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Project Report on Agrochemicals

Project Report on Agrochemicals

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Published by kamdica
MBA Project Report on Agrochemicals
MBA Project Report on Agrochemicals

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Categories:Types, Research, Science
Published by: kamdica on Oct 18, 2009
Copyright:Attribution Non-commercial

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03/25/2013

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For more Notes, Presentations, Project Reports visit – a2zmba.blogspot.comhrmba.blogspot.commbafin.blogspot.com
Executive Summary 
The sheer size of Indian agriculture has attracted virtually every multinationalcompany from all over the world to come to India and tap its potential. Howeverdespite its huge potential, the actual usage of agrochemical products in India islowest in the world. Uneducated farmers with small plots of land, erratic natureof 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 prosperousfarmers whose agricultural practices match up with the best anywhere in the world. Agrochemicals usage is restricted to only 1/3
rd
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 atRs.2700 crores in the year 1999. Agrochemicals play an important role in increasing agricultural production asthey protect crops from insects, pests, plant diseases and weeds before harvestingand post harvesting. Initially manufactured as technical grade products they aresubsequently 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 andsuperior product quality act as entry barriers. Environmental concerns haveresulted in high regulation for the agrochemical industry making priorregistration for a large number of products mandatory.The production process is essentially conversion job with raw materials, powerand labor acting as the major cost elements. The industry is working capitalintensive as the players give long credit periods to the farmers due to their pooreconomic status.Pesticides attract excise duty of 16%whereas other agricultural inputs like seedsand 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 itexpensive to manufacture pesticides based on imported intermediaries.The size of the global agrochemical market was placed at US $32.4bn in 1999 andis 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 indeveloped countries are advocating safer means of pesticides application andshifting towards biotechnology to increase crop yield.India is the second largest manufacturer of basic agrochemicals in Asia with 145pesticides 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 indeveloped countries. Insecticides account for nearly 76% while herbicidesaccount for only 10% of the pesticides usage in India.The Indian agrochemical market is at Rs30bn in 1998-99. The industry has atotal current investment of Rs 15bn comprising 80players in the organized sectorand more than 500 players in the small-scale sector. Nearly 125 producers areengaged in manufacturing technicals while 500 units are engaged in makingpesticides formulations. In terms of production capabilities, Indian players arehighly 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 from86600 MT in FY1999. The peculiar feature of this sector is that the consumptionis skewed in favor of a few cash crops. The geographical spread of usage is alsorestricted to a few states like Andhra Pradesh, where the consumption profilematches that of the developed countries.The agrochemical industry is highly dependent on monsoon and consumption isskewed in favour of Kharif crops with maximum use of pesticides in July toSeptember period. In India the industry is almost similar to commodity industry,therefore the players have little pricing power. In the current year the industry issuffering from over capacity and poor offtake due to erratic monsoons and loweracreage. The industry has witnessed intense price competition from unorganizedplayers 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 annumrecorded earlier.In future the industry is expected to witness higher consolidation as severalplayers are trying to exit due to poor profitability and bad market conditions. Thegovernment regulations and ban on certain pesticides has encouraged researchand development to identify new and effective products that are safe for theenvironment. 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 inthis sector. Generally patent protection enables producers to command higherprices which is an incentive for R&D, as Indian players usually lack the resourcesto invest in R&D.The outlook for the industry remains dependent on normal monsoons andincrease in farm income. The ease of undertaking research and developmentactivities and cheap availability of skilled labour force has encouraged Indiansubsidiaries of global giants to make India a sourcing base. The gradual shifttowards higher consumption of herbicides and introduction of new high marginproducts is expected to improve the profitability of organized players in the longrun. Besides consolidation among the global players is expected to realign themarket share among the domestic players similarly and will result in greaterresearch and development products to be introduced in the country.In future the firms will have to set up integrated world class manufacturingfacilities employing state of the art processes and technologies developed throughin-house research and development to survive in the fiercely competitive market.Indian companies will have to develop technological capabilities and focus moreon research and development by identifying new and better generation moleculesin order to compete with MNCs.
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