Such a business strategy has served the agrochemicals sector well till now since it keeps the costs down and lets it concentrate on pricing, marketing and other key areas. This advantage may even continue for some more time since the industry already has process technologies for over 60 generic, off-patent molecules. And, many more molecules are anticipated to lose patent protection in the next few years. However, the situation is likely to change thanks to growing intellectual property protection concerns and accentuating competition from multinational companies. Bio-pesticides, deemed safe for environment and health, are also likely to emerge as potential competitors for chemical pesticides in due course, though their current market share is just around three per cent. The pesticide industry will, therefore, need greater self-reliance in the discovery of new molecules.
Emphasis on R&D is imperative for another reason as well. The number of serious crop pests is gradually increasing. Going by a recent report on the agrochemicals sector, prepared by the Tata Strategic Management Group with support from the Federation of Indian Chambers of Commerce and Industries (Ficci), the number of serious pests that attack wheat has risen from just two in 1940s to 19 now. In rice, similarly, the count of major pests has risen from 10 to 17 and in sugar cane, from just two to a whopping 43. The case is no different for pulses and oilseeds. This is bound to require more pesticide use which, currently, is hardly around 0.6 kg a hectare. This looks minuscule in contrast to pesticide consumption of five to seven kg a hectare in developed countries and 13 kg in China.
Apart from pests, the menace of diseases and weeds is also expanding. This makes the development of new fungicides and weedicides more important. Currently, the Indian agrochemicals market is dominated by insecticides (insect killers), which enjoy a 60 per cent market share. In contrast, the share of fungicides (for controlling plant diseases) is just around 18 per cent and that of herbicides (for weed control) still at 16 per cent. The demand for these products is bound to swell in coming years, given that new diseases and weeds are also surfacing.
This apart, the geographic and crop-wise spread of pesticide use, too, is quite skewed right now. It is confined largely to crops such as rice, cotton, wheat and sugar cane and that too in a few states, such as Andhra Pradesh (both Seemandhra and Telangana), Maharashtra, Punjab, Uttar Pradesh, West Bengal and Haryana. As the use of pesticides spreads to more crops and other regions, the demand for new-generation pesticides is bound to spiral.
There are many reasons for low R&D investment in the agrochemicals sector, including some over which the industry has little control. The most significant reasons among them are the prohibitively high cost of evolving a new product and long gestation period. The Tata-Ficci study reckons the investment needed for evolving a new molecule at $250 million. Besides, it takes nearly 10 years to commercialise the product. Even generic products can take five years for registration. Regulatory bodies generally lack resources and infrastructure to expedite the registration of new products. In many cases, even the rules are not clearly defined.
Some of these issues obviously need to be addressed by the government. But the industry, too, needs to explore ways and means to get over these constraints. For, the growth opportunities for this sector have to come from expansion of the product portfolio, higher exports of generic products and expansion of the herbicide and fungicide market.
surinder.sud@gmail.com