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Agrochemicals: Some business basics - Views on News from Equitymaster
 
 
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  • May 29, 2001

    Agrochemicals: Some business basics

    Agrochemicals (popularly known as pesticides) are basically a broad spectrum of chemicals that farmers use to protect crops from a whole host of insects, weeds, and diseases, both before harvesting and post harvesting. Whereas, herbicides are used during the early stage of crop cycle insecticides and fungicides are used in the later stage. The Indian agrochemical market has been pegged at around Rs 35 bn in FY00. Besides being dependent on the vagaries of monsoons, the demand remains skewed in favor of kharif crops (July to September period) with rice and cotton accounting for almost half the pesticides usage. Again, the mature agriculture states like Punjab, A.P. and Karnataka accounts for more than 60% of the total pesticides consumption.

    Another interesting feature of the Indian agrochemical market is the consumption pattern among different pesticides compared to global standards.

    Pesticide Type % of total
    consumption
    Global
    Benchmark (%)
    Herbicides 10 48
    Insecticides 76 29
    Fungicides 13 17
    Others 1 6

    As is evident from the above table, domestically the consumption of pesticides is skewed towards insecticides. While globally a significant 48% of pesticides are consumed in the form of herbicides in India itís a minuscule 10%. The reason for this is not hard to find.

    Weeds are unwanted plants that compete with crops for water, light and nutrients. As a result, crops grow weak and become susceptible to diseases. All these factors cause acreage to drop drastically. Now, to remove these unwanted weeds there are two available options. Either resort to manual pulling or destroy weeds through chemical control i.e. herbicides. Manual pulling is not only labour intensive, the process also keeps the roots of these weeds undamaged. Most farmers in India resort to manual process of plucking these weeds to save high herbicides cost. However, the equation is changing. With farm labour becoming more and more dearer and farmers getting tuned in to best agricultural practices, the consumption of herbicides is rising.

    Insecticides on the other hand cannot be replaced by labour and hence the consumption pattern looks skewed. The consumption of pesticides in India is just 600 gm per hectare as against 10 kgs per hectare in developed countries. Increase in farm income and gradual shift towards higher usage of herbicides is expected to increase consumption of agrochemicals.

     

     

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