Fertiliser makers turn focus on irrigated areas

When the talk of El Nino and deficient monsoon was doing the rounds in February, Rallis India Ltd decided to focus on cash crops cotton and sugarcane for its crop protection business to deal with a deficit rain scenario.

The company tweaked its strategy and as part of its contingency plan channelised its resources — by putting more staff and placing more products — targeting cotton growers in the North and sugarcane growers in Maharashtra with its herbicides, fungicides and package on practices, said V Shankar, Managing Director and CEO of Rallis India Ltd.

Cotton, planted in the irrigated belts of Punjab and Haryana and in the Ganganagar tracts of Rajasthan, is not dependent on the monsoon. At the same time, the sugarcane acreage was relatively higher in Maharashtra and adjoining districts of Karnataka, where good rains last year had prompted farmers to plant more. The strategy seems to have paid off and Rallis, a Tata enterprise, reported a growth of 27 per cent in net profits and 14 per cent in topline for the April-June quarter.

With the monsoon gathering momentum last week, concerns have eased in some quarters, though it is too early to assess the impact.

The monsoon has been a bit unusual this year. Besides a delayed start, a prolonged dry spell has created a drought-like situation in many parts – triggering anxiety in several quarters.

El Nino, resulting from the warming up of the sea surface temperature in the Pacific, that could trigger drought in the Northern Hemisphere including India, is now seen to be weak against initial fears of a severe one.

The seasonal rainfall, so far, is below normal by about 35 per cent and only a fourth of the 36 meterological sub-divisions have reported normal rains.

“The situation has changed and with revival of rains in the last one week, we are now seeing a pick up in sales,” said RG Agarwal, Chaiman of Dhanuka Agritech Ltd, an agrochemical maker.

This year Dhanuka has largely focussed its sales in irrigated areas, which account for close to 40 per cent of the total arable land in the country.

Recalling the performance in 2009, an El Nino year, during which Dhanuka’s sales grew 8 per cent, Agarwal expects the company to sustain sales at last year’s levels.

Dhanuka’s sales force has been actively positioning the brands actively and the company has enhanced the credit period for the dealers to 120 days from 90 days to tide over the situation.

Dhanuka plans to strengthen its presence in the eastern parts, the hotbed for the second Green Revolution and where rains have been good this year. Rajesh Agarwal, CEO of Insecticides (India) Ltd, said kharif sowing has been delayed by about two weeks and a clearer picture will emerge in a week to 10 days.

The impact of the rain deficit could be felt during the Rabi season more, he said.

Insecticides India, which expects sales to be 10 per cent lower for at least 5 to 10 of its 120 brands, is going slow on sourcing raw materials, Agarwal said.

The kharif season accounts for close to half of agri-input makers’ yearly sales.

Interestingly, fertiliser sales volumes are higher by about 25 per cent during April-June period this year, despite deficient rains. The higher sales volume has largely gone into replenishment of the stock pipeline with the trade. The higher off-take during Rabi last year had led to the depletion of the stocks.

“Higher sales don’t necessarily mean that the nutrient has gone into the soil,” said PS Gehlaut, Managing Director, India Potash Ltd, adding his company was going slow on imports and bringing in the nutrient as and when required.

Similarly, Zuari Industries Ltd, which largely caters to Maharashtra and Karnataka, expects its imports will be lower by about a fifth this year.

“We have been cautious in our approach and not been building inventories,” said Suresh Krishnan, Managing Director, Zuari Industries. Also, the company has modulated a bit of its production to deal with the sub-normal rainfall.

Sales of fertiliser, which peaked to 59 million tonnes in 2011-12, have been declining in the last two years. Timely arrival of monsoon and its spatial distribution is crucial for the fertiliser offtake.

Kapil Mehan, Managing Director of Coromandel Industries, said sales have started picking up with the revival of monsoon. “There is some movement as sowing has picked up,” Mehan said adding that overall sales would be higher by 10-15 per cent this year.

(This is part of a series on how India Inc is responding to the monsoon situation)