Farming solutions – the next frontier for breakthrough growth of Indian agrochemical companies
India has a population of 1.18 billion which is expected to reach 1.45 billion by 2030. This rising population will lead to increasing demand for food grains. On the other hand, per capita land available for agriculture has been steadily decreasing.
This coupled with rapid urbanization and non availability of agricultural manpower has had a strong impact on farm production. Agricultural produce has not been growing in tune with demand. Currently average crop yields in India are much lower than global benchmarks.
For example, average yield for rice is 3.2 tons/ha in India vis-à-vis 4.2 tons/ha globally. Similarly, yields for soybean and corn are 1.0 and 2.4 tons/ha domestically compared to 2.5 and 5.0 tons/ha globally. The current price increases of food products reflect the situation having reached alarming levels and we have to rely on imports to meet our domestic consumption. This is only expected to worsen further if we do not take necessary steps to reverse it. Improving crop yields has become very critical and will become imperative in the future.
India has the resources necessary to meet all its increasing needs and be left with a handsome surplus if we can use our significantly large area under cultivation effectively. This would however call for a holistic ‘friend of the farmer’ approach, offering locally relevant farming solutions, where agrochemical companies could lead and benefit by improving yield and productivity.
The Indian agrochemical industry, which is Rs. 15,000 Cr today, could grow well beyond its aspirational target of Rs. 50,000 Cr by 2020. The opportunity lies in developing and executing innovative farming solutions that address the needs of the Indian farmer with very low landholding size, resources and knowhow available to him. Farming solutions would require a collaborative approach together with seed technology, IT, nutrients and other service providers. For the agrochemical companies it implies that to achieve such growth, capacity additions of over 100,000 tons would be required with significant capital investments of over Rs 3,000 Cr. In addition, substantial investment will be required for R&D and farmer-awareness activities.
Besides effectively creating farming solutions with other partners, the Indian agrochemical industry itself faces critical challenges which could hinder its growth if not addressed effectively. The industry is predominantly generic in nature with very little investment in R&D. Lack of awareness amongst farmers on usage of agrochemicals and best practices followed globally is a major roadblock for the growth of the industry. Current per capita consumption of pesticides in India continues to be very low at 0.6 kg/ha compared to 7 kg/ha in USA and 13 kg/ha in China. It is estimated that crop losses in India due to non usage of agrochemicals amount to Rs. 90,000 Cr p.a.
Relatively weak IP protection regime is another area of concern. A huge parallel market for spurious and spiked pesticides exists which leads to significant revenue loss for genuine manufacturers. In addition, long lead times for new product registrations and non-availability of land and regulatory clearances are hindrances to setting up new investments.
The Indian agricultural landscape is distinct from most other countries of the world and needs to be well understood to arrive at relevant farming solutions. We have a largely fragmented land-holding structure (refer fig.1) with subsistence farming in several regions. Farmers are typically not educated or exposed to modern methods of farming. The fragmented and small landholdings translate to lesser spending power by individual farmers for seeds, irrigation, fertilizer or agrochemicals. Deeper understanding of the market by geography, perhaps even at a district level, becomes critical to success. These differences need to be clearly understood and call for customized solutions to suit India’s diverse agro-climatic conditions.
Agrochemical companies can take the lead to look beyond the traditional offerings and adopt a holistic approach to farm management to enable India to achieve its true potential in agriculture. These companies have a strong farmer-connect and reach, with the potential to influence and change the way farming is traditionally done in this country. If ever there was a burning platform necessitating this, it is now!
The Indian market abounds with such examples where innovative and customized solutions have grown the market and catapulted the first movers to market leaders. The automotive industry in India received a strong fillip with India becoming a manufacturing hub for small cars. A call to develop the low cost car meeting specific needs of the Indian customer who could not afford it earlier, helped to create and proliferate the low end ‘micro’ segment.
Similarly, the paint industry experienced a huge growth with introduction of tinting machines which offer customized paint solutions closer to point of sale, recognizing the Indian consumer’s need for tailored shades and ‘look and feel’ before deciding. Castrol took the initiative to develop a completely new channel for lubricant sales. This offset the disadvantage of not being able to utilize traditional sales channels, which were controlled by PSUs, and created a robust distribution network for Indian motorists and car owners through other points of sale.
Let us consider the benefits of adopting a holistic and innovative approach with the case of pulses. A brief study indicated that India could more than double its current production of pulses if crop nutrients, timely availability and usage of better seed varieties, requisite irrigation and proper storage were available (refer fig.2). This would improve our yield to global levels and help us meet our domestic demand. Arriving at the solutions innovatively recognizing the Indian context is critical. However the real challenge lies in the execution. First movers will be able to reap the benefits and enjoy sustainable growth.
Agrochemical companies could adopt specific crops or geographies within their sphere of influence and help farmers increase output. This may mean working with various stakeholders such as microfinance companies, adopting contract farming, increasing farmer awareness through demonstrations and extension services, propagating better farm practices, ensuring right usage of crop protection chemicals, increasing usage of hybrids/ GM seeds and providing better storage facilities to reduce post harvest losses. The power of IT can be effectively leveraged to provide farmers with timely advice and guidance for improving productivity, addressing pest related issues and optimizing the value chain.
Download Agro Chemicals India 2011 report by FICCI
at the link below :
- Farming solutions – the next frontier for breakthrough growth of Indian agrochemical companies
- Introduction to Agrochemicals
- Global market overview
- Indian market overview
- IPM and newer methods of crop protection
- Profiles of key manufacturers