Doing Business in India

By Renee Targos

China’s COVID-19 shutdowns forced the rest of the world to look for alternative supply sources. The crop protection industry looked to India to help fill the gap.

Atul Churiwal, Owner of Krishi Rasayan Exports Pvt Ltd. says, “This has led to big growth of technical manufacturing units both with increasing capacity of existing manufacturers as well as many new companies that started green field projections. The trend is still continuing, and Indian exports are growing at a rapid pace.”

As the second largest exporter of agrochemicals globally, India continues to develop in research and development (R&D), infrastructure, contract research organizations (CROs), and improved logistics. However, as fast as growth took place in 2022, the country took a hit this year with oversupply in the market.

Last year, the agrochemical industry felt the impact of geopolitical issues, inflation, contracts on demand, and rising prices. However, Indian companies continued expansion to meet the needs of multinationals and still are charging forward to gain ground.

• A Challenging Year •

Indian companies are navigating through a tough year by continuing to build relationships with multinationals because of the improvements made during the COVID-19 pandemic.

Amit Talesra, Assistant Vice President, Meghmani Organics Limited, says, “This year has been a challenging year for the Indian chemical industry, which has been impacted by a multitude of global macroeconomic factors. It is important to note that the entire industry is facing a pile-up of high-cost inventory due to oversupply situations in the marketplace. This has put pressure on the revenue as well as margin across chemical companies.

“Overcapacity remains a key constraint on the price trend in China,” Talesra continues. “According to CCPIA’s data from January 2021 to September 2023, China’s pesticide industry has invested more than $9 billion in production capacity expansion. The new capacity for active ingredients was 560,000 MT and the new capacity of intermediates was 1.13 million MT. Many companies in China had been in a state of loss for a long period of time. The declining prices are clearly unsustainable.”

Multinationals learned from COVID to diversify their business, and with tense relations between China and the U.S., many U.S. as well as Latin American countries are looking to India for sourcing.

Abhijit Bose, Chief Marketing Officer at Tagros, says, “The global agrochemical market is about $75 billion, with 75% of the products being off patent and generic. India is fast emerging as a sourcing hub of post-patent products by Latin American companies.”

• India’s Expansion •

India’s crop protection industry growth is supported by its strong manufacturing base, government-funded infrastructure, sustainability, and R&D services. Here are four points you need to know when doing business in India.

Sourcing 

For those sourcing from India, Churiwal says, “Indian manufacturers generally have smaller capacity as compared to China. Therefore, companies look for sourcing from Indian manufacturers can continue on niche products where the prices per kilogram are higher.”

Another point to remember is many Indian manufacturers have invested in backward integration to become less dependent on China.

“India’s advancement in the agrochemical domain is significantly fueled by the backward integration of production processes,” says Talesra. “Indian firms have strategically invested in the production of off-patent molecules, thus reducing reliance on imports from China. With India being the preferred +1 source, many Indian companies are focusing on sustainable practices, increased capacities, and backward integration.”

Government Investment 

India has a coastline of more than 4,660 miles with proximity to shipping traffic transiting the Indian Ocean with high-capacity ports to handle large container ships. Major manufacturing plants are located in the coastal states of Gujarat, Maharashtra, and Tamil Nadu.

The Government of India is investing in various infrastructure projects to assist in export logistics.

“Massive investments are being made to boost India’s cargo capacities and to increase World bank – LPI Index,” says Bose. “LPI indicators show that India has improved the score in infrastructure, international shipments, logistics quality & competence and timelines.”

Bose says there are also plans to improve and create special road and rail corridors to handle containers to reduce time, carbon footprint, and costs.

The Government of India is industry-friendly policies to support business practices.

“There are encouraging government policies which shall be instrumental for successful business in India,” says Talesra. “The current government, recognizing the significance of the agrochemical sector, plans to introduce a production-linked incentive system. This scheme offers output incentives ranging from 10% to 20%, aiming to stimulate domestic manufacturing, generate employment opportunities, and bolster India’s global competitiveness.”

Sustainability

While the Government of India supports the agrochemical industry in its growth, it also promotes high standards for sustainability practices in the Indian agrochemical industry.

“The government is very active in promoting “Make In India” and thus promoting manufacturing activities in the country in a big way,” says Churiwal.  “The challenge is the pollution norms. The Indian government is making it tougher thus units where pollution control is not up to proper standards, could be an issue as their production could be hampered.”

As Indian companies serve a global market, manufacturers are looking to uphold global health, safety and environmental (HSE) standards.

“There is an increasing awareness about HSE compliances,” says Bose. Companies are not only complying with Government of India standards, but also “with the latest global HSE standards, which is critical for catering to global customers.”

As the Government of India works to create a healthy environment for growers and consumers, Indian manufacturers are adhering to regulations.

“Stringent laws and regulations govern chemical and pesticide manufacturing in India. These regulations meticulously oversee the import, manufacture, sale, transportation, and distribution of insecticides to ensure human and animal safety,” says Talesra. “The Central Insecticides Board and Registration Committee, operating under the Industries (Development and Regulation) Act of 1951, plays a crucial advisory role to the government. They evaluate insecticides based on toxicity, suitability for aerial application, dosage, frequency of use, and potential hazards to handlers. Such adherence to global standards fosters consumer trust worldwide and bolsters India’s reputation as a dependable source of premium agrochemicals.”

Talesra says Indian agrochemical companies are implementing various sustainability initiatives, such as:

• Developing environmentally-friendly formulations that minimize the use of hazardous chemicals and reduce environmental impact.
• Investing in research and development to innovate sustainable agricultural solutions.
• Making processes more transparent and reliable.

Research & Development

R&D is a growing sector in Indian agrochemical industry. Companies are investing in building GLP laboratories as a part of their expansion.  “Companies from LATAM, the EU and U.S. are coming for data generation at a reasonable cost and timeline,” says Bose.

Internally, Indian companies are spending approximately 4% – 5% of annual turnover on R&D, corporations are now focusing on investing in securing patents which includes products, processes, copyrights and trademarks, says Bose. “There is a greater awareness and compliance with intellectual property laws.”

• Heading into 2025 •

As MNCs and Japanese companies started focusing more in India for contract manufacturing since COVID-19, the large regional companies from Brazil, Argentina, and the U.S. are also increasing their partnerships with Indian manufacturing companies, says Bose.

Churiwal agrees. “2023 has been a challenging year for all technical manufacturers, be it India or China, with huge inventories all over the world. However, I see a revival happening from the later part of 2024 with the demand picking up. Indian companies have aggressively tied up with many MNC for long-term contracts and are ready to face the challenges from China.”

The challenges from China are forcing MNCs to continue to look for alternative sources.

“Many MNCs are collaborating with Indian companies, making supply agreements, doing contract manufacturing in various projects,” says Talesra.  “This will help Indian companies to utilize the expansion done in the recent past. The imposition of duties by the U.S. on Chinese goods have made U.S. importers to look for an alternative source. India had been at an advantage and had been seen as a reliable source to meet the requirements.”  •

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