PMFAI responds to Indian Government’s Industrial Policy Draft

To achieve the target of USD 5 Trillion Indian economy by 2024-25, promoting and supporting indigenous manufacturing sector is very important. This will ultimately increase the exports.  Restricting of excessive imports is another area which ultimately attract investments in indigenous manufacturing sector and increase production capacities which not only boost economy but will also create more employment opportunities for Indian citizens.

 

Today India is 4th largest producer of Agrochemicals/Pesticides in the world, after US, Japan and China with market size of Rs.35,000 crores, out of which more than Rs.15,000 crores worth pesticides exported to global markets mainly by Indian MSMEs and Rs.20,000 crores worth domestic consumption. If the Government make policy changes, such as: 

 

(1) Compulsory registration of Technical Grade Pesticides in India prior to granting registrations for imports of Formulations; 
 

(2) Increase Customs duty on imports of Finished Pesticides Formulations; and
 

(3) Export registrations are made fast track with minimum data requirements;

 

then India can become No.2 in Agrochemical Production in the world by achieving total production worth Rs.50,000 crores with exports over Rs.25,000 crores.  

 

Mr. Pradip Dave, the president of Pesticides Manufacturers & Formulators Association of India (PMFAI)

 

 

Regulations for Pesticides registration in India is governed by Insecticides Act, 1968 and Insecticides Rules, 1971.

 

Till the year 2005-2006 registrations for Technical Grade products and Formulations were given simultaneously under Section 9(3), which qualified Indian manufacturers to apply for registrations u/s 9(4) “me too” registration.  But from 2007 registration authority viz. Ministry of Agriculture and Farmers Welfare & Central Insecticides Board & Registration Committee (CIB&RC) adopted policy guidelines for granting registrations for Imports of readymade Pesticide Formulations to the country without registering Technical Grade Pesticides in India, which badly affected the growth and progress of Indian Pesticide industries. The policy resulted in no investments in new plants in last more than 10 years by large-scale companies to manufacture technical grade pesticides in India. This has also led to many MNCs closing their technical manufacturing plants in India and importing Finished Pesticides Formulations in large quantities, contrary to the concept of “Make in India” to promote indigenous manufacturing.

 

Technical Grade Pesticides are the basic manufacturing use products which goes in Formulation Manufacturing.  When importers are allowed to import finished products without registering Technical grade products in India, the policy discourage registration and manufacturing of Technical Grade products locally which hampers growth of indigenous manufacturing sector.  This particularly affects growth of MSMEs who are mainly involved in Formulation manufacturing in India and key to increase exports. Currently there are more than 1000 formulation manufacturing units are there in India, which are mainly MSMEs

 

“We appeal to the Government to take necessary steps to adopt policy mandating compulsory registration of Technical Grade Pesticides in India prior to granting registrations for Formulations (import or indigenous manufacture), as is prevailing in major agricultural nations like US, Europe, Brazil, China, Australia, Argentina etc.”

 

 

Excessive imports in chemicals sector has been great cause of concern to the country and its economic growth where huge amounts are lost in foreign exchange.

 

Kindly note that uncontrolled imports of “Finished Pesticide Formulations” to the country has also been great threat to the growth of indigenous agrochemical manufacturing sector, particularly MSMEs who are mainly Formulators of various pesticides. The existing Customs Duty structures on imports of Finished Pesticides Formulations at 10% in comparison with prevailing Customs Duty structures on imports of Raw-material/Intermediates (manufacturing use products) at 7.5% does not leave much of scope for the growth of indigenous agrochemical sector. The country has been witnessing large-scale imports Finished Pesticides Formulations and Chemicals, leading to huge trade deficit in the chemical sector.

 

The present Customs Duty structures are as given below:

 

(a)   Present Basic Customs Duty on Raw-materials/Intermediates (which goes in manufacturing) under Chapter 29 is 7.5% ;
 

(b)   Present Basic Customs Duty on imports of Technical Grade material used for manufacturing, falling under Chapter 38 is 10%; and
 

(c)   Present Basic Customs duty on imports of Readymade Pesticide Formulations (Finished product) under Chapter 38 is also 10%.

 

The difference of just 2.5% Customs Duty between Raw-material/Intermediates and Finished Pesticides Formulations are not enough to attract investments and encourage manufacturing in India.  Unless and until Customs Duty structures are revised and harmonized, it will be extremely difficult for indigenous manufacturers continue local production of pesticides formulations and all efforts of Government to attract new investments in manufacturing sector and creating job opportunities for Indian citizen likely to go waste. 

 

Above Customs Duty structures are quite discouraging to attract investments in indigenous manufacturing of Pesticides Formulations, as Customs Duty on Raw-material/Intermediates which goes in manufacturing is 7.5% ; and imports of Finished products of readymade Pesticides Formulations under Chapter 38 attracts only 10% Customs Duty.

 

“To encourage and attract investments in local manufacturing sector, we appeal following changes in Customs Duty structures:

 

(a)   Basic Customs Duty on imports of Finished Pesticide Formulations falling under Chapter 38 be increased from current 10% to 25%;
 

(b)  Basic Customs Duty on imports of Raw-material/Intermediates falling under Chapter 29 be kept same at 7.5%; and
 

(c)   Basic Customs Duty on imports of Technical Grade Pesticide falling under Chapter 38 be increased from current 10% to 15%

 

There must be reasonable variation in applying Customs Duty on inputs which are required for manufacturing in India versus Finished products which are imported. Otherwise pesticide manufacturing sector in India will be at big disadvantage, particularly MSMEs who are key drivers of country's economy and main employment providers for Indian citizen.”

 

 

In spite of all constraints, India is 4th largest producer of Agrochemicals/Pesticides after US, Japan and China.  Presently Indian agrochemicals market size is Rs.35,000 crores, out of which more than Rs.15,000 crores worth pesticide formulations are exported to global markets mainly by Indian MSMEs. India with its strong basic manufacturing set up and process knowhow offers quality pesticides formulations to the world markets.

 

But the major challenge faced by Indian pesticide industry is in developing technologies to manufacture Technical Grade pesticides (Active Ingredients) and key Intermediates & Chemicals required to manufacture technical grade products.  

 

Presently majority of the intermediates are imported from other countries, mainly China. So the aim for the country be achieving self-reliance in creating technologies for – 

 

(1) indigenous manufacturing Technical Grade Pesticides used in manufacturing Pesticide Formulations; and

 

(2) manufacturing key Intermediates used to manufacture Technical grade products. 

 

“To achieve the goal of Make in India, our first priority should be marginalizing imports wherein huge amounts of foreign exchange is lost. We also need to reduce dependency on other countries for technologies/Active Ingredients for agrochemical formulations.  Premier Chemicals Research Institutions under Govt. of India like CSIR and associated Chemical Research Institutions can help in creating technologies indigenously and offer for commercialization to Indian industries. This can make Indian industries competitive in global markets.”

 

“Government of India should adopt policies and provisions to support and development assistance for indigenously developing technologies for Intermediates and Technical Grade Pesticides through its premier Chemical Research Institutions under CSIR.”

 

 

The Chemical Industry in India is very much concerned about the recent development due to environmental measures initiated by Central and State Pollution Control Boards on the basis of National Green Tribunal (NGT) order based on CEPI (Comprehensive Environmental Pollution Index) assessment.

 

The chemical industry is facing biggest disruption due to NGT moratorium, which can lead to an economic crisis. Chemical industries are already started to close down in Vapi, Gujarat. Please note that 50% of chemicals are produced in Gujarat and 20% in Maharashtra.  More than 90% of chemical industries are located in industrial estates.

 

“We have to bring to your notice that the method of work on CEPI score at various industrial clusters is not scientifically worked out.  CEPI is scientifically flawed method to assess environmental quality arising from industrial activity.  CEPI involves overall assessment of environmental status of an area, which may be due to contribution from multiple pollution sources such as industrial, vehicular, generator sets, municipal and other solid wastes, sewage etc. CEPI kind of pollution measure index does not exist in the entire world and need immediate corrective steps.”

 

Already the manufacturing sector of the country is in shambles and GDP is at lowest growth in last six years. On one hand, Government is talking about promoting the concept of “MAKE IN INDIA” and encouraging indigenous manufacturing sector; and on other hand un-scientific measures are adopted by authorities leading to industrial distress. In this way where the country is moving?

 

As the current pollution mitigation measures are initiated due to NGT Order, which is based on CEPI scores, there is a need for immediate re-visit to the methods adopted.  Till then NGT directives should not be implemented.  Otherwise it will have huge impact on industrial activities and GDP, Employment, Health care, Agriculture etc.

 

 

Increasing Exports of Pesticides is key for progress of indigenous agrochemicals industry as also for earning valuable foreign exchange for the country.  Over regulations for Exports will adversely affect exports of pesticides from the country.

 

Export Orders for Pesticide Formulations are very time-bound depending upon the Agriculture Season in different countries and timely delivery is very important, otherwise customers will look for suppliers from other countries. All importing countries have their own regulations and registration requirements for imports and to ensure quality & safety of the products imported, which each exporter has to go through to meet importing country’s registration norms. Therefore, imposing unnecessary data requirements & raising unqualified deficiencies for export-oriented products will only help add to costs and delays in exports from the country. Data available on public domain also be accepted by the registration authority for exports, as export orders are country specific.