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Pesticide Industry: Technology Trends and Opportunities
Soumitra Biswas, Adviser, Technology Information, Forecasting & Assessment Council. Sangeeta Baksi, Principal Scientific Officer, Technology Information, Forecasting & Assessment Council. There is an ardent need for making the vibrant downstream industries capable of producing worldclass end products through process intensification to strengthen its presence in export as well as domestic market segments. The article emphasises on various technology trends and opportunities in the pesticide industry in India.

The dynamics of chemical industry in terms of creation and growth of new ventures, reallocation of its resources, generation of more efficient processes and products and modernisation of infrastructure and human resources greatly depend on R&D utilisation capabilities. It has been strongly felt that there is an ardent need for making the vibrant downstream industries capable of producing world-class end products through process intensification to establish the strong presence of Indian chemical industry in export as well as domestic market segments.

Towards meeting such objectives, India needs extensive R&D inputs to the chemical sector to strengthen its industrial growth, innovation and competitive performance in order to meet the challenges for positioning India on the global map as the future destination for R&D and industrial investments. In addition to industrial importance, competitive R&D and innovations in Indian chemical sector would also cater to the needs evolving for Indian society by exploiting future global opportunities. Efforts have been made by various groups in recent years to study the Indian chemical industry from the perspectives of its growth and global competitiveness. However, deliberations and analysis on short & long term impacts of R&D on Indian chemical industry have been very little so far.

Considering the importance of the sector, a specialised study titled ¬Indian Chemical Industry - Technology Imperatives & Business Opportunities  was commissioned by TIFAC jointly with the Indian Chemical Council (ICC), Mumbai. The study aimed to identify and address the technology gaps in Indian chemical industry to catch up with the global trends, identify economically attractive routes of inducting cutting edge technologies, to make India global R&D destination, strengthen the industry-academia linkages etc. The study has encompassed three sub-sectors of chemical industry namely, speciality chemicals, knowledge chemicals & basic chemicals.

Knowledge Chemicals
The knowledge chemicals segment consists of highly differentiated chemical and biological substances used to bring in specific and targeted outcomes in humans, animals, plants and other life forms. The segment is characterised by a high degree of research, intensity of intellectual capital and deployment of skilled manpower. The segment comprises three major sub-segments namely, agrochemicals, pharmaceuticals and biotechnology with pharmaceuticals being the largest revenue generator.

This segment relies extensively on R&D for new products. Most of the R&D is capital intensive and the scale of operations is important to provide the financial strength and access to global markets. Patents and the presence of appropriate regulations to protect intellectual capital are key considerations for players wishing to enter new markets.

Companies in this segment have adopted R&D both as a means to achieve product leadership as well as to coordinate process innovations and realise savings in manufacturing costs. R&D levels in leading companies within this segment are between 5-15 per cent of sales.The technology trends and opportunities for the pesticides industry as an important segment of knowledge chemicals are delineated in the subsequent sections.

Global Pesticides Industry - Emerging Trends
The global market for chemical pesticides has undergone rapid changes over the last decade; this can be partly explained by greater efficiency of pesticide use as a result of improvements in pest management practices and technology.

Factors such as increased adoption of Genetically Modified (GM) crops and Integrated Pest Management (IPM) techniques aimed at both improving pest management practices, and in some cases targeting a reduction in pesticide use have also hindered the growth in demand for chemical pesticides. The trends that have significantly impacted the global pesticides industry are appended in the following pages.

Increased Demand for Food Safety and Quality
Although use of pesticides significantly contributes towards enhancing agricultural production, failure to adhere to the safety norms at various stages of pesticide production and use cause serious health risks to humans, animals, or the environment with regards on-farm ingestion by workers, discharge of toxic chemicals into the air and water, and consumption of foods that contain pesticide residues by consumers.

Laboratory studies show that residual pesticides in food can cause health problems, such as birth defects, nerve damage, cancer, and other effects that might occur over a long period of time. However, these effects depend on the toxicity of the pesticide and the extent of exposure. With increased consumer awareness about the negative impact of pesticides on human health, consumers increasingly demand that environmental and social considerations in agriculture be taken into account.

Demand for food safety and quality in also evident from tightening safety regulations on import of food products in various countries (with regulations on the quantity of pesticide residues). High level of pesticide residues often act as a constraint in agricultural exports. Food processors and retailers are also setting higher standards regarding product quality. Increasing awareness about the detrimental effects of pesticides on safety of food crops and environment coupled with the rapid growth of organic products has enhanced the public awareness about the alternatives to chemical pesticides such as biopesticides, integrated pest management practices, etc.

Increasing Cost of R&D
Cost of developing new Active Ingredient (AI) for pesticides has increased considerably over the past few decades. According to a study by Phillips McDougal, total cost of discovering, developing and registering a pesticide has increased from USD 152 million in 1995 to over USD 256 million during 2005-08. The major contributors to the cost are field trials (21.2 per cent of the cost) which involve long drawn test of pesticides on several crops across number of agro-climatic zones, followed by chemical synthesis (16.4 per cent), which involves synthesising large number of molecules and developmental chemistry (14.1 per cent), which involves optimising process at pilot plant for its scale up.

Moreover, lead time for product commercialisation (lead time from synthesis to sale of product) has increased to 10 years. This indicates the rise in complexity and volume of data required by regulatory bodies and the time taken to develop the data.

Adoption of GM Crops
For thousands of years farmers and plant breeders have been changing crop plants to improve characteristics such as size, resistance to disease and taste. Plants, which grow well and have a higher yield or taste better are selected and bred from. This is still the most widely used technique for developing new varieties of a crop and is limited by natural barriers, which stop different species of organisms from breeding with each other.

Genetic modification is very different to these traditional plant breeding techniques.Since the introduction of GM crops in 1996, the production worldwide has grown from covering 1.7 mha (4.3 million acres) in 1996 to 125 mha (308.9 million acres) in 2008. Owing to the benefits of these crops, adoption of GM crops has increased to 13.3 million farmers in 25 countries in 2008 from 7 million farmers in 18 countries in 2003.In 2008, the US followed by Argentina, Brazil, India, Canada, and China were the principal adopters of biotech crops, with the US retaining its top world ranking with 62.5 mha (50 per cent of global biotech area).

Adoption of Biopesticides
Biopesticides are certain types of pesticides derived from natural materials as animals, plants, bacteria and certain minerals. For example, canola oil and baking soda have pesticidal properties and are considered biopesticides. Biopesticides are becoming increasingly popular and are safer than traditional chemical pesticides. As against chemical pesticides, biopesticides are inherently less harmful; and are more target specific than chemical pesticides.

Moreover, they are often effective in small quantities and decompose quickly and do not leave problematic residues. As an integral part of Integrated Pest Management (IPM) programmes, biopesticides can greatly reduce the use of conventional pesticides without affecting the crop yields.

With such advantages offered by biopesticides, their usage is being promoted worldwide. Biopesticides are expected to grow at a 15.6 per cent CAGR from USD 1.60 billion in 2009 to USD 3.30 billion in 2014. In 2005, biopesticides accounted for about 2.5 per cent of the total pesticide market; this has grown to about 4.2 per cent by 2010. North America consumes the largest share (40 per cent) of the global biopesticides production followed by Europe and Oceanic countries accounting for 20 per cent each. The R&D status of biopesticide may be assessed based on the publications and patents. India has 3.55 per cent share of the biopesticide related patents worldwide.

From Agrochemical Companies to Agriculture Company
Major agrochemical companies in the world are now reorienting themselves as ¬agriculture-company , focused at chemistry and biotechnology based innovation to deliver better yield and quality of food, fibre, animal feed and energy. The companies namely, Bayer, Syngenta, Monsanto, DuPont and Dow Agro Sciences have both pesticides (53 per cent share of the market) and seeds (49 per cent share of the market) in their product portfolio to offer to the agricultural community. This orientation contributes to a broader perspective over the entire plant production system, because it integrates pesticide and seed technology development.

Technology Trends
Technology has been the key success factor in the knowledge chemicals industry as it provides a sustainable competitive advantage. Technology trends in this industry can be mapped at two stages: research & development and production. Globally companies focus on high-end specialty products and tend to dominate the market for patented new molecules.

Typically global pesticides companies spend 8-10 per cent of their turnover on R&D. The research activities encompass discovery of new agrochemical molecules, developmental and regulatory processes associated with them, which aim at determining the relative efficacy of the product, whilst ensuring that the new active ingredient satisfies the regulatory provisions to demonstrate that the product is safe from both human and environmental viewpoint.

In addition, the agrochemical industry undertakes a significant amount of R&D aimed at maintaining and developing the existing product portfolio. Some of these studies are undertaken to extend the product application to other crop-pest situations or to other country markets.

Main phases of R&D can thus be broadly classified as below:
• R&D for new active ingredients
• Development of new active ingredients, involving long-term toxicity tests, meeting regulatory requirement, registration and launch of a product in a major crop market.
• Post-launch development

Re-registration/registration maintenance: activities or studies to be undertaken in response to the requirements of registration authorities
Others include activities required to satisfy regulatory requirements for registration in other countries, and line extensions of existing products.

• Product monitoring and stewardship, relates to the research associated with undertaking the requirements of the regulatory authorities  post-introduction.

In addition, a significant level of investment is made by generic companies in the development of off-patent products. Total cost of research (comprising chemical synthesis, biological testing, toxicology/ environmental chemistry etc.) has increased from USD 72 million in 1995 to over USD 85 million during 2005-08. Moderate increase in cost of research has been due to reduction in cost of biological testing and marginal increase in cost of chemical synthesis. Adoption of latest technologies such as combinatorial chemistry, rapid throughput screening and genomics are the primary reasons for cost saving.

Cost of development (comprising chemical development, field trials, toxicology tests and environmental test) has gone up manifold from USD 67 million to USD 146 million. The major contributors to escalation of developmental cost are chemical tests as well as scaling up and field trial. Cost of registration has also doubled from USD 13 million to USD 25 million between 1995 and 2005-08; the largest element of this increase being the internal costs for preparing information dossiers and managing these operations.

Conventional chemistry, biology & biochemistry, modern technological tools such as genomics, high-throughput screening and bioinformatics are extensively used in identifying new lead structures. Besides research on new chemical compounds, companies are also developing new mixtures or innovative formulations of existing products in order to broaden their applicability (in additional crops), and to make products easier to handle.

Many of the global companies are focussing on genetic engineering to develop insecticidal and/or resistant crop traits. Over the last few years, R&D of seeds and traits has received greater importance. During the last 9 years, while expenditure on agrochemicals has increased by 3.9 per cent per annum, R&D expenditure on seeds has grown by 11.5 per cent every year.

R&D Scenario in India As Indian companies primarily focused on applied research and concentrated on producing generic and off-patent products, R&D expenses by Indian companies have been at approximately 1 per cent of their turnover. However, with the onset of the product patent regime in India since 2005, the Indian companies would need to enhance R&D efforts to meet the challenges from MNCs. The R&D efforts of Indian companies encompass more efficient processes for the existing products, substitution of imported raw materials and new formulations of generic products. Research activities on improving formulations for better stability and increased shelf life to suit wide range of agro-climatic conditions (e.g. stronger sunlight, which tends to degrade many products) are prevalent in India. The industry has achieved success in developing advanced processes for several products viz. monocrotophos, neem extracts, butachlor, anilphos, adifenphos, pheromones, etc.

The Indian industry lacks in development of new active ingredients. The companies suffer from weak financial muscles to absorb the cost of technology failure. Moreover, majority of Indian players expect a quick return on their investment. As a result, the industry is inclined towards research in the area of generics rather than investing on discovery of new active ingredient. The industryacademia collaboration has been minimal in the area of chemical pesticides. While agro-biotechnology has benefited from some collaborative research between industry and national laboratories, the full potential has not been exploited. The access to foreign markets by Indian manufacturers is restricted through registration procedures stipulated by different countries. A company desirous of marketing a generic product in a new market is required to obtain registration for that product in each target market necessitating significant investments (USD 10-15 million per registration in most markets) and long gestation periods of 4-5 years (for field trials, if required). According to the Pesticides Manufacturers  and Formulators  Association of India (PMFAI), one of the greatest hindrances to growth of the indigenous agrochemical industry is its inability to register its product globally due to prohibitive cost.

Agrochemicals Scenario: Global Forecast (2010-2015)
Due to increasing population and decreasing land availability, the global agrochemical market is expected to grow from USD 134 billion in 2010 to USD 223 billion in 2015, registering a high CAGR of 10.6 per cent from 2010 to 2015.

Market growth is also driven by the use of agrochemicals in energy crops for the production of biofuels, which are rapidly gaining in importance over fossil fuels. Programmes such as Integrated Nutrient Management (INM) and Integrated Pest Management (IPM) are now in place to minimise risks from agrochemicals related to health, economy, and environment. Herbicides and insecticides will remain the largest product types due to their extensive use on the major field crops that account for most pesticide consumption.

However, fungicides and other pesticide products are expected to register faster growth through the forecast period. Fungicide value gains will derive from a continuing move away from sulfur and other commodities in favour of formulated synthetic fungicides. Moreover, while herbicide and insecticide volumes have been affected by the use of Bacillus thuringiensis (Bt) and other biotechnologyderived products, fungicide usage has not suffered from such developments.