Chemical News

Agrochemicals industry: Innovation key to sustainable growth

The relevance of the Indian agrochemicals industry cannot be overstated. Pests, weeds and other infestations cause immense losses at all stages of the life of a crop – starting from the seed and ending with storage. The losses are difficult to pin down, but post-harvest loss numbers of up to 40% do not seem to surprise anybody. This is a staggering wastage anywhere in the world, and all the more so in India, where a significant amount of a family’s income goes to feeding its members.

The relevance of the Indian agrochemicals industry cannot be overstated. Pests, weeds and other infestations cause immense losses at all stages of the life of a crop – starting from the seed and ending with storage. The losses are difficult to pin down, but post-harvest loss numbers of up to 40% do not seem to surprise anybody. This is a staggering wastage anywhere in the world, and all the more so in India, where a significant amount of a family’s income goes to feeding its members.

Much hype has been created in the media over the need for efficient supply chains that can take produce from the ‘field to the fork’ seamlessly and many believe foreign direct investment can play a significant role in improving efficiencies along this long value chain, and benefit consumers with better quality food at more attractive pricing. This could be debated – as it has been for some years now – but what is clearly unsung is the vital role the crop protection industry plays.

For many reasons, crop protection products or agrochemicals have had a bad rap. The products are by their nature toxic – at least to the pests they aim to kill or maim – and this hazard has been compounded by misuse, overuse and indiscriminate use. The issue of toxic residues in products ranging from food grains, fruits & vegetables, colas, water and even industrial products such as essential oils, natural gums and resinoids have reinforced an image that the industry is out to kill.

Nothing could be further from the truth. Appropriate use of the right agrochemicals, in the correct dosage and at the right time in the lifecycle of the crop plays a significant role in enhancing yields. What is ironical is that the bad press the industry gets is despite the fact that India’s per capita agrochemical usage is amongst the lowest in the world – far below world averages, and even below neighbouring countries. These figures can only climb up, as India’s governments and its farmers look to boost output of all sorts of agri produce to feed its growing population – and do this with less and less land available for agriculture.

Export focus

The agrochemical industry in India took off in the early-80s, when technologies for manufacture of several active materials – technicals, in industry jargon – became widely available from the research laboratories of CSIR. The mushrooming of industry resulted in massive over-capacity, and exporting ones way out of trouble became the strategy for many Indian companies. The focus was clearly on generic agrochemicals – ones in which patents had expired – and like in the API industry, continuous process research put many companies in a fairly strong competitive position to capture a significant chunk of global markets.

The industry has since reinforced this position. A handful of companies have ventured overseas to set up subsidiaries and joint ventures to offer formulated products. This has required them to invest heavily in product registrations, supported by voluminous data to prove efficacy and safety under different agro-climatic conditions. While some companies have chosen to go it alone, others have chosen a less riskier path of joint ventures and alliances.
Contract manufacturing opportunities

Today, the Indian agrochemical industry, as a whole, exports more than it sells in the local market. Contract manufacturing opportunities have emerged and a handful of companies have lucrative relationships with MNCs to service their requirements of active ingredients. In a few instances, multinationals have even chosen to buy into manufacturing assets here and integrated these into their global supply chains. These trends are expected to gather momentum going forward.

Challenges in the domestic market

While the export opportunity is clearly attractive, there can be no denying that things have gotten tougher in the domestic market. For one, many products of yesteryears – the organochlorines and organophosphates, to cite two examples – seem to be going out of favour, either because of regulatory bans and/or the preference of farmers for more efficacious and safer products. Product obsolescence is a major challenge the agrochemical industry everywhere faces, as pests develop resistance to chemical treatments. Constant innovation is the only way to stay ahead!

In this respect MNCs, with their strong research pipelines and ability to invest significant resources in new products, are better placed. While the Indian agrochemical market is still dominated by older generics, newer patented molecules are steadily eroding this dominance. How this challenge will play out in the years ahead will greatly influence the structure of the agrochemical business in India.

The business of biotechnology

The other challenge for the Indian agrochemical industry comes from the business of biotechnology. The introduction of Bt-cotton – India’s first genetically modified crop – saw a significant reduction in the use of insecticides on the crop, as the intrinsic ability of cotton to combat pests made copious sprays redundant. This genetically modified variety now accounts for close to 90% of all cotton produced in India and its impact on agrochemical consumption has more or less played out. Indeed, industry watchers believe the crop now requires spraying of other agrochemicals and now represents an opportunity.

From the on-going research efforts at major crop-science companies it is clear their emphasis is on biology. The leading companies of the world are now using conventional breeding techniques and genetic modifications to develop seeds with increased tolerance to stresses (drought, salinity, heat etc.); that can give higher yields per unit of land; and even produce crops with enhanced nutritional and other benefits. Their increased acceptance in many, if not all parts of the world, will have impacts on the pattern of agrochemical usage. India will also not be an exception as farmers embrace these shifts. All of this will challenge Indian agrochemical companies looking inward at local markets and even those eyeing markets elsewhere.

The profile of agrochemical usage has changed significantly in the last decade, with the dominance of insecticides being somewhat eroded by increasing usage of herbicides and fungicides. This reflects the new realities facing Indian agriculture: the shift from producing merely basic food grains to more valuable crops, including fruits & vegetables; and the shortage of labour for manual weeding operations. The agrochemicals industry will need to accurately predict the nuances in these shifts and prepare themselves for the new opportunities and challenges.

Increasing emphasis on innovation

The biggest challenge – aside poor public perception – for the domestic Indian agrochemical industry is its lack of innovation. Neither individually nor collectively has the industry done much to address this issue and this is short-sighted, to say the least. Admittedly, new chemical entity research is an expensive and time-consuming task, beyond the reach of nearly all of the industry, but there are innovations in the area of formulation science, application techniques and even in providing extension services to farmers that the industry must look to address.

Else it will find itself slowly being edged out of the marketplace!