Growing population and land scarcity to drive Indian agrochemicals industry

India is the fourth largest producer of crop protection chemicals globally after US, Japan and China. Agrochemicals play a critical role in ensuring food and nutrition security of the nation. Mostly referred to as ‘pesticides’, they are used for plant protection and improving crop yields. Each year almost 30% of the potential food production is lost due to insects, pests, plant pathogens, weeds, rodents and birds and in storage. Hence use of pesticides has become of utmost importance. Further given large growing population and scarcity of land available for farming, agrochemicals industry has a vital role to play in the agricultural sector. 

 

Indian crop protection industry is capital intensive and is highly regulated. The industry mainly comprises technical grade manufacturers and formulators. The technical grade producers usually sell premium quality chemicals in bulk to formulators, who then prepare formulations by mixing the carriers, solvents, surface active agents, and other relevant compounds. There are close to 125 technical grade manufacturers, about 800 formulators and more than 145,000 distributors involved in the chain.

 

Pesticides are essential inputs used for increasing agricultural production by preventing loss to crops before harvesting or post harvesting. The industry is broadly categorized into different segments largely dominated by insecticides.

 

 

Production of Pesticides:  Protection of crops assumes an important place in the Indian agricultural economy due to various factors such as increasing population, decrease in arable land, adverse climatic conditions etc. The industry has witnessed phenomenal growth in terms of production over the last 5 years and has placed India at 4th position globally in terms of production of pesticides. Production of pesticides is expected to remain firm in near future with increasing demand of food grains from growing population.

 

 

Import-Export of Indian Pesticides: Imports mostly comprise of pesticides which are generally not manufactured in India. Most of the imports come from China, USA, Japan, Switzerland and Germany. Exports form a huge market for domestic pesticide producers in India and almost constitute 50% of the India crop protection industry. India is the 13th largest exporter of agrochemicals globally. Most big players are engaged in exports of pesticides to different parts of the world. India is a net exporter of pesticides to countries such as US, Brazil, France, China and some other European & African countries. Pesticides market has witnessed strong growth over the years and is expected to grow further mainly due to export demand which is expected to grow at 15-16% per annum. 

 

Demand for food grains: India is one of the most populous countries in the world, having less than 2% of the total land mass. Growing demand from increasing population and government’s high emphasis on achieving food grain self-sufficiency is expected to drive the growth in industry.

 

Limited availability of arable land: Available arable land has been reducing day by day on account of several construction activities for roads, residential and commercial purposes. Therefore the scope for bringing new areas under cultivation is severely limited. The pressure is therefore to increase yield per hectare which can be achieved through increased usage of agrochemicals.

 

Increasing awareness: Total value of crops lost due to non-use of pesticides is around $17 billion every year as per government estimates. Companies are increasingly training farmers regarding the right use of agrochemicals in terms of quantity to be used, the right application methodology and appropriate chemicals to be used for indentified pest problems. With increasing awareness, the use of agrochemicals is expected to increase.

 

Heavy dependence on Monsoon: The agricultural sector's heavy dependence on monsoon rains brings a lot of unpredictability to the sector. Every year, as farmers pin their hopes on meteorological predictions, so does the agrochemical industry. Normal monsoons imply a healthy season and a healthy demand.

 

High R&D costs: Agrochemical industry has mostly developed in making generic agrochemicals rather than investing in research and development to produce new molecules that can be patented. The mounting R&D costs and huge time period to develop new agrochemical molecule prevents large chunk of players from investing into the new product development. 

 

Low awareness: Only 25-30% of the farmers are aware of agrochemical products and their usage. Small farmers in remote and tribal belts still practice subsistence agriculture, selling whatever little output is left in the local markets. In the wake of the increase in population and loss of land for infrastructural and housing projects, the agricultural holdings continue to decrease in size. In such circumstances, it becomes imperative to educate the last farmer about the importance of using agrochemicals and using them judiciously. Knowing the complexities involved in usage of agrochemical, it is important to educate the farmers about the appropriate kinds of pesticide, its dosage and quantity. 

 

Threat from Genetically Modified (GM) seeds: Genetically modified seeds possess self- immunity towards natural adversaries which have the potential to impact the business of agrochemicals.

 

Counterfeit Products: Rising sale of spurious pesticides and spiked bio-pesticides also pose a major threat to industry growth. This negatively impacts the revenues of the organized sector.

 

Dhanuka Agritech has received a 'Licence to manufacture Insecticides' from Joint Director of Agriculture (Plant & Protection), Rajasthan for the Manufacturing unit of the company situated at Keshwana in the state of Rajasthan.
 

Agro-chemical firm Rallis India has received green clearance for setting up of a Rs 200 crore manufacturing unit in Gujarat. As per the proposal, the company will set up a manufacturing plant with a capacity to produce 52,000 tonnes per annum (TPA) agrochemical technical products and 10,000 TPA of agrochemical formulations along with 6 MW captive power plant at Dahej SEZ in Bharuch district.
 

Insecticides India (IIL), an agrochemicals manufacturer, has launched its mobile application for farmers and agricultural community to help them get latest information about agricultural products and their usage at the click of a button.
 

PI Industries has launched a new product ‘Vibrant’, an insecticide to control pest of Rice crop.
 

 

India is the second most populous country in world and is estimated to grow over time. Increasing demand of food grains for growing population and declining farmlands have increased pressure on farm yield improvement and reduction in crop losses due to pest attacks. In order to bridge the demand-supply gap in food grains, prevention of crop losses becomes necessary which needs deeper penetration of agrochemicals. Current low consumption of crop protection products in India, 0.6 kg/ha compared to world average of 3 kg/ha, offers immense opportunities for future growth. Further, government has initiated several policy measures to enable farmers to gain access to credit facilities. These policies are more focused on providing timely and adequate credit support to all farmers.