Inputs for agriculture such as pesticides and herbicides have turned costlier, thanks to the weakening rupee. Agro-chemical makers such as Dhanuka Agritech and Insecticides (India) Ltd have hiked their product prices by 10-15 per cent ahead of the kharif sowing season. This is mainly since the drop in the rupee value has made their chemical inputs costlier.

“It is impossible to match last year's product prices. There's no way we can absorb the impact of the weakening rupee,” said Mr Rajesh Aggarwal, Managing Director of Insecticides (India) Ltd (IIL). The company has recently increased prices by an average of 10-12 per cent across its product range and plans to implement another round of price hike sometime in June-July, Mr Aggarwal said.

The import dependency for various inputs such as intermediate chemicals and technicals ranges as high as 30-40 per cent for many agro-chemical players.

Besides the rupee slide, the hike in prices by Chinese chemical makers is also hurting Indian players.

“Our Chinese suppliers have hiked prices as high as 50 per cent for some intermediate chemicals, which is affecting us,” said Mr M.K.Dhanuka, Managing Director, Dhanuka Agritech Ltd. The company imports about 25 per cent of its raw materials to make pesticide and herbicide formulations.

The hike in excise duty in the Budget has already been passed on to consumers resulting in higher prices. Even multinationals such as Syngenta are feeling the heat of a weakening currency.

“Ideally we will like to pass on the costs to our customers, but recognising the fact that our customers profitability is also impacted because of the inputs cost going up and output prices under pressure, we will evaluate and selectively pass the cost of goods increase, but this is certainly not sustainable for us,” said Mr Parveen Kathuria - Head of Sales at Syngenta India. “We believe everybody is evaluating this option and will decide in the next couple of days or so,” he said.

However, the agrochemical makers are divided on the impact of the price rise on consumption of their products. “With the price increase and input cost going up, consumption is bound to come down and ultimately the overall production of crop protection products for the country is likely to be affected,” said Dr. K C Ravi, Head of Commercial Acceptance and Public Policy, South Asia, Syngenta.

But, Mr Dhanuka felt that there will be no big impact of such price rise on consumption as farmers are getting better realisation for their crops and they would continue to purchase pesticides to safeguard their crops from pest and diseases. “However there is always some impact on the consumption pattern due to such price rise,” he said.

(This article was published on May 29, 2012)
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