How Agrochemical Industry can overcome proposed pesticides ban?
Covid-19 pandemic has affected the all the countries and business sectors to variable degree with autos, real estate, travel & tourism among others being impacted the most while FMCG, food related sectors, agrochemicals taking relatively lesser brunt. During this downturn, the Indian government’s proposal to ban 27 pesticides has taken the agrochemical industry by surprise. The list of banned pesticides includes at least three which were already banned in several countries as they were highly hazardous e.g. Monocrotophos is banned in 112 countries, carbofuran in 63 countries and methomyl in 41 countries.
However, the ban is expected to be implemented starting next fiscal year in a phased manner. Since, more than 50 per cent of annual sales of the pesticides proposed to be banned is already over, it will have minimal or negligible impact on revenues in this fiscal year. The product ban in a phased manner allows the companies to realign their product portfolio through generic substitutes, co-marketing opportunities, and products going off-patent and softens the blow on revenues. Furthermore, the government is allowing exports of these products accounting for 40 per cent of revenues, 20 of these 27 pesticides are exported to Latin America, United States, Asia Pacific, and European Union where their usage is permitted.
Anticipating such bans, driven by ban in other regions as well as the shift towards safer alternatives -green chemistry, biologicals etc. – for crop management globally, most companies have already begun to diversify their product portfolio and geographical expansion in recent years. The agrochemical companies who can quickly capture market for alternate products (technicals and formulations) will benefit most. The agrochemical manufactures can sail through the tough times focusing on the workplace health and safety, cost and supply chain optimization while serving the customers with available resources. Despite manufacturing, supply, logistics related challenges, the Indian agrochemical companies slowly have regained their strengths and are beginning to serve the farmers.
Some strategies that can help agrochemical companies ward off the current and future challenges caused by pesticide ban and pandemic(s) are:
- Co-marketing for strategic advantage: Co-marketing of new products in collaboration with global MNCs in Indian market preferably the products that provide safer and better alternatives to existing products will help the agrochemical industry gain major portfolio optimization.
- Innovation and R&D:Product registrations is a long-drawn process and go through extensive registration and screening process globally and in India. The creation and scale-up of the external partnerships for innovation and R&D enabling them to develop and commercialize new products in the agrochemicals market and will be critical to maintain a healthy pipeline of products.
- Optimized use of digital technologies: The companies in the agrochemical industry need to be transformed from being mere providers of farm inputs to complex providers of integrated products by using ‘digital’ as a major component across all its operations. Acquisition of partnerships with companies with better technology backup will help increase access to advanced technologies and incorporate them into business operations beginning from R&D for product development, screening, manufacturing, marketing, and information dissemination. The digital technologies will help companies in the agrochemical industry to launch digital platforms for data collection, visualization, modeling, and weed out major inefficiencies in operations and stay ahead of the curve.
The way we do business has transformed completely and will likely remain so. There may still be some unforeseen changes in near to long term. This is true for all business sectors and for agrochemicals, which play a critical role in the global food supply. The agrochemical companies need to remain dynamic to accept challenges and adopt novel tools and technologies for strategic advantage in the industry as well with their competitors.
AVP in Life Sciences Advisory Group