PESCTICIDES AND CEMENT

INDUSTRY
3
General Summary:
o At international level the Pesticides sector is characterized by what may be
called monopolistic competition, while the Cement industry is dominated by a
few big companies and is patently cartelized.

o International anti-competitive case studies indicate that the main emphasis

seems to be the cartel like behavior of cement majors with the principal
objective of market sharing and price fixation while there is some monopoly
behavior particularly in the case of high tech seed industry in Pesticides case.

o India is both a dominant producer and consumer in the Insecticides segment of

the Pesticides industry and further firm level analysis indicates that none of the
M&A cases qualify for action under Section 5 of the Indian Competition Act,
2002.

o More detailed analysis indicates that the degree of competition in the Pesticides
industry has been increasing in that the concentration levels in terms of sales
has been decreasing over the nineties.

o There is some limited evidence that mergers in the Pesticides sector in high tech
seed segment have been used for substantially increasing market shares.

o There seems to be some presumption that the M&As in cement industry which
fall under the ambit of Section 5 of the Competition Act provisions on
combinations are non-competitive in that the merging firms have a very similar
average cost structure so that they could not have been guided only by
efficiency considerations. However, there is no clear indication that these
mergers have led to any substantial market share increase over time.

o It is clear that current data is available only at the firm level. However, most
firms are multi-product and firm level data cannot be used efficiently to
delineate the relevant product for which competitive behaviour has to be
defined as per Section 2(t) of the Competition Act, 2002. This also creates a
problem in defining the relevant geographic area as specified in Section 2(s)
of the Act. Hence, it seems necessary to work with specific product and plant
level data bases. These are not publicly available. Existing studies tend to look
at concentration, market shares etc. at the national industry level and thus
seriously understate the possibility of anti-competitive behaviour of firms.

o In this study cost-audit data provided by the Ministry of Company Affairs is

used. Particularly in the case of the Cement industry the data allows us to study
competitive behaviour at both product market and relevant geographic

market levels. Our study indicates that there is some evidence of price fixation
and market sharing agreements in the sense of Section 3(3)(a) and 3(3)(c) of the
Competition Act. This however, merits further investigation.

Industry Structureof pesticides

In India, there are about 125 technical grade manufacturers (10 multinationals), 800
formulators, over 145,000 distributors. 60 technical grade pesticides are being
manufactured indigenously. Technical grade manufacturers sell high purity chemicals
in bulk (generally in drums of 200-250 Kg) to formulators. Formulators, in turn,
prepare formulations by adding inert carriers, solvents, surface active agents,
deodorants etc. These formulations are packed for retail sale and bought by the
farmers.
The Indian agrochemicals market is characterized by low capacity utilization. The total
installed capacity in FY09 was 146,000 tons and total production was 85,000 tons
leading to a low capacity utilization of 58%. The industry suffers from high inventory
(owing to seasonal & irregular demand on account of monsoons) and long credit
periods to farmers, thus making operations working capital intensive.
India due to its inherent strength of low-cost manufacturing and qualified low-cost
manpower is a net exporter of pesticides to countries such as USA and some
European & African countries. Exports formed ~50% of total industry turnover in
FY08 and have achieved a Compounded Annual Growth Rate (CAGR) of 29% from
FY04 to FY08.
Key Segments
Insecticides: Insecticides are used to ward off or kill insects. Consumption of
insecticides for cotton has come down to 50% from 63% of total volume after
introduction of BT cotton.
Fungicides: Fungicides are used to control disease attacks on crops. The growing
horticulture market in India owing to the government support has given a boost to
fungicide usage. The market share of fungicides has increased from 16% in 2004 to
20% in 2009.
Herbicides: Herbicides are the fastest growing segment of agrochemicals. Their main
competition is cheap labor which is employed to manually pull out weeds. Sales are
seasonal, owing to the fact that weeds flourish in damp, warm weather and die in cold
spells.
Bio-pesticides: Bio-pesticides are pesticides derived from natural substances like
animals, plants, bacteria and certain minerals. Currently a small segment,
biopesticides
market is expected to grow in the future owing to government support and
increasing awareness about use of non-toxic, environment friendly pesticides.
Others: Plant growth regulators, Nematocides, Rodenticides, Fumigants etc.
Rodenticides and plant growth regulators are the stars of this segment.

IMPACT OF PESTICIDES
Use of pesticides in India began in 1948 when DDT was imported for malaria control and BHC
for locust control. India started pesticide production with manufacturing plant for DDT and
benzene hexachloride (BHC) (HCH) in the year 1952. In 1958, India was producing over 5000
metric tonnes of pesticides. Currently, there are approximately 145 pesticides registered for use,
and production has increased to approximately 85,000 metric tonnes. Rampant use of these
chemicals has given rise to several short-term and long-term adverse effects of these chemicals.
The first report of poisoning due to pesticides in India came from Kerala in 1958 where, over
100 people died after consuming wheat flour contaminated with parathion. Subsequently several
cases of pesticide-poisoning including the Bhopal disaster have been reported.

Despite the fact that the consumption of pesticides in India is still very low, about 0.5 kg/ha of
pesticides against 6.60 and 12.0 kg/ha in Korea and Japan, respectively, there has been a
widespread contamination of food commodities with pesticide residues, basically due to non-
judicious use of pesticides. In India, 51% of food commodities are contaminated with pesticide
residues and out of these, 20% have pesticides residues above the maximum residue level values
on a worldwide basis. It has been observed that their long-term, low-dose exposure are
increasingly linked to human health effects such as immune-suppression, hormone disruption,
diminished intelligence, reproductive abnormalities, and cancer. In this light, problems of
pesticide safety, regulation of pesticide use, use of biotechnology, and biopesticides, and use of
pesticides obtained from natural plant sources such as neem extracts are some of the future
strategies for minimizing human exposure to pesticides.

Agricultural development continues to remain the most important objective of

Indian planning and policy. In the process of development of agriculture, pesticides
have become an important tool as a plant protection agent for boosting food
production. Further, pesticides play a significant role by keeping many dreadful
diseases. However, exposure to pesticides both occupationally and environmentally
causes a range of human health problems. It has been observed that the pesticides
exposures are increasingly linked to immune suppression, hormone disruption,
diminished intelligence, reproductive abnormalities and cancer. Currently, India is
the largest producer of pesticides in Asia and ranks twelfth in the world for the use
of pesticides. A vast majority of the population in India is engaged in agriculture and
is therefore exposed to the pesticides used in agriculture. Although Indian average
consumption of pesticide is far lower than many other developed economies, the
problem of pesticide residue is very high in India. Pesticide residue in several crops
has also affected the export of agricultural commodities in the last few years. In this
context, pesticide safety, regulation of pesticide use, proper application
technologies, and integrated pest management are some of the key strategies for
minimizing human exposure to pesticides. There is a dearth of studies related to
these issues in India. Therefore, the thrust of this paper was to review the
technology of application of pesticides in India and recommend future strategies for
the rational use of pesticides and minimizing the problems related to health and
environment.