• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Aarati Krishnan

We have never seen the lack of patent protection as a major hurdle in launching new products. In fact, we hold Indian registrations for almost the entire complement of products held by our parent and generally do not hold back any brand from our parents' portfolio.

Excerpts from the interview:

You are focused on herbicides, which is a relatively small segment of the Indian crop protection market. Is the expected shift from conventional insecticide products to herbicides happening?

India is still an insecticide-dominated market. But we have seen the herbicide market grow from 6-8 per cent of the total market to 14-15 per cent. As we see it, this growth will continue.

Herbicide usage will be driven by three factors. Farm labour costs are rising. Availability of labour is a real problem. And migration of labour from the rural to urban areas is shrinking the rural labour force.

However, there are uncertainties about how fast this substitution will happen and in which markets it will happen. This will hinge largely on farmer economics.

For instance, though we put in around four years of effort in the soybean market, herbicide usage in soybean has not caught on. This is because the final prices of soybean have been under pressure from imports. Herbicide use will thus vary depending on how the economics of each crop look in any particular year.

Q Are you comfortable with not being present in the largest segment of the domestic market, that is, insecticides?

We are focused on three areas-herbicides, seeds and traits. These are the global areas of strength for our parent-Monsanto Inc. But we are increasingly moving away from a product-specific approach to one focusing on "crop solutions." That is, rather than launch insecticide or herbicide products on a one-off basis, we try to offer whatever it takes to cater to a single focus crop. We have identified rice, wheat, cotton ,soybean and corn as the key focus crops.

Will you hasten the pace of new product launches after 2005 when the new patent regime takes effect protecting you from copying by competitors?

We have never seen the lack of patent protection as a major hurdle in launching new products. In fact, we hold Indian registrations for almost the entire complement of products held by our parent and generally do not hold back any brand from our parents' portfolio.

There are two reasons to this. Even without patent protection, we have managed to establish a following among farmers and hold on to our market shares for our brands. For instance, Machete, our butachlor formulation, has 60-70 competing products, but we have still managed to retain a reasonable market share.

This is attributable to two factors. First, we work at the farmer's level to create demand. Two, we also provide after-sales service. Every farmer who has a problem with our product or doubts about has access to our executives through a helpline. We score against companies, which sell products to their distributors and walk away. Because of these advantages we are sure that even if launch our products in a no-patent environment, we will make money on them.

Q There has been a lot of pricing pressure on agrochemicals. How much does branding and a focus on herbicides, help you?

We are constantly under pricing pressure, whichever the product or segment. Given the number of players in the Indian market, prices will remain soft in future as well. Take a product like Machete. Though we have been selling for 30 years now, we still have no opportunity to raise prices on this product. This is why cost management is important. We have been working at cutting the costs of our operations and of our raw materials. For now, the stability of the rupee will help us because all of our technical material for herbicides is sourced from abroad.

India is a low cost sourcing base for technical grade agrochemicals. Yet you prefer to source your technical material from your parent's plants overseas. Why?

All of our sourcing is out of world-class plants run by our parent. For instance, for butachlor or alachlor, Monsanto would operate just one plant to service all of its operations spread across countries. Given the economies of scale from this arrangement, I cannot hope to match those costs if I set up a manufacturing facility here. The only option would be to move the entire plant to India, which is a strategic decision.

Secondly, we are particular not only about the active ingredients in our products, but also about the profile of the inactive ingredients. For instance, we may get butachlor of 95 per cent purity in the Indian market, but I would be worried about the five per cent of impurities in that product. Yes, there are outsourcing possibilities from India. We are using India as an export base for our seeds business because we believe we have competitive advantages in this business in India.

Q Do you think India has the potential to emerge as a base for agrochemical research?

India is a great place for applied research. But as to basic research, that is, finding new molecules, I think history is a good indicator. Of the 150-odd products that have been registered in the country, there is none which has been registered first by an Indian company. Basic research calls for a lot of investment and a great deal of patience, apart from good R&D capabilities. Yes, India has definite strengths in applied research-finding new uses for a product, finding new formulations of a product or new delivery systems for a product. When it comes to biotechnology, there are possibilities. We are using our Indian research center at Bangalore for bioinformatics, crop transformation and innovations in product chemistry.

Q After your successful experiment with marketing Bt cotton last year, would you look to bringing products such as Roundup Ready soybean into the Indian markets?

The Bt cotton approval has given us a clear path forward for other product introductions. The Bt cotton introduction has helped us in that it has helped establish a set procedures, rules and processes for introduction of new biotech products into the country. We can now use our experience with Bt cotton, to explore which of our global products will be the most suitable for introduction in the Indian market. But every new product introduction will require a minimum gestation period of at least 5 years, for field trails and so on.

In the first year of marketing Bt cotton, the monsoon has been quite erratic. Isn't this a big setback to your efforts to expand your biotech product portfolio in the country?

I don't think it is true to say that farmers have had a negative experience with Bt cotton. Yes, there were problems in very specific pockets. But these problems were linked to moisture-stress and equally impacted Bt and non-Bt cotton. But by and large, the feedback from farmers has been positive. Another factor is that the pest build up has been low in the current year. This has made the difference in yields between Bt and non-Bt cotton less apparent. But it would be an exaggeration to say that farmers are disappointed with Bt cotton.

But don't the higher costs of planting Bt cotton enhance a farmer's investments and thus, his risks?

Far from it, we are lowering the risk for the farmer significantly. Ask the farmer, and he will tell you that the single biggest risk for him, is not non-availability of water, but the need to protect his crops from pest attacks. The bulk of his investments are made in pesticide sprays, which he saves through Bt cotton.

Secondly, whenever we have visited fields, we have found that a farmer takes extra care of the portion of the field where he has planted Bt cotton, because his investment there is precious. He makes sure that if water is limited, he first uses it on his Bt crop.

How has the offtake of herbicides been in the current year?

It has been a bad season, but we have not been too impacted by the failure of the monsoons. The bulk of our products are targeted at crops that are irrigated. We have had a few setbacks in select soybean areas and plantation crops, but our seeds business and our herbicides business in other markets, have helped compensate for this. Basically it helps that I don't operate in the 75 per cent of the market (the insecticides segment) that the industry operates in. As long as there is a limited impact on my 15 per cent of the market and I get some volumes from my seeds business I am comfortable.

Q Globally, Pharmacia has divested its 85 per cent stake in Monsanto US(your parent) to the public shareholders. How does this impact you ?

Nothing changes as far as we are concerned. We have never depended on Pharmacia to fund our research programme, only on Monsanto Company US. We used to have a half a billion dollar research budget and this remains in place. We will continue to have access to our parent's knowledge and international experience and to their product pipeline.

Last year, Monsanto Company US generated $300 million in surplus cash and it hopes to generate surplus cash from operations in the current year as well. Therefore there appears to be no reason why we may have to look outside for funding our research.

Send this article to Friends by E-Mail
Comment on this article to BLFeedback@thehindu.co.in

Stories in this Section
BHEL bags order for steam turbine generator set

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line