in the proposed ban list.
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