Unless this sector looks beyond re-producing generic substances and invests significantly in research and development to generate new molecules, it will neither be able to realise its full potential nor contribute to national development, writes RAJESH AGGARWAl
Much like the pharmaceutical sector, India’s agro-chemical industry too has thrived on making generic agro-chemicals rather than investing in research and development to produce new molecules that can be patented. The latter approach requires substantial investments that will not have immediate or short term gains but fundamental long term benefits for the industry.
Indian companies have mostly chosen to market generic agro-chemicals to make money instead of committing to the long lengthy process of new product registration. In recent years, however, there is an increasing realisation that the Indian chemical industry is forsaking long term gains by adopting a myopic view.
The demand for agro-chemicals is rising, thanks to the growing awareness and willingness of farmers to invest in their crops. At the same time, the need to create products that benefit local farmers and suit their agricultural conditions is also being felt.
New molecules will add to India’s intellectual property and this brings substantial gains for companies in the long run. However, foresight is crucial. Indian companies should be ready to make long-term investments and withstand longer gestation periods for R&D to reap fruits. There has to be a balance between marketing generic agro-chemicals and inventing new ones. Time is ripe for the Indian industry to graduate to the next level.
India is currently the fourth largest producer of agro-chemicals in the world after the United States, Japan and China. The agro-chemicals industry is crucial to the Indian economy, that is heavily dependent on the agricultural sector. The increasing population of India (already 16 per cent of the world lives in in this country which has only two per cent of the total landmass of the world) is also limiting the availability of per capital cultivable land. Higher yields to meet the growing need for food grains can only be achieved through greater emphasis on agro-chemicals and their judicious use.
With domestic consumption increasing, employment of advanced technology and strategic moves by the agrochemical industry can actually raise the export capacity of Indian agricultural as well. It is noteworthy that India still exports food grains.
However, despite the many benefits of using agro-chemicals in a heavily monsoon-dependent agricultural economy, the use of these in India remains uncharacteristically low. This, coupled with a lack of R&D initiatives, and a paucity of foresight in the industry, has meant that India’s agro-chemical industry has not been able to lead the way.
It is estimated that the Indian chemical sector spends only one to two per cent of its total turnover on R&D as compared to around five to 10 per cent spent by chemical industry in developed countries. This needs to change if the Indian agro-chemical industry is to remain globally competitive.
With the Indian agro chemical industry today mature enough to make long term investments, many players are talking about the need to make R&D investment a major part of their strategy. The use of low dosage, high-potency agrochemicals is the way forward.
Due to its inherent strength of low-cost manufacturing and skilled low-cost manpower, exports remain viable for the Indian industry. However, most of the exports are off-patent products. R&D to develop a new agro-chemical molecule is a high investment area that requires much financial investment plus a long gestation period of three to five years for registration of new chemicals. High investments have deterred Indian players from developing new molecules and have instead led to increased focus on generics.
The strong presence in the Indian market of multi-national corporations who have the ability and know-how to develop innovative products has also made it easier for Indian players to contract manufacture for short-term gains. Indian companies typically have not focused on developing newer molecules and will face challenges in building these capabilities.
The Indian agro-chemicals market grew at an impressive 11 per cent from $1.22 billion in 2008 to an estimated $1.36 billion in 2009. However, there is still much space for the local demand for agro-chemicals to grow.
Consequently, India remains a net exporter of pesticides primarily to the US, Europe and Africa. In 2008, exports formed 50 per cent of the total industry turnover, according to estimates by the Federation of Indian Chambers of Commerce and Industry.
This is a crucial time for India’s agro-chemical industry. The turn the industry takes now will decide if it will be able to evolve into an indigenous chemical-producing industry or remain re-producers of generic molecules.
(The writer is managing director, Insecticides (India) limited)