Indian agrochemical industry set growth phase
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Indian agrochemical industry set for a growth phase

7:30 AM, 6th October 2018
Indian agrochemical industry

By Rajendra Gogri

The Indian economy traditionally being an agrarian economy has seen a tectonic shift from an agriculture industry based economy to become a service industry based economy. More than half of its population is dependent on agriculture as its primary occupation.

The Green Revolution in the early 1970s helped India become a food surplus country from a food deficient country and currently ranks amongst the top 15 exporters of agricultural products in the world. However, despite all these achievement the agriculture sector is facing a number of issues which includes reduction of arable land, lower per hectare yield, increase in pest attacks and lower farmer income. This is where agrochemicals have an important role to play.

Agrochemical landscape in India

India is currently the 4th largest manufacturer of agrochemicals after The United States, Japan and China. Currently, its agrochemicals market is valued at $4.1 billion and is expected to grow at a growth rate of 8.3 percent to reach $8.1 billion by 2025.

Exports are expected to fare even better and are expected to grow at a rate of 8.6 percent to reach $4.2 billion by 2025. In spite of these achievements the country lags in terms of usage of agrochemicals. Per hectare consumption of agrochemicals is currently less than 1 kg which when compared to other developed countries, is less in volume terms. Presently, the maximum use of crop protection chemicals is seen in paddy cultivation followed by cotton.

Bifurcation of agrochemicals

Currently agrochemicals are broadly divided into two main types: Soil Nutrients, Crop Protection Chemicals. The further bifurcation of Crop protection chemicals is as mentioned below.

  • Insecticides: These chemicals are used to protect pest attack on the plants.
  • Fungicides: These are used to control spread of diseases caused by fungus in plants and animals.
  • Herbicides: These are used to control the growth of weeds in the cultivation area.
  • Bio Pesticides: These are generally derived from natural sources like animals, plants, bacteria and other minerals.
  • Others: These includes Plant Growth Regulators, Nemotocides, Rodenticides, fumigants etc.

Reasons for Increased use of  Agrochemicals in Domestic Markets

The current use of agrochemicals in the Indian market is very low and is approx. 0.65 kg per hectare which is far less as compared to The United States where it is 4.58 kg per hectare. This low consumption of agrochemicals in one of the reasons for the low yield per hectare production of agricultural products in India. Also, around 25 percent of the total crops produced in India are destroyed due to pest attack.

Agrochemicals can play an important role in curbing the pest attacks this leading to increased productivity.

Also the world population is growing at a rapid pace. India is currently home to approx. 18 percent of the world population whereas covers only 2 percent of the landmass. There is a surge in demand to meet the dietary needs of this ever increasing population, however the arable land remains constant, hence there is a need to increase the per hectare production which can be done by efficient use of agrochemicals. Currently, India ranks amongst the top 15 manufacturers of agricultural products. With the increase in agricultural production, there will be huge scope for export of these products.

Horticulture and floriculture have also started gaining prominence in India. The Government of India with an eye on increasing the production of agricultural products has been launching various schemes like ‘Mission for Integrated Development of Horticulture’ etc. This has led to increased use of agrochemicals, mainly fungicides.

There has been a lot of awareness amongst the farmers regarding the use of agrochemicals, and the right way for its applications. Also, it has been one of the key objectives of the Prime Minister of India Narendra Modi to “Double farmers income by 2022.’ Thus, there will be a definite increase in consumption of agrochemicals and soil nutrients.

Developing India as an Agrochemical Manufacturing Hub

In the past couple of years there has been a significant reduction in the exports from China. This is owing to the implementation of stringent environmental norms by the Chinese government, crackdown on the polluting chemical industry and impending duties from US on Chinese products. There has been a large scale shutdown of plants which are causing pollution, relocation of chemical plants to far off industrial areas as well as compulsory effluent treatment plants for every chemical plant. As a result China’s exports have been severely dented. On the other hand Indian Chemical

Industry performed extremely well in terms of exports. In the case of manufacturing of agrochemicals, India is being noticed as a manufacturing hub. The Government of India through its ‘Make In India’ initiative has been inviting various national and international companies to manufacture and expand operations in India. Many companies are now looking to source chemicals from India in order to de-risk their sourcing from China. In addition to that, there are numerous other reasons for MNCs investing in India, few among those are low capex, availability of skilled manpower at low cost, infrastructure advancement, to name a few. It is important that the industry takes notice and grabs the opportunity to establish India as a global chemical manufacturing hub and eventually creates a healthy, thriving ecosystem.

Export Markets

As per a report by the Federation of Indian Chambers of Commerce and Industry (FICCI), India exported crop protection chemicals worth $2 billion. The country is the 4th largest manufacturer and the 13th largest exporter of agrochemicals globally. Also, at present the manufacturing capacity utilization is not 100 percent, leaving a huge scope for exporting the surplus production. India has been traditionally exporting agrochemicals to the US, Europe and some Latin American countries. However there tremendous export potential to markets such as Africa, Middle East and East Asia.

Way Forward

The current Indian Agrochemical scenario presents an exciting growth opportunity for chemical manufacturers. The agriculture industry is set for a fast paced growth, which will lead to increased use of agrochemicals. Also with the current manufacturing capacities being under-utilized there is major scope to improve capacity utilization for export production. These increasing volumes will lead to significant increase in employment, exports, new product development, decrease in imports, which will support the ‘Make in India’ campaign and ease of doing business. However while gearing up for this growth phase we must also ensure that the growth is a Sustainable one.

Author: Rajendra Gogri is Chairman and Managing Director of Aarti Industries Ltd.

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