India's Pesticide Industry: struggling to reach its potential

Crop losses in India due to weeds and pests are estimated at around 30% of the total agricultural production. Use of herbicides per hectare is amongst the lowest in the world, and notably, the crop yield per hectare is also very low. Yet India needs to produce an additional 5 million tonnes per year for the next 20 years to meet its food grain needs of 300 million tonnes by 2020. It may be a highly challenging task but it is also a necessity and, to succeed, the plant protection industry will need to play a vital role.

India is one of the largest producers of pesticides in Asia. Indian companies have developed process technologies for more than 30 pesticides, and pesticide exports from India are steadily on the rise. Many Indian companies have opened offices and stock depots in Europe and Australia to ensure quick delivery, and exports have increased in the last three years by as much as 15%.

However, the industry seems to be passing through a financial crisis. The focal causes for this are rising costs of inputs, governmental duties and taxes, and the cost of capital. There are also high rates of excise duty both on intermediates and finished products, and excise and sales taxes account for nearly 20% of the cost of pesticides.

The industry is also constrained by regulatory norms. At present, there are high data generation costs for different crops and pests, and the systems and protocols needed for registration of new products are extremely stringent. Export formalities for insecticides and pesticides are particularly cumbersome, and cause huge losses of orders and hence, of precious foreign exchange.

There are also many spurious producers, who are cheating the Indian farmer at the cost of the plant protection industry. The industry finds it difficult to tackle these due to loose government regulations and inadequate rules. The Insecticide Act of 1968 is outdated in spite of several amendments that have been made. For example, there is no provision in the Act to deal with counterfeit pesticides, and the reputable companies, in whose name they are sold, have to prove to the satisfaction of the court that they have not manufactured any sub-standard materials.

The global market in generic pesticides is likely to increase by 70% by the year 2005. It is expected that the strong fundamentals of the Indian pesticide industry, such as cheap availability of raw materials, process expertise, low operating costs and R& D strengths, will attract many foreign companies. This in turn should boost investment in research, and thus there would seem to be a bright future for agrochemical companies in India. However to boost the industry, the government will need to come up with more incentives. Smoothing the procedures for registration and export licensing would be a good place to start.

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