Presentation_PwC_Agrochem.pdf

Presentation_PwC_Agrochem.pdf

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  Overview of Agrochemicals Sector India Chem2021 March 2021
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  PwC 1. Overview ofAgrochemicals Industry 03 2. Driving Growth & developing India as a Mfg. hub 07 Agenda 2 March 2021 Ov erv iew of Agrochemicals Sector
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  Overview of Global &Indian Agrochemicals Industry 3
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  PwC Recent research studiesindicate that the increasing usage of agrochemicals in both developed and developing nations is with the aim of attaining higher crop yields Higher instances of ban on Crop protection Chemicals in major regions like North America & Europe has slowed overall growth rate of agrochemicals in these markets Production of sustainable bio-based agricultural products is projected to increase due to increasing instances of ban on several pesticides/fertilizers Strong research funding by key manufacturers for new products is expected to drive growth in next 5 years Global growth of agrochemicals market can be attributed to increasing adoption in developing nations An Overview of Global Agrochemicals Industry The Agrochemicals Industry is valued at around USD 208.6 Bn (2020) and is projected to reach USD 246.1 Bn in 2025 growing at a CAGR of 3.4% Key highlights of the Global Agrochemicals Industry • Growing demand for food supply due to the rapid growth in the human population has triggered agricultural intensification during the last few decades • While North America is the fastest growing market, Asia Pacific is the largest market of agrochemicals • The industry highly competitive market with the presence of several multinational companies. Global Agrochemicals Market: Market Growth Rate, By Region, 2019 Source: Mordor Intelligence, PwC Analysis Trends in Global Agrochemicals Industry High Medium Low 4 March 2021 Ov erv iew of Agrochemicals Sector
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  PwC Increasing interest offarmers towards solutions like ‘product as a service’, mobile app based advisory, market information etc. Monetization of farming services such as spraying of agrochemicals and direct-to-farm delivery of agri-inputs Increasing focus on diversification into specialty nutrients products such as biofertilizers, bio- stimulants, micronutrients and organic products Evolving models like direct selling through FPOs and direct-to-consumer (D2C) platforms like e- commerce are impacting the entire ecosystem Increasing focus towards digital avenues has improved decision making and enhanced traceability across the value chain An Overview of Indian Agrochemicals Industry Indian Agrochemicals Industry was valued at around Rs. 42,000 Crore (~6 Billion USD) in 2019-20 and is expected to grow at a CAGR of around 8% till 2025 Domestic Consumption, 20,000 Exports, 22,000 Consumption vs. Exports in 2019 (Rs. Crore) Key highlights of Indian Agrochemicals Industry • Indian is the fifth largest producer and the fourth largest exporter of agrochemicals • Inadequate use of agrochemicals can lead to ~25-30% yield losses in medium to long term • Scientific, timely and sustainable use of agrochemicals is essential to ensure food security and enhance farmer income Consumption of Agrochemicals by Segments in India – FY’19 (MT, Technical Grade) Insecticide s, 36.3% Fungicides, 35.5% Herbicides, 15.0% Bio- pesticides, 11.9% Others, 1.4% Source: PwC Research Source: Statistical database, Directorate of Plant Protection, Quarantine and Storage Trends in Indian Agrochemicals Industry 5 March 2021 Ov erv iew of Agrochemicals Sector
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  PwC Challenges of IndianAgrochemicals Industry Indian Agrochemicals Industry is facing few challenges which can limit its growth in future Lack of awareness • Average farmer lacks scientific knowledge of agronomy and agrochemical usage • High reliance on recommendations by agrochemical dealers • Imbalance in agrochemical usage has been limiting the crop yields Regulatory challenges • Complex, costly and time-consuming registration process • Registration of new molecules remains a forte of large global players • Only 273 molecules registered in India, compared to 473 molecules in EU and 527 molecules in Japan • Limited efforts towards improving R&D infrastructure and registration process High reliance on generic molecules • Low adoption of specialty molecules due to unaffordability and awareness • Preference towards the use of time-tested genetic molecules • High R&D costs and complex registration process limiting improved products in the market 13.1 11.8 6 3.7 2.6 2.5 0.6 China Japan Brazil Asia World US India Agrochemical usage in major regions and countries – 2017 (kg/ha) Source: FAOSTAT Source: European Commission; FAMIC Japan; Ministry of Agriculture and Farmer Welfare; FAOSTAT • Only 0.6 kg/ha of agrochemical is used in India (6 times lower than the average usage in Asia & 4 times lower than global average) • High reliance on generic and bulky products imply significant gap between current and optimal usage Low usage of agrochemicals 6 March 2021 Ov erv iew of Agrochemicals Sector
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  Driving Growth & developingIndia as a Global Manufacturing hub 7
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  PwC Role of Agricultureand Agrochemicals in Economic Growth Agrochemicals will contribute to economic growth through industrial growth (direct) and improvements in agricultural output (indirect) 32.6 56.6 36.6 63.6 114.3 198.8 FY20 FY25 Agriculture and allied Industrial Services 3 Factorsdriving the CAGR of Agri & Allied Sector • Yield growth ~ 4–4.5% • Value growth ~ 3–3.5%% • Agriculture exports ~ 2–2.5% GVA – 183.5 GVA – 319 CAGR 9.3% Contribution of agriculture sector in economic growth (INR lakh crore) Role of agrochemicals in economic growth ~4-4.5%growth • Upto 30% improvements in yields or reduction in yield losses in major crops Yield growth Value growth Increasing exports ~3-3.5%growth • Promotion of high value and intensive agriculture ~2-2.5%growth • Exportable surplus and complianceto food safety norms • Direct incremental growth through enhancement in Agrochemical Exports ~ INR 16,500 crores • Direct incremental growth through increase in Agrochemical consumption ~INR 16,000 crores Growth in agriculture sector ~INR24 lakh crore 8 March 2021 Ov erv iew of Agrochemicals Sector
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  PwC Growth Drivers forIndian Agrichemical Industry Reforms related to trade, marketing, production, manufacturing, product registration, IPR and other policies will drive the growth of the agrochemicals industry and agriculture sector India as a global manufactur ing hub R&D Agricultural exports Policy environment Trade and marketing Agrochemical trade Consumer aw areness Technical interventions Production Foreign investments Small and regional players • Encouraging optimal usage of safer molecules for compliance w ith export & food safety norms • Improvements in MRL testing infrastructure to improve access and low er cost of testing • Promoting and incentivising capacity enhancement and exports oriented manufacturing • Relaxations in registration and licensing process • Pro-MSME industrial policies to promote sustainability and grow th of small players • Improvements in R&D infrastructure & related policies • Renew ed focus on becoming self-reliant and reducing import/manufacturing dependence on China presents great opportunity for India • Production linked Incentive scheme for agrochemical sector • Review of policies related to IPR protection • Public Private Partnership (PPP) led R&D models • Government led sourcing of improved products/technologies • Promoting pooling of R&D investments among small and regional players Public and private sector intervention to improve aw areness regarding scientific agrochemical usage and its benefits • Promoting digital technology for driving aw areness/interest • Promoting pay-per-use technology solution to increase adoption of technology • Single w indow clearance for agrochemical manufacturing, marketing and exports related approvals • Simplifying export registration process and compliances • Re-evaluation of banned and restricted molecules for export manufacturing 9 March 2021 Ov erv iew of Agrochemicals Sector
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  PwC An Overview ofAgrochemicals Manufacturing in India India is 4th largest producer of agrochemicals globally, and 50% of the growth witnessed by the agrochemical companies in India (in last 5-6 years) has been driven by exports Production* of Agrochemicals in India (in ‘000 MT) (* Approx. 43 Technical Grades) Key highlights • Both Production and exports of agrochemicals has grown substantially in last decade • India is net exporter of agrochemicals (13th largest) & exports stood at USD 1.8 Bn. in 2018-19 compared to USD 510 Mn. in 2010-11 • Production of agrochemicals has grown at a CAGR of ~5% in last 5 years • Regulatory ban has impacted the industry over last few years. For instance, the proposed ban on 27 products in 2020, is expected to impact the exports worth ~USD 0.5 Bn. Agrochemicals Exports from India (in ‘100 MT) Source: CARE Ratings, PwC Analysis Source: Statista, PwC Analysis Over last decade, India has strengthened Manufacturing ecosystem of Agrochemicals 179 186 188 213 214 FY 14 FY 15 FY 16 FY 17 FY 18 253 285 307 378 410 461 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 2009-10 2018-19 Technical Manufacturers Formulators Distributors Technical Grade Pesticides Mfg. Capacity Utilization ~125 ~145 ~800 ~1000 ~1.5 Lakhs ~2 Lakhs ~60 ~80 ~58% ~80% Source: FICCI, Industry Interactions 10 March 2021 Ov erv iew of Agrochemicals Sector
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  PwC We would needto rebalance our supply chain between China & rest of the world – India included - Leading Global Agrochemical Player India as a Global Manufacturing hub India can become “The Global Manufacturing Hub” for Agrochemicals due to number of favorable factors Sentiments from the Industry Low Cost Over past decade, India hasdeveloped a unique advantage by mastering low cost manufacturing of agrochemicals(driven by availability of labour, tax benefitsetc.) Manpower & Production Capacity India hassufficient availability of technically trained manpowerand unutilised production capacity to fulfil local aswell asglobal agrochemical demand SeasonalDomestic Demand & Low Usage India’sdomestic agrochemical demand isseasonal, hence providing an opportunity to cater to global markets. Moreover, agrochemical usage (kg/ha) isvery low in India compared to other countries, which can drive manufacturing in future Impact of COVID Post COVID, many global manufacturersare contemplating a move of shifting their production from China to India and other countries. Hence, to reduce existing heavy reliance on China Govt. Focus Govt. haslaunched variousschemes(Make in India, Start-up India, Production Linked Incentive Scheme etc.) in past decade, which will play a crucial role in transforming India into a global manufacturing hub India has unique advantage in catering to Domestic as well as Global Agrochemical Markets Govt. needs to speed-up the process of providing manufacturing/export licenses, so that India can become self sufficient - Leading Indian Agrochemical Player Govt. must help local manufacturers, so that India can scale/ strengthen its agrochemical manufacturing. - Industry Association Govt. needs to focus on strengthening local IPR laws to ensure viability of R&D investments in developing new molecules - Leading Global Agrochemical Player Owing to above factors & Industry Alignment, India can become a Global Manufacturing Hub for Agrochemicals in Future 11 March 2021 Ov erv iew of Agrochemicals Sector
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