Agrochemical or agrichemical is essentially agricultural chemical, a generic term for chemical based agricultural products. Majorly, agrochemicals refer to a broad range of pesticides, including insecticides, herbicides and fungicides. It even includes synthetic fertilizers, hormones and other chemical growth agents, and concentrated stores of animal manure. Agrochemicals are generally toxic in nature and bulk storage has to be very controlled or else accidental spillage of such chemicals may cause environmental or health hazards.
India’s global rank is fourth as a supplier of agrochemicals in the global market, after USA, Japan and China thereby indicating the significance of agrochemical industries in India. However, the consumption of agrochemicals in India is surprisingly low (0.58 kg/hectare) as compared to USA where the consumption of agrochemicals is as high as 4.5 kg/hectare and Japan with an even higher consumption of 11 kg/hectare. Paddy (one of the chief crops of India) has the maximum pesticide consumption of 28% followed by cotton (20%) of the total agrochemicals consumption. The ever increasing population of India is proportionally shrinking the per capita availability of land which calls for a considerable improvement in the use of agrochemicals in our country. With the domestic consumption increasing, employment of advanced technology and strategic moves by the agrochemical industries can actually double the export capacity of the Indian Agricultural Industry in the next four years.
The synthesis of agrochemicals in India involves a complex chain of manufacturers, formulators and distributors. A current study show that, there are, 125 ‘technical grade manufacturers’ including 10 multinationals, 800 ‘formulators’ and over 145,000 ‘distributors’. About 60 technical grade agrochemicals are manufactured indigenously. Formulators add ‘inert carriers’, ‘solvents’, ‘surface active agents’, ‘deodorants’, etc. to the ‘high purity chemicals’ sold in bulk (usually 200-250 kg drums) by the technical grade manufacturers to synthesize the desired formulation. The desired formulations are then packed and sold in retail to the farmers by the distributors. The low utilization of agrochemicals in our country is mainly due to irregular demands during seasonal crops and dependence of farmers on the monsoon season. Operational ‘working capitals’ are further hiked due to the long credit given to the farmers. Low cost manufacturing of the agrochemicals and availability of low cost labor actually enables India to export agrochemicals to US, some European and African countries.
Some of the key factors driving the agrochemicals market in India are listed below:
• With 16% of the world population concentrated in India and only a landmass of less than 2% necessitates achieving self sufficiency in production of food grains to meet the ever increasing demand for food grains, an important driving factor for the agrochemicals market.
• With the export graph shooting up and limited farmland availability, India has, “190 million hectares of gross cultivated area and the scope of bringing new areas under cultivation are severely limited. Available arable land per capita is reducing globally and is expected to reduce further. The pressure is therefore to increase the yield per hectare which can be achieved through increased use of agrochemicals.” 50% of the total industry size in 2009 was attributed to Indian agrochemical exports.
• India witnessed a 50% hike in the fields of floriculture and horticulture in the past three years which had prompted the Indian Government to launch a ‘national horticulture mission’ expecting to double productions by 2012. This boom in the floriculture and horticulture industry will create a demand for agrochemicals especially fungicides.
• Non-use of pesticides results in a loss of USD 17 billion worth of crops every year as per a Government survey. So both the Government and the companies are keen to stop this irrational loss and are educating farmers on the proper methodology and appropriate chemicals to be used in countering pest problems. Increasing awareness amongst the farmers is likely to boost a demand for agrochemicals.
Some of the challenges currently faced by the Indian agrochemical industries are cited below:
• R&D in the field of agrochemicals is expensive and time consuming as evident from the fact that the creation of a new agrochemical molecule takes about nine years and an investment and USD 180 million. Indian companies have so far neglected this concept of creating new agrochemical molecules. Developing such R&D capacities and remaining cost effective at the same time will prove to be a tough challenge.
• The business of agrochemicals is threatened by the ‘genetically modified (GM) seeds’ which ‘possess self immunity towards external adversaries’.
• Widespread and huge number of consumers necessitates a proper network to ensure the availability of the desired product. Companies have adopted the new policy of eliminating the distributors from the network and dealing directly with the retailers thereby creating a cost effective distribution system. Though retailers have to be educated in this process on product usage, the companies are able to offer a competitive price to the farmers.
• Promotion of Integrated Pest Management (IPM), India Government and various NGOs of zero budget farming and bio-pesticides has started to create awareness amongst the farmers to reduce chemical usage. Increase in the demand of organic food has initiated farmers in Karnataka to adapt to organic farming. Agrochemical companies need to combat the environmental issues and negative impact of pesticides successfully to avoid any disrepute to agrochemical usage.
• Like all strata of our society corruption has permeated the agriculture sector too. The agrochemicals market is flooded with spurious pesticides, the estimated market of which was USD 233 million in 2009. This has affected sizable revenue of the legal agrochemicals market.
The Indian agrochemicals market grew at a rate of 11% , that is, from USD 1.22 billion in financial year 2008 to an estimated USD 1.36 billion in financial year 2009. Agrochemicals exports contributed to 50% of the total industry turnover in financhial year 2008 and have achieved a Compound Annual Growth Rate (CAGR) of 29% from 2004 t0 2008.
However, the most comprehensive study on the agrochemical industry of India has been provided by the apex industry body ASSOCHAM, ‘Indian Market For Agrochemicals’ which predicts, “Growing at a CAGR of about 15%, the agrochemicals sector in India is likely to cross Rs 25,000 crore mark by 2015. The Indian agrochemicals market is currently (2012-13) poised at Rs 16,000 crore”. But the agrochemicals market in India is still very fragmented. However, the huge potential of foreign investment in the Indian agrochemical market is undeniable. The companies in this sector should increase their investment in the field of research and development of agrochemicals which in turn will spur the exports increasing competitiveness in the global scenario.