Agrochemicals - Lets understand what leads the growth!

A Agrochemicals - The rising trend for the chemical sector

Twitter Handle: @shuchi_nahar

The Indian economy has transformed substantially, from being a ship-to-mouth economy since its independence to become one of the largest economies in the world. Agriculture continues to be a dominant element in the Indian economy. Along with major economic reforms, Government programs, such as the Green Revolution have played a critical role in transforming the country’s agriculture sector and paved the way towards economic growth of the country.

Agrochemicals specifically have played an important role in preventing crop losses to pests and improving overall productivity. Proper and scientific usage of agrochemicals may lead to approximately 20–30% improvement in productivity. Currently, the usage of agrochemicals in the Indian agriculture sector is amongst the lowest in the world.

India is one of the leading producers in the world. Be it food grains, horticulture crops, oilseed production, Agricultural exports, or FDI in the domain, all have flourished over the past few decades.

Top countries by pesticide use (000' tonnes)

Europe and Asia-Pacific are the highest consumers of agrochemicals and account for around half of the global consumption. These regions also account for around 85% of the agrochemical exports around the world, making them the global manufacturing and exports hub. Agrochemical consumption around the world has transformed agriculture and has helped in achieving substantial gains in yields of many agricultural crops. A study in 2013 estimated that pests can cause a yield loss of as much as 28.2% in wheat, 31.2% in maize, and 28.8% in cotton. Therefore, there is a direct relation between pesticide usage and agricultural production.

With an estimated crop loss of above 2 trillion INR per annum due to pests, coupled with a very low level of pesticides usage of 340 g/ha (compared to most developing agriculture economies), there is a strong role that agrochemicals can play in protecting food sufficiency and quality of agricultural produce in India, with very favorable cost-benefit ratio.

Usage of agrochemicals along with other high-quality agri-inputs has been instrumental in improving agricultural production and productivity around the world. However, there are disparities when it comes to the productivity of major food crops amongst countries.

Although the disparities can be contributed by many factors, such as the extent of agri-input usage, availability of resources, agro-climatic conditions, and markets, it is safe to assume that higher but correct pesticide usage can lead to substantial improvements in yield. The below infographic illustrates a comparison of yields of major food crops in India with major food-producing countries.

India is the fifth largest producer and the fourth largest exporter of agrochemicals. The Indian agrochemicals industry was valued at around INR 42,000 crore in FY20 out of which domestic consumption was worth around INR 20,000 crore, while exports during the same period were worth around INR 22,000 crore. The industry is expected to grow at a CAGR of 8–10% till 2025 and the growth is expected to be driven by several growth levers like increasing population, decreasing arable land, increasing demand for high-value agricultural products, and increasing efforts from the industry and the Government to promote awareness and technology penetration.

The following table highlights the subsegments and user industries wherein specialty chemicals find a large range of applications: 

Important trends drive the Indian Agrochemical sector. 

The following pointers highlight the current and upcoming trends in the agrochemical industries

•Increasing focus towards digital avenues has improved decision making and enhanced traceability across the value chain

•Evolving models like direct selling through FPOs and direct-to-consumer (D2C) platforms like e-commerce are impacting the entire ecosystem of agrochemicals in India

•Increasing focus on diversification into specialty nutrients products such as biofertilizers, bio-stimulants, micronutrients, and organic products has picked up across the industry. These segments have seen multiple investments in a bid to develop innovative and cost-effective products for farmers.

•Monetization of farming services such as spraying of agrochemicals and direct-to-farm delivery of agri-inputs are changing the landscape of the industry. Various start-ups have come up in the domain and have been trying to capitalize on the existing market demand.

•Increasing interest of farmers towards solutions like ‘product as a service, mobile app-based advisory, market information, etc. have enabled quick dissemination of information enabling better decision making from farmers. This is also expected to drive farm productivity, profitability, and higher risk-adjusted returns for farmers.

•Specialty chemicals have come up as an attractive emerging area that has witnessed strong growth, new investments, and capability enhancement among Indian Agrochemical players. Their application in a variety of end-user industries makes these even more suitable for agrochemical companies as a product offering.

 

It’s time to create a 360-degree buzz about the role of agrochemicals in Indian agriculture and their importance in ensuring food and nutrition security. Government and industries should work together,  review existing regulatory and policy hassles right from production to end consumers, and make a robust plan towards the theme of "Make in India and Make for the World." Insecticides dominate the Indian crop protection market however Herbicides are emerging as the fastest-growing segment.

Production, Export, and Imports of agrochemicals (Unit: 000 tonnes)

Production of agrochemicals (technical grade) has grown by 11.9% during 9M-FY21. Despite the impact of the coronavirus on the domestic market two consecutive good monsoon seasons, the vibrancy of the rural markets, and a good sowing season have attributed to an increase in production. New product launches, pro-active raw material planning along efficient capacity utilization have also supported the increase in manufacturing. An increase in manufacturing of technical augurs well for the industry as it is getting more backward integrated.

During the budget announcement, the government also increased the credit for farmers increased from Rs. 15 lakh crores to Rs. 16.5 lakhs crores and decided to further add 1,000 mandies through the eNam platform which is to give benefit to the farmers to sell his crops at better prices which will ultimately improve the profitability of the farming community.

Going forward, with acreage and crop prices both improving, the sector is structurally well-placed also considering the fact that this year’s harvest is slated to be a bumper crop and the farming community will be having good liquidity to spend money to safeguard their crop from pests and diseases.

Twitter Handle: @shuchi_nahar

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