Report Summary
Agriculture is the lynchpin of the Indian economy. Ensuring food security for more than 1 bn Indian population with diminishing cultivable land resource is a herculean task. This necessitates use of high yielding variety of seeds, balance use of fertilisers, judicious use of quality pesticidesalong with education to farmers and the use of modern farming techniques.
It is estimated that India approximately loses 18% of the crop yield valued at Rs.900 bn due to pest attack each year. The use of pesticides help to reduce the crop losses, provide economic benefits to farmers, reduce soil erosion and help in ensuring food safety & security for the nation.
The Indian pesticide industry with 85,000 MT of production during FY 07 is ranked second in Asia (behind China) and twelfth globally. In value terms, the size of the Indian pesticide industrywas estimated at Rs.74 bn for 2007, including exports of Rs.29 bn.
Globally, due to consolidation in the industry, the top five global MNCs control almost 78% ofthe market. In India, the industry is very fragmented with about 30-40 large manufacturers and about 400 formulators.
The per hectare consumption of pesticide is low in India at 381 grams when compared to the world average of 500 grams. Low consumption can be attributed to fragmented land holdings, low level of irrigation, dependence on monsoons, low awareness among farmers about the benefits of usage of pesticides etc. India, being a tropical country, the consumption pattern is
also more skewed towards insecticides which accounted for 64% of the total pesticide consumption in FY07.
India due to its inherent strength of low-cost manufacturing and qualified low-cost manpower is a net exporter of pesticides to countries such as USA and some European & African countries. Exports formed 39% of total industry turnover in FY07 and have grown at a Compounded Annual Growth Rate (CAGR) of 18% from FY 03 to FY 07.
Prior to 2005, i.e. in the process patent regime, Indian companies focused on applied research and concentrated on marketing generic and off-patent products. Due to this, the R&D expense by Indian companies was lower at approximately 1% of turnover. Global companies focused on high-end specialty products and dominated the market for patented new molecules.
However, with the onset of the product patent regime in India since 2005, the Indian companies will need to increase R&D expense to meet competition from MNCs. Alternatively Indian companies can be competitive in the area of Contract Research and Manufacturing Services (CRAMS).
With the advent of the Integrated Pest Management (IPM) technique, the use of biopesticides and Genetically Modified (GM) seeds has increased. Globally, GM seeds are used mainly for commercial crops like cotton, maize, soyabean and canola. In India, Bt cotton is widely used and the acreage stood at 6.20 mn ha for 2007, a growth of 63% over the previous year. Use of GM seeds may diminish the use of insecticides but the use of herbicides may improve.
Our Research feels that the demand for pesticides can be augmented only through sustainable growth in agriculture. With the government's focus on development of the agriculture sector, the industry may see a better future. The Indian pesticide industry is also likely to move towards the global product mix, with an increase in the use of herbicides and fungicides. Exports will continue to remain the growth driver.
