This article is taken from Agrow dated 22/05/20.

The proposal to ban 27 pesticides, including some widely sold active ingredients, by India's Ministry of Agriculture has left Indian companies stunned.

The proposal to ban 27 pesticides, including some widely sold active ingredients, by India's Ministry of Agriculture has left Indian companies stunned.

The proposal is shocking not only because the list includes some of the largest sold and exported active ingredients, many of them considered indispensable for Indian farmers, but also due to the timing of it when the industry is already dealing with the repercussions of the country-wide Covid-19 lockdown. "The Covid-19 pandemic has caused huge disruptions in the agricultural supply chain, coupled with labour shortage and in the absence of properly planned alternatives, crop yield, food security and farmers' livelihood in the country will be adversely impacted with this ban," says CropLife India.

Some of the purported reasons for the proposed bans on the ais - their being banned in other jurisdictions around the world and a lack of data - do not hold true for many of those ais, some industry analysts that Agrow spoke with pointed out. For instance, among the reasons for banning the fungicide, mancozeb, the order mentions that it has been banned in one country, namely, Saudi Arabia, which could hardly be called a cause for grave concern, they point out. Similarly, the insecticide, malathion, has been mentioned as having been banned in Syria and Palestine. "The order has certain factual errors, inconsistencies and incomplete claims; as per the data submitted by our member companies and other original registrants for some of these molecules," says CropLife India's chief executive officer, Asitava Sen.

The 27 pesticides are: the insecticides/acaricides, acephate, benfuracarb, carbofuran, chlorpyrifos, deltamethrin, dicofol, dimethoate, malathion, methomyl, monocrotophos, quinalphos and thiodicarb; the herbicides, 2,4-D, atrazine, butachlor, diuron, oxyfluorfen, pendimethalin and sulfosulfuron; and the fungicides, captan, carbendazim, dinocap, mancozeb, thiophanate-methyl, thiram, zineb and ziram. The draft order called "Banning of Insecticides Order 2020" was published in the government gazette on May 18th and it shall be taken into consideration 45 days from the date of publication.

While these products were duly registered in the country after scientific evaluation for their safety and efficacy by CIB & RC (Central Insecticides Board and Registration Committee) and they were further supported with more scientific data, as and when required by the regulatory body, CropLife India says. Farmer woes will increase during the approaching kharif season and at a time when locust attack is looming over the border areas of Punjab and Rajasthan, it cautions.

Impact on the industry

CropLife India cites a third-party study, which estimates that the proposed ais together constitute about 18-20% of the Indian market. Indian financial company IIFL estimates that the ais make up over 20% of the Indian agrochemical industry's annual revenues, including the domestic and export markets. IIFL estimates acephate and mancozeb to have the biggest shares among the domestic and export markets. It estimates the market for acephate at around Rs 21,000 million ($277 million), of which Rs 11,500 million ($152 million) comprise exports. For mancozeb, IIFL estimates the market at Rs 15,500 million ($205 million), of which Rs 11,000 million ($145 million) come from exports.

Most leading Indian companies will suffer the impact if the ban were to come into effect. For the biggest among them, UPL, although it has a broad portfolio, would be affected by a ban on most ais in the list. Some of the key ais for the company from a domestic as well as export perspective would be mancozeb, acephate and pendimethalin. In addition, it holds a substantial share of the domestic monocrotophos market.

The inclusion of some organophosphate ais, such as acephate, chlorpyrifos and monocrotophos would impact companies including Rallis India and Insecticides India. Rallis would further be impacted by the bans on pendimethalin, atrazine and captan. Mancozeb would also impact Indofil and Coromandel International.

Opportunity lost?

The disruption of manufacturing within China since February because of Covid-19 and the subsequent continuing disruption in logistics and transportation was seen as an opportunity for the Indian industry to grab some of China's export business. "Due to the unprecedented crisis of COVID-19, many countries want to shift their production bases and trade from China," says Mr Sen. He calls that a "remarkable opportunity" for India. "However, to capitalise on the situation, we need to present a positive and stable investment climate, coupled with a non-alienated regulatory framework," Mr Sen point out. He cautions that a sudden ban on 27 molecules generates negative sentiments for investments. "India is one of the largest producers and exporters for some of molecules listed in the draft order; and a ban will also lead to adverse impact on global supply chain," warns Mr Sen.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.