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Indian agro–chemical cos: a drought post 2005? - Views on News from Equitymaster
 
 
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  • May 2, 2000

    Indian agro–chemical cos: a drought post 2005?

    The effect of the introduction of a product patent regime and its impact on the Indian pharmaceutical sector has been endlessly debated. However, another set of companies that would be equally, if not more affected, would be the Indian agro–chemical companies including United Phosphorous, Excel Industries, Rallis and Transpek Industries.

    So far these have been efficient technical grade pesticide manufacturers and the structure of the Indian market have allowed them to remain profitable. The Indian pesticide market has far been dominated by insecticides for two crops rice and cotton. Among the formulations, it is the multinationals such as Agrevo, Novartis, Monsanto, Cyanamid, Bayer that have the upper hand over the likes of United Phosphorous and Excel.

    The world over it is the parent’s of these companies, which are leading the charge into biotech, gentology and tissue culture. For instance, Monsanto has been in the forefront of research and discovery of pesticide resistant seeds for cotton, soyabean, and corn.

    Though these have caught on to some extent in the USA itself, farmers in Europe are far more circumspect about the acceptance by regulators and consumers of genetically modified foods.

    All these companies are present in India and would become far more aggressive in the Indian market, after the introduction of the patent regime. The question is: where does the changing international scenario and the impending changes in the patent regime leave the Indian agro–chemical firms? They have neither the financial wherewithal for buying out research, nor have they demonstrated innovative abilities, which would enable them to hold their own in the emerging scenario.

    The one possible way out for the Indian players could be the building of competencies in distribution. They could emerge into one stop shops which offer farm management services, such as meeting the demands for spray equipment, fertiliser & pesticide mixes as well as sourcing seeds. Alternatively, they could become suppliers of technical grade pesticides to the multinationals themselves, in which case, the margins would be very meagre. Whether, they become contract manufacturers or prefer to become distributors remains to be seen.

     

     

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