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Executive Summary The sheer size of Indian agriculture has attracted virtually every multinational company from all over the world to come to India and tap its potential. However despite its huge potential, the actual usage of agrochemical products in India is lowest in the world. Uneducated farmers with small plots of land, erratic nature of 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 prosperous farmers whose agricultural practices match up with the best anywhere in the world. Agrochemicals usage is restricted to only 1/3rd 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 at Rs.2700 crores in the year 1999. Agrochemicals play an important role in increasing agricultural production as they protect crops from insects, pests, plant diseases and weeds before harvesting and post harvesting. Initially manufactured as technical grade products they are subsequently 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 and superior product quality act as entry barriers. Environmental concerns have resulted in high regulation for the agrochemical industry making prior registration for a large number of products mandatory. The production process is essentially conversion job with raw materials, power and labor acting as the major cost elements. The industry is working capital intensive as the players give long credit periods to the farmers due to their poor economic status. Pesticides attract excise duty of 16%whereas other agricultural inputs like seeds and 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 it expensive to manufacture pesticides based on imported intermediaries. The size of the global agrochemical market was placed at US $32.4bn in 1999 and is 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 in developed countries are advocating safer means of pesticides application and shifting towards biotechnology to increase crop yield. India is the second largest manufacturer of basic agrochemicals in Asia with 145 pesticides 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 in developed countries. Insecticides account for nearly 76% while herbicides account for only 10% of the pesticides usage in India. The Indian agrochemical market is at Rs30bn in 1998-99. The industry has a total current investment of Rs 15bn comprising 80players in the organized sector and more than 500 players in the small-scale sector. Nearly 125 producers are engaged in manufacturing technicals while 500 units are engaged in making pesticides formulations. In terms of production capabilities, Indian players are highly 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 from 86600 MT in FY1999. The peculiar feature of this sector is that the consumption is skewed in favor of a few cash crops. The geographical spread of usage is also restricted to a few states like Andhra Pradesh, where the consumption profile matches that of the developed countries. The agrochemical industry is highly dependent on monsoon and consumption is skewed in favour of Kharif crops with maximum use of pesticides in July to September period. In India the industry is almost similar to commodity industry, therefore the players have little pricing power. In the current year the industry is suffering from over capacity and poor offtake due to erratic monsoons and lower acreage. The industry has witnessed intense price competition from unorganized players 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 annum recorded earlier. In future the industry is expected to witness higher consolidation as several players are trying to exit due to poor profitability and bad market conditions. The government regulations and ban on certain pesticides has encouraged research and development to identify new and effective products that are safe for the environment. 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 in this sector. Generally patent protection enables producers to command higher prices which is an incentive for R&D, as Indian players usually lack the resources to invest in R&D. The outlook for the industry remains dependent on normal monsoons and increase in farm income. The ease of undertaking research and development activities and cheap availability of skilled labour force has encouraged Indian subsidiaries of global giants to make India a sourcing base. The gradual shift towards higher consumption of herbicides and introduction of new high margin products is expected to improve the profitability of organized players in the long run. Besides consolidation among the global players is expected to realign the market share among the domestic players similarly and will result in greater research and development products to be introduced in the country. In future the firms will have to set up integrated world class manufacturing facilities employing state of the art processes and technologies developed through in-house research and development to survive in the fiercely competitive market. Indian companies will have to develop technological capabilities and focus more on research and development by identifying new and better generation molecules in order to compete with MNCs.

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Introduction And Definition Contribution Of Agricultural Sector To The Economy Agriculture occupies a dominant position in India’s economic structure. The success of the Green Revolution enabled the country to achieve self–sufficiency in food grains production. Over the last five decades the industry has expanded with more than 500 players, making India the second largest manufacturer of basic crop protection chemicals in Asia in volume terms. In terms of turnover the industry is worth Rs. 3,600 crores and given the low rate of consumption there is huge potential for growth waiting to be tapped. There is also another factor that could bring about a major upsurge in the industry’s fortunes if properly addressed – exports. With the global generic pesticide market forecast to grow by 54% to $27,000 million by 2005, many MNCs are keen to leverage India’s strategic location for their Asia Pacific activities. India is also being viewed as a major contract-manufacturing base by leading global players. The demand for food grains is expected to increase significantly to 212mn metric tonnes in FY2001 from the current production of 203mn metric tonnes in FY99. Record production of food grains has been possible primarily on account of various inputs used in agriculture namely seeds, fertilizers and pesticides. Importance Of Agrochemicals Agrochemicals form the largest and the most diverse group of chemical compounds. Popularly referred to as pesticides they are mainly used for plant protection and improving crop yields. Every year nearly 30% of the potential of food production valued Rs 150bn are lost due to insects, pests, plant pathogens, weeds, rodents, and birds and in storage. Hence the use of pesticides has become extremely necessary. Besides given the large growing population and scarcity of land available for cultivation, pesticides industry has a vital role to play in the agricultural sector. Basic Usage And Types Pesticides are essential inputs used for increasing agricultural production by preventing loss to crops before harvesting or post harvesting. The different types of pesticides are insecticides, fungicides, herbicides, rodenticides, nemanticides etc and are derived from chemicals. Pesticides can be classified into two type namely technical grades and formulations. Technical grades exist at the first stage of manufacturing process and generally consist of highly toxic and hazardous liquids. They’re in technical parlance defined as products with high chemical purity. Whereas further processing of technicals with emulsifiers and other agents (sometimes referred to as excipients) result in next stage namely
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formulations. Formulations are tailor-made for diverse applications on insectpest spectra, plant diseases, weeds etc. Broad Categories Broad Categorization Of The Pesticides Industry The industry is broadly classified into different segments like insecticides, fungicides and herbicides and the main products and their use is given below as follows: Nature Insecticides Major Products Monocrotophos, Phosphamidon, Parathion, Endosulphan,Quinalphos Copper Oxychloride, Nickel Chloride, Mancozeb Anilphos, Pendimethalin,Paraquat, Naropamide Zinc Phosphide, Aluminum Phosphide Purpose To kill insects

Fungicides Herbicides/ Weedicides Nemanticides/ Rodenticides/ Fumigants

To eliminate fungus To remove unwanted plants/ weeds To kill pests in plant roots and to eliminate rodents

Consumption pattern of the Indian pesticides industry compared with global consumption patterns The consumption of pesticides in international and domestic areas among broad categories is given below: Nature Insecticides Fungicides Herbicides Others Global share (%) 29 17 48 6 Local Share (%) 76 13 10 1

Source: Allan Woodburn 1998 for global market share, Pesticides Association of India
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Technical Classification Based On Usage The agrochemical compounds can also be classified into organosphosphates, synthetic pyrethroids, organochlorines and carbamates. Recently bio-pesticides have been in limelight. Currently organophosphates and synthetic pyrethoids constitute nearly 70 percent of the pesticides produced in the country. The following table classifies pesticides usage according to the chemical structure as follows: Nature Organo-chlorines Organo-phosphates Synthetic Pytheroids Bio-pesticides Product classification DDT, BHC Monocrotophos Decis Neem based

The following table classifies pesticides usage according to the chemical structure in value terms in World and India: Nature Organo-chlorines Organo-phosphates Synthetic Pytheroids Bio-pesticides and others India (%) 16 50 19 15 World (%) 6 37 22 35

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Global Scenario The size of the global agrochemical market for year 1999 was about US $32.4bn and it is expected to grow at the rate of 5% per annum in future. Within this market the global generics market is worth $24bn accounting for 80% of the total size of the market. The patented product market size is about $6bn. It is expected that by 2000 the size of the generic agrochemical market will have increased to $27bn and will account for 70% of the total global agrochemical market. The following table shows the usage of agrochemicals among the different regions across the world: Regions North America Western Europe Far East Latin America Rest Source: Allan Woodburn 1998 The top 20 agrochemical companies worldwide control 85% of global sales revenues while the top 10 among them command 72% of the market share. The following table indicates the leading global players and their revenues for the year 1999. Global agrochemical company Novartis Aventis Monsanto Du Pont Pioneer Bayer
Agrochemicals

Market Size (%) 30 25 23 12 10

Revenues ($bn) 5.7 5.7 5.6 4.5 3.9
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The top producers in crop production across different countries in terms of yield is given below: Crops Rice Wheat Groundnut Soybean Source: CMIE International Scenario Currently developed countries are shifting towards precision agriculture. Manufacturers in these countries are currently laying emphasis on safer means of pesticides application to overcome harmful effects on human beings. Besides many players are shifting to biotechnology to increase crop yield and reduce usage of crop protection chemicals. Yield Kg /hectares 8157 3151 847 2304 Top producer China China India USA

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Evolution And Structure Of The Agrochemicals Market Pesticides were initially used in India by importing DDT for malaria control and BHC for locust control in 1948. The first use of pesticides in agriculture began in 1949. Indigenous production of pesticides began with the establishment of DDT and BHC plant in 1954. By 1958 India was manufacturing five basic pesticides having production of over 5000 MT. Thereafter the industry has witnessed a steady progress reaching a production volume of 60000 MT per annum in mid eighties. Till recently, bulk of the production had been of insecticides but now production of fungicides and herbicides is also increasing. Today India is the largest manufacturer of basic pesticide chemicals among the South Asian and African countries next only to Japan. Currently 145 pesticides have been registered in the country of which 85 technical grade pesticides are manufactured in the country. The total production of technical pesticides for the financial year 98-99 was estimated at 84700 MT tonnes against the installed capacity of 110.2mn ton by the Department of chemicals and fertilizers. Even though India has a large capacity in volume terms it accounts for less than 2.5% of the world markets in monetary terms. India along with China accounts for more than 10% of the total world production. However, consumption has been low at 600gm compared to 10,000gmper hectare in the developed world. The low consumption and usage of pesticides in the country arises on account of poor awareness levels, economic status of farmers and low proportion of cropped area under irrigation coverage. India is currently the largest manufacture of pesticides in Asia and is among the top 10 producers in the world. The Indian agrochemical industry is a Rs30bn industry with 15-20% of the output being exported. Indian pesticides products are now exported to USA, France, UK, and CIS besides a number of countries in South America, Asia, Africa and Australia. Operating margins of Indian companies are higher than MNCs by 2-3% because of higher level of integration. Higher administration and interest expenditure means that net profit margins of players operating in this industry are quite low at 4% to 5%.

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Industry Characteristics The agrochemical industry has the following characteristics:

Monsoon dependent: The Indian agriculture is still dependent on the monsoon and consequently the prospects of the industry are affected by the trends in rainfall received in different parts of the country every year. The maximum demand for pesticides usage takes place in the month of July to September period. Thus the prospects of the players in the crop protection business are subject to vagaries of the monsoon and seasonal demand. Crop-wise and State-wise imbalance: The pesticides usage is highly skewed in favour of kharif crops and certain states. Rice and Cotton account for nearly 50% of pesticides usage. Among the states Andhra Pradesh, Karnataka and Punjab account for nearly 60 percent of total pesticides market. Generic nature: Currently more than 70% of molecules are off patent and hence there is no threat to Indian players with respect to patent regime. However with the discovery of new proprietary molecules and entry of multinational players with strong research and development capabilities, many new patented products will be launched in the country. Limited investments in research and development: Since there have been very few proprietary products and poor patent protection in the country, this industry has seen low investments in research and development. Environmental regulations: India has comparatively less stringent environmental protection regulations and has consequently become a preferred manufacturing base for many multinational players in the Asia Pacific region. Currently Agrevo (now Aventis) and Bayer (India) act as a global sourcing base. Small scale of operations: There are very few Indian players with a global scale in terms of size of operations, facilities, laboratories, etc. In fact the Indian operations are undertaken on a small scale and cater to generic products compared to MNCs whose operations are on a large scale with focus on specialty products. High working capital: The agrochemical industry requires high working capital due to its seasonal nature and long credit period given to farmers. Thus high inventories during off-season period and high receivables during poor monsoon put further pressure on the working capital requirements.
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Strengths & Weaknesses Indian manufacturers have traditionally concentrated on the generic pesticides market. India is one of the largest producers of pesticides in South East Asia after China. Though the proportion of generic products as a percentage of global crop protection in sales has slipped in recent years, it is expected to stabilize to a level of around 30 %. This represents a growth opportunity for Indian companies who are poised to capitalize on their strengths in generics. Given the fact that even as of today, 8 out of 10 active ingredients are off patent, experts are expecting generic exports to touch Rs.10,000 crores. There are also opportunities from the patent expiry of a large number of molecules, which were introduced in the 70s. The industry needs to adopt the innovation route, which has seen a company like Gharda Chemicals capture market from renowned multinationals like Aventis and Ciba-Geigy, by making products not only more efficiently and economically but also by safer methods. Gharda’s innovative approach of producing isoproturon using urea instead of toxic phosgene has yielded rich dividends for the company. There is no reason why other manufacturers cannot adopt this route. Though manufactures are upbeat about the prospects of exports it needs to be emphasized that the industry will do well to plan ahead considering the fact that older chemistries are getting obsolete and it cannot keep on flogging the same molecules much longer. It is time toxic insecticides are phased out and replaced by safer, greener alternatives such as botanicals like neem, etc. The pressure to phase out such environmentally unfriendly products will become more intense in the WTO regime. Development in the field of GM (genetically modified) crops has thrown up new challenges. In many parts of the world the trend is in favour of GM crops, and indications are that in the next decade GM will gain increasing acceptance in India. In case of cotton this may come about in the next couple of years at the most. Considering that cotton is the mainstay of the Indian agrochemical industry this will impact the industry on a scale unprecedented in the annals of the Indian agrochemical industry. A number of MNCs have started looking at ways to strengthen their Indian presence. Consequently they have indirectly raised the stake in their listed Indian companies by merging them with wholly owned subsidiaries.

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Critical Success Factors For The Industry The Indian industry comprises basic manufacturers, formulators, importers, distributors and dealers both in the public and private sector. The players include both large-scale multinationals and Indian companies besides medium and small-scale companies. The total current investment is about Rs15bn.The following are the critical success factors for the industry:
• •

Promotion and farmers' education play a big role and are usually carried out by the players in the industry. Marketing has to be very localized, as the country has different production profile in different parts of the country. Secondly it has to be very aggressive in some areas compared to others as the penetration levels vary substantially from area to area. Any company has to constantly endeavor to improve its existing products and develop new ones in tandem with the consumer’s needs, as the crops develop resistance to the existing pesticides during various cycles. To a large extent, environmental factors also determine the life cycle of the products. The industry is increasingly manufacturing high value, low volume and environmentally friendly niche products.

Manufacturing Process And Technology Raw material and labor are the major cost elements (constitute about 60%-65% of sales). Production is manpower intensive and batch processes are employed for production of the pesticides. Product obsolescence is a common phenomenon in this industry. Lack of patent protection in India makes multinationals wary of the Indian markets. The quality of indigenous pesticides is poor, resulting in the imports of the next generation of molecules. This has also restricted the presence of the multinationals to 40% of the market share. Organised players have to incur significant expenditure on selling and distribution on educating the farmers and reaching interior parts of the country.

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Regulations Governing The Industry The pesticides industry in India is regulated by the Insecticides Act 1968 and Insecticides Rules 1971 framed there under. Presently registration procedure requires submission of authentic data on chemistry, bio efficacy and residues, toxicity and packaging and labeling with details on pesticide presence in water, soil, crop and environment. Besides detailed data on carcinogenecity, mutagenecity, teratogenacity, neuvotoxicity is also required for submission for allowing commercial usage. Once the regulatory procedures are complied with, manufacturing or marketing of pesticides is allowed. The production and use of Chlordane and Heptachlor has been banned from Sept ’96 along with BHC (formulation) with effect from April 1997. This was done on consideration of the harmful effect of these pesticides on the soil and other bioorganisms. However some of these pesticides were later permitted for use on grounds of public health. The government constituted a committee in Dec 98 to consider and review usage of 28 pesticides in the country. The final report of the group will have a great impact on the pesticides production and consumption in the country.

Excise And Custom Duties
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Excise Duties Pesticides had remained exempt from excise duty for decades. However in ’94-95 budget a 10 percent excise duty was levied which was further reduced to a concessional duty of eight per cent in the ’97-98 budget. Thus Indian pesticides industry had differential rates of excise duties for technicals and formulations in 1998-99. Technical grade pesticides attracted a higher 16 per cent duty while formulations were subject to a lower duty of 8 per cent. Thus there existed disparity, which resulted in technical-grade manufacturers not able to fully claim modvat credit. This anomaly has now been rectified with increase in the excise duty on the formulations to 16% in the budget for FY 2000. Currently there exists anomalous excise duty structure as excise duty is levied on pesticides while other agricultural inputs like seeds, fertilizers, micro nutrients continue to be exempt from levy of any kind of duties. Custom Duties Technical grade pesticides currently attract maximum ceiling rate of 35% advalorem custom duty along with imposition of 10%surcharge. They are also subject to special additional duty (SAD) of 4% with the result that effective rate of duty on pesticides works out to 44.9%. Besides pesticides intermediaries also attract a similar rate of duties. Consequently it is expensive to manufacture pesticides by importing intermediaries from abroad. Thus most of the domestic consumption is based on supplies made by local manufacturers.

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Demand & Supply Scenario In 1992, the government formulated the law, which made it obligatory for manufacturers of basic bulk agrochemicals, popularly called technicals, to sell 50% of their output to the outside formulation manufacturers. After the law was repealed these formulators found starved of raw materials, so many of them began producing technicals on their own. As a result the number of these small manufacturers went up from 300 in 1992 to more than 500in 1998. Today’s glut is a result of that capacity addition. The sector’s fortunes are closely linked to the production of cash crops like cotton, tobacco, etc that are the main recipients of agrochemicals (cotton-40%). Over capacities and strong competitive pressures within this sector have affected profit margins of the players in this industry. Most of the manufacturers have achieved an average capacity utilization of 65%-70%. While supply has expanded, demand has not kept pace as it has been hurt by the climatic factors. In 1996-97 the marketing season of cotton pesticides was affected when cyclone ravaged Andhra Pradesh. Thus the prices of cotton pesticides fell and created inventories. The next year saw the repetition of the same scenario when the cultivation of cotton did not begin in July. The erratic monsoon trends further affected the crop production in the Kharif season resulting in lower offtake for the pesticides. Small players panicked when the demand did not pick up and went for distress sales, which further brought down the prices. FY98-99 has been one of the worst for the agrochemical industry due to various reasons. Poor crop in previous season, reduced acreage's and erratic nature of the rainfall are the principal reasons for the adverse performance of agrochemical industry in this year.

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Snapshot Of The Agrochemical Sector In The Nineties The following table indicates the production and demand for pesticides in the last nine year as follows: Year 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 (P) Source: Pesticides Association of India and industry data The demand for pesticides used in agriculture amounted to 89428 MT in ’95-96 that has decreased to 83183 MT in‘97-98 and is expected to touch 86600 MT in ’98-99. Production Consumption (000 Tonnes) (000 Tonnes) 74 72 76 83 90 96 102 96 98 53 58 63 68 75 89 72 83 86

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Production Of Pesticides In The Country Domestic agrochemical industry has about 80players in the organized sector and more than 500 players in the small-scale sector. More than 60 technical grade pesticides are manufactured indigenously by 125 producers while500 units are engaged in making pesticides formulations. Manufacturers in the organized sector are producers of the basic technical grade, which is used by small-scale formulators to manufacture pesticides. The penetration levels for pesticides are very low in most parts of the country except certain states like Andhra Pradesh and Karnataka where the consumption is high due to higher composition of cash crops. India is a dominant producer of isoproturon- a weedicide and accounts for nearly 25% of the worldwide production. Besides synthetic pyrethroids, such as fenvalerate, cypermethrin, endosulphane and a wide range of organophosphates like Monocrotophos are also manufactured in India.

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Production Production ('000 MT)

Product

Installed Capacity

92 93 73.4 5.3 2.0 2.2 0.27 1.0

93 94 71.8 5.5 1.3 2.7 0.51 1.5

94 95 75.6 6.0 1.5 5.1 0.46 1.8

95 96 77.7 6.6 1.4 8.5 0.40 1.8

96 97 84.1 7.3 1.6 7.3 0.40 1.9

97 98

98 99

Insecticides 81.9 Fungicides Herbicides Weedicides 10.7 4.8 10.3

60.4 66.0 9.2 1.9 7.33 0.5 1.6 8.0 1.7 6.7 0.5 1.8

Rodenticides 0.9 Fumigants Total 1.6 110.2

84.17 83.31 90.46 96.40 102.6 80.9 80.9

Technical grade pesticides have been growing at the rate of 10% in the last few years.

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Cropwise Consumption of Pesticides Cotton- Accounts for 45% of all pesticides used in India, making it the single most important crop market in India. Irrespective of where it’s grown, cotton attracts several insects throughout its life. On account of severity of insect pressure virtually every product category finds its use including Organochlorines, OP’s, Carbamates and Pyrethriods. However, of late pests have developed resistance to the traditional compounds and farmers have lost heavily on account of reduced yields. There was a distinct danger of farmers opting of cotton cultivation due to the pests menace. Fortunately some multinationals companies introduced new products with remarkable success such as Imidacloprid, Acetamiprid, Larvin and Avaunt. With the introduction of these products, cotton cultivation has once again become an attractive proposition to the farmer. Such new products, which are patented, are generally expensive as compared to older generic molecules. Hence the new farmer is judicious combination of old and new products to maintain its profitability. Rice- is the second largest consumer of pesticides in India, accounting for 22% of all pesticides in India. Rice crop needs to be protected from weeds, diseases and a whole host of insects, which attack the roots, stem, wheat and grain. Consequently the demand for insecticides, fungicides and herbicides is more balances in rice as compare to cotton. Of late, certain pests have become extremely difficult to control such as BPH, leaf roller, sheath blight and blast. Fortunately recent introduction of new molecules such as Hexaconazole, Tricyclozole, Validamycin and Imidacloprid helped control this menace and paddy yields have shown remarkable improvement. Other crops- India grows over 100 different crops for food and non-food purposes, and each crop provides a niche market for one specific product or the other.

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India in the Global Markets Imports Developing a new product is an extremely expensive proposition on India and is confined to large multinationals in India. As and when a new product finds a fit in controlling a specific pest in India, the concerned multinationals go through the process of registering and importing the new molecule into India. Hence products that are imported are generally new sophisticated molecules, which are not manufactured in India. Exports During 1999, Indian exports of agrochemicals reached Rs. 1500 crores, a steep climb from Rs.64 crores exports during the year 1989. Hence in the field of agrochemicals trade India has a healthy surplus on account of abundant and easy availability of high quality and low cost raw materials and intermediates. The high quality of Indian products such as cypermethrin, chlorpyriphos and endosulfan gave India a distinct edge over China. On account of the huge potential for agrochemicals abroad several Indian manufacturers set up large capacities in India, anticipating that very soon domestic demand would justify the same. However, the growth was slower than expected.

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Future Demand Projections And Key Drivers For Agrochemical Sector The pesticides demand is expected to go up to 90000 tonnes in the year 2000. It is not easy to make accurate demand projections for the pesticides. Increase in cultivated areas for commercial crops, use of High Yielding Varieties (HYV) seeds for key crops like cotton, sugarcane and intensive work undertaken by the government authorities and industry players for encouraging the use of pesticides makes it difficult to accurately predict pesticides usage for plant protection in future. The continuous extension of modern agricultural practices by way of production of new pesticides along with enhanced awareness for plant protection in terms of cost benefit ratio of pesticides has also added to difficulties in making future projections. India has lowest amount of spending on crop protection at US $3 per hectare compared to double digit figures most for developed nations in the world. The following table compares the expenditure incurred on crop protection among different countries in the world.

Country Japan USA Brazil China India Source: Chemical weekly

Expenditure on crop protection (US$ per hectare) 1113 43 26 6 3

The table above clearly indicates that India offers good potential for pesticide industry mainly on account of large growing population and low expenditure incurred on crop protection in the world.

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The following table illustrates the decline in the cultivation of land available for a person in (hectares) as follows: Year 1991 2025 Source : E M Beyer, BCPC Weeds Brighton 1991 Urbanization and increase in population is reducing the amount of good quality land available for growing food. Thus farmers will have to increasingly improve productivity by improving yield per hectare to meet the growing population needs. The total irrigated area continues to rise along with improvement in general standards of living of farmers. Accordingly increase in awareness levels of farmers and higher purchasing power will result in demand for better quality of agricultural inputs There are various other factors that indicate that agrochemicals are likely to witness better days ahead. Already crop prices have firmed up and corporates are awaiting guidelines to enter into commercial agriculture. Besides profitable markets are developing in new commercial crops such as vegetables, fruits, oilseeds and pulses. Ha/ per person 0.330 0.200

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Outlook For The Indian Agriculture Sector And Linkages With Agrochemical Sector Agriculture will drive agrochemical industry performance: Agriculture sector contributes about 23% of the India’s Gross Domestic Product and is expected to maintain a similar contribution in future as well. The high growth of population along with limited availability of land will put pressure on food grain production. The increase share of cash crops in agriculture and higher irrigated land under cultivation with greater awareness levels of the rural masses will result in higher agrochemical usage. Higher yields to contribute to higher food grains production: With the area under cultivation being saturated and no increase in acreage for food grains in the last five years, the increase in food grain production will have to take place on account of higher food grain production. Besides environmental policies and state government laws have slowed down the process of de-reserving the land under forests for cultivation. Growth in agriculture linked to agrochemicals: The agricultural sector will grow by 7% to 10% pa in value terms and 2% pa in volume terms in the next few years. This will result in agrochemical sector growth of at least 10-12% pa in value terms. This growth in agrochemical sector will be driven by higher usage of pesticides both before harvesting and post harvesting. Increased rural income: The country is witnessing an explosive boom in the consumer goods sector and with an increasing affluent middle class demand for quality and processed foods is expected to increase. The entry and growth of food processing industry will create demand for high quality agriculture produce. New committee to review pesticides usage in country: The government has recently constituted a group of experts under the chairmanship of Dr R. B. Singh to undertake a review of 28 pesticides for their continued use or otherwise in the country such as Malathion, DDT, Trichlor Acetic Acid (TCA), Sodium Cyanamid, Zinc Phosphide (2,4,D). The government is in the process of banning 2 pesticides with undesirable long-term effects like Monocrotophos and Phorate to lessen the negative influence of these chemicals on soil and other bioorganisms. Hence government policy and guidelines will determine the future growth of the pesticide industry.

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Competitive Positioning Of The Key Players The Indian pesticides market can be divided into three major groups as follows: On the one hand there are large Indian companies that produce both technical grade pesticides and formulations and have a large product portfolio of generic products. Key players among them are Excel Industries, Rallis Industries. On the other side there are a large number of subsidiaries of multinational companies catering to niche segments like specialty products. The chief players are Monsanto Chemicals, Bayer (India), Novartis (India) and Cyanamid Agro. Lastly there is presence of a large number of small players engaged in formulation business. The local market is characterized by large capacities with low capacity utilization that has resulted in a steady decline in the selling prices of many generic products. The uncertain weather conditions coupled with long credit period for farmers and poor economic status of farmers have resulted in low margins for the players in the industry. Many Indian players have very little investments in research and development activities. Consequently the Indian players own very few proprietary molecules and product patents. Patent protection is necessary so that producers can invest in intensive research and development and identify new and more effective but less harmful products. The following factors are considered by industry players as critical for the future growth in this industry: To have a global reach: There are more than 100 countries particularly high priced US and European markets, which offer opportunities for the Indian players to improved sales revenues and improve capacity utilization. To obtain global registration: It is mandatory for players operating outside India to comply with various rules and regulations like registration of pesticides to enable local sales in the country. To have extensive distribution channels: A strong reach across the country using a network of wholesalers and retailers spread geographically across cities and regions will enable the players to consolidate their position with reference to unorganized players. To have large product portfolio: Wide range of product portfolio covering most of the target markets which are experiencing substantial growth.

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In future the firms will have to set up integrated world class manufacturing facilities employing state of the art process and technologies developed through in-house research and development to survive in the fiercely competitive market. Besides companies will have to provide superior quality products at cheaper prices with complementary services and build a strong customer franchise

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Opportunities For Indian Players The following table briefly enumerates the opportunities of Indian players in the industry based on the characteristics of the agrochemical industry as follows: Characteristics of the agrochemical Opportunities for Indian players industry Limited activities Research and development Exploit the generic business as 70% of molecules are off patent Opportunity to tap commercial crops Set up manufacturing base for global players Develop niche markets and low dosage molecules in future Opportunity to develop new markets and increase awareness levels for pesticides usage

Seasonal demand Environmental regulations Small scale of operations Large unutilized idle capacity

Marketing of pesticides : Case study on Syngenta Cropscience
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Brief history of Syngenta Although Syngenta is a brand-new company, it has a long and impressive history. In fact, their roots trace as far back as 1758 when Johann Rudolf Geigy-Gemuseus opened a chemical business in Basel, Switzerland. Syngenta’s heritage is formed from the innovations and skills of Novartis and Zeneca, two of the leading names in the agribusiness industry, in the year 2000. Syngenta's depth of experience and knowledge, firmly position us as the new global leader in providing innovative solutions and brands to growers and the food and feed chain.

What Syngenta thinks about... Agriculture has an impact on the lives of everyone, from farmers to consumers. Syngenta appreciates the importance of its role and responsibilities as a worldleading agribusiness. We are committed to sustainable agriculture, through innovative research and technology.

Marketing strategy The marketing of agrochemicals is done through “rural marketing”. Here the consumer targeted is the ‘farmer’. The attitudes, lifestyle and consumer behaviour of the farmers differ from those of the urban consumers. Hence, a slightly different approach has to be adopted while marketing agrochemicals. Syngenta has also moulded its strategy to suit the Indian market. Being a MNC it has to take special measures to cater to its Indian consumers. We will take a look at the marketing strategy of Syngenta based on the 4 P’s of marketing, namely, Product, Price, Place (distribution) and Promotion.

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PRODUCT At Syngenta its their constant endeavour to provide the farmers with the best product. Their product-line consists of premium-end products the list of which is given below.
Crop Treated Corn, Wheat and Sorghum Barley and Soyabeans Insecticides Ekalux Karate 5EC Karate Ekalux 5EC Cotton, Professional Peanuts, Products Tobacco and Rice Curacron Curacron Vertimec 50 EC 50 EC 1.8 EC Karate Nuvacron Icon 5EC 10 WP Polytrin C44 Ekalux EC Polytrin C44 EC Nuvan Kungfu 2.5 EC Tilt Ridomil MZ Cuman L 25 EC 72 WP Topas Apron 10 EC 35 WS Blue Copper Tilt 50 25 EC Thiovit Kavach Topik 15WP Gramaxone Rifit 50 EC Cruiser Cruiser 70 WS 70 WS Vegetables and Fruits

Fungicides Apron 35 WS

Herbicides Dual 50 EC Seed Apron Treatment 35 WS Chemical

Syngenta continuously meets the demand of the farmers by adding new products, changing existing ones and eliminating others. The ideas for development of new products or modification in existing products come from the feedback received from the farmers and also sometimes dealers. Syngenta has a huge network of field-workers who practically go into the farms to find solutions to recurrent as well as new problems related to crop protection and collect feedback.
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It has to conduct ongoing research & development activities, as one of the inherent features of agrochemicals is obsolescence due to the ability of the pests to gain immunity to these products. PRICE The products offered by Syngenta are premium end products and hence are priced slightly higher. But their product range consists of the best that is there to be offered in the market due to their immense R&D activities and emphasis on technology. The farmers too believe in the quality of their products and price comes secondary to such quality products. PLACE (PHYSICAL DISTRIBUTION) Syngenta makes very little use of middlemen as they strongly believe in “personal selling”. Their general channel of distribution is – Company Salesperson

Dealer/Retailer

Farmer They have strict policies when it comes to offering credit to middlemen. Since the company salespersons are in very close contact with the farmers they can offer timely supply of their products. PROMOTION Since Syngenta is a newly formed company it is currently engaging itself in a lot of marketing activities. As earlier mentioned Syngenta very strongly believes in personal selling, that is, creating demand at the grassroot level. Their target audiences are the farmers and also opinion leaders like village chiefs or teachers (as they are educated). They also target influencers like the Department of Agriculture to help promote their product.

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They use media like “direct mailers” to inform the farmers about their products and schemes, which, helps in creating a good rapport with the farmers and they distinguish Syngenta from rest of the companies. Press or print media is used very judiciously since many of the farmers are not educated. For print advertising popular regional newspapers or trade journals are used. For television advertising regional television is used extensively and the most preferred channel is Doordarshan since the reach of Cable television is minimal. Programmes like “aamchi maati, aamchi mansa” which are targeted towards farmers are used for advertising. Radio is a very essential media since it has a wide reach. Audio advertising is also done through vehicles, which announce the product and its features by way of catchy phrases. Films and slides are another very effective way of marketing. They are screened at village theatres or at farmer meetings specially organized to inform them about the product. The films are either educational where only the product story is told or they may be theme based like a feature film wherein the product story is told through dramatization of a theme which appeals to the farmer. Other media used are wall paintings, hoardings and point of purchase media like posters and danglers. Another effective way of marketing is “word-of-mouth publicity”. The company targets influencers like village sarpanch or a very prosperous farmer who enjoys very good reputation among the farmers. These people inform other farmers about the company and its products. Public relations This element is used to build preferences and awareness among the farmers. This is done through trade fairs, sponsorship of events, public service activities. For instance Syngenta is involved in a project called “Project Sahyog” to help farmers cultivating rice. It also organizes lot of training programmes to create awareness and train the farmers about modern farming techniques and use of High Yielding Varieties. This is in short the marketing strategy of Syngenta Cropscience. Other agrochemical companies also adopt a similar strategy.

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Conclusion The end consumer demands more quantity, better quality and wide variety of products. To deliver the same companies will have to provide better seeds, offer better farm management techniques using new and greater variety of pesticides that will enable higher crop production with greater crop protection. Thus future growth of this industry will be driven by companies providing farm solutions that will cover the entire gamut of food supply chain management beginning from crop production till the stage of crop protection. This will basically involve understanding farmers’ needs by setting up in house technologies to increase yields. Besides control over major inputs and setting up efficient distribution services with adoption of international practices relating to crop management will enable Indian agrochemicals sector companies to meet the global challenges. The crop protection chemicals industry in India is at a threshold, which could lead to new and hitherto unexplored vistas of opportunity. The next couple of years could well mark the beginning of a new phase of fast track growth provided the government is willing to go that extra mile in empowering the industry. Considering the initiatives taken by the government in backing up its promises there is considerable scope for optimism.

For more Notes, Presentations, Project Reports visit – a2zmba.blogspot.com hrmba.blogspot.com mbafin.blogspot.com

Project on Agrochemicals

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