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Government purchasing: a double-edged sword

Government purchasing: a double-edged sword

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Government purchasing has again become a hot topic in domestic agricultural means of production industry while approaching the end of 2012.
Government purchasing has again become a hot topic in domestic agricultural means of production industry while approaching the end of 2012.

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Published by: CCM Intelligence on Dec 10, 2012
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05/14/2014

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Government purchasing: a double-edged sword

Summary: Government purchasing has again become a hot topic in domestic agricultural means of production industry while approaching the end of 2012. Tags: acquire, IPO, government purchasing, Agricultural Insurance Regulations, FAO/WHO pesticide specifications, chlorpyrifos, micro-credit industry,

While approaching the end of 2012, Government purchasing has again become a hot topic at many agricultural means of production conferences. Many pesticide enterprises, especially those missing the government purchasing this year, expressed that they will continue to lay great efforts to prepare for the government purchasing battle in 2013, according to CCM’s November issue of Crop Protection China News.

Since the Ministry of Agriculture of China (MOA) released the agricultural subsidy policy on 6 April, 2012, USD254.37 million (RMB1.6 billion) of subsidy has been allocated to 11 winter wheat planting provinces and areas in China to subsidize farmers' use of pesticides and foliar-fertilizers on winter wheat, with total planting area reaching 21.33 million ha. Adding up the subsidies allocated on rice, vegetable, tobacco, cotton, etc., the whole government purchasing capital of agricultural means of production in 2012 is estimated to reach USD317.97 million (RMB2 billion).

Government purchasing is now called as a double-edged sword because it brings both advantages and disadvantages to domestic agricultural means of production industries. As the capital of government purchasing gradually grows in recent years, more and more domestic enterprises are attracted to scramble for the bid inviting of local governments and those enterprises who win the bid enjoy good profit. Take Jiangsu Anpon Electrochemical Co., Ltd. (Jiangsu Anpon), a typical enterprise in domestic government purchasing of agricultural means of production for example, it won the bid of 300 tonnes of pymetrozine in the government purchasing of Jiangxi Province in 2010, valuing USD15.9 million. In 2011, its pymetrozine products again won the government purchasing bid of Jiangsu Province with the quantity of 120 tonnes, valuing about USD6.35 million.

The government purchasing not only benefits the performances of the enterprises who win the bid, but also promotes their products for free. Owing to domestic chaotic pesticide market, domestic farmers with low educational level usually can't tell counterfeit agricultural means of productions from good quality ones. When the government purchases agricultural means of productions for them, they believe that these products from government purchasing are reliable and show great loyalty to the brands of the products when they buy them by themselves.

Moreover, government purchasing not only helps farmers to save a considerable spending on agricultural means of production, but also ensures farmers to use the right pesticides and fertilizers which are the main cores of Chinese Central Government to carry out the policy of government purchasing.

However, except for those enterprises who enjoy benefit from government purchasing, others and those traditional dealers of agricultural means of production, on the other sides, complaint that government purchasing is unfair to some extent and has affected greatly the traditional sales channels of agricultural means of production.

Owing to the cumbersome procedures of the bid inviting, lots of pesticide enterprises lack experiences of preparing bidding materials. As many pesticide enterprises located in different provinces need to travel to other provinces for the bid inviting, they are forced to give up when they find that it is impossible to fetch the materials needed in a short time. In addition to the cumbersome procedures and lots of bid materials needed, the high threshold of the enterprise's registered capital set by local governments is also a big pressure to the pesticide enterprises who want to gain the bid inviting, especially those medium and small sized ones. Some provinces which invite public bidding by provincial authorities only allow large and famous pesticide enterprises to participate in.

Traditional pesticide dealers feel great pressure in government purchasing activities as well. As those government purchased products are distributed to farmers for free, the sales channels of pesticide dealers continue to shrink. Moreover, some of these products will not be used in the right year due to different planting conditions and outbreak conditions of pest and diseases but will be used next year, thus affecting the sales of pesticide dealers.

Although many enterprises complaint about the unfair rules in local government purchasing, they still believe that it represents the third kind of sales channel in domestic agricultural means of production industry. The only way to get involved in the activity is no other than better preparing and actively participating.

Source: Crop Protection China News 1222 http://www.cnchemicals.com/Newsletter/NewsletterDetail_16.html Content of Crop Protection China News 1222: Nantong Jiangshan to acquire Thai agrochemical enterprise Ningbo Tide achieves remarkable performance in international market Anhui Guangxin tries IPO again

Government purchasing: a double-edged sword China's first Agricultural Insurance Regulations issued China actively participates in development of FAO/WHO pesticide specifications Lier Chemical shuts down chlorpyrifos production lines Gofar Bio-Pesticide's production halts Huilong sets foot in micro-credit industry to promote its development

Crop Protection China News, a monthly publication issued by CCM on 15th&31th of every month, offers timely update and close follow-up of China’s Crop Protection industry dynamics, analyzes market data and finds out factors influencing market development About CCM CCM is dedicated to market research in China, Asia-Pacific Rim and global market. With a staff of more than 150 dedicated highly-educated professionals. CCM offers Market Data, Analysis, Reports, Newsletters, Buyer-Trader Information, Import/Export Analysis all through its new proprietary product ValoTracer. Please visit http://www.cnchemicals.com for more information Guangzhou CCM Information Science & Technology Co., Ltd. 17th Floor, Huihua Commercial & Trade Mansion, No.80 Xianlie Zhong Road, Guangzhou 510070, China Tel: 86-20-37616606 Email: econtact@cnchemicals.com

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