12/16/2009

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Value Added Fertilisers:
Marketing Challenges & Strategies
Sovan Chakrabarty
President & Business Head
(Shriram Fertilisers & Chemicals)
DCM Shriram Consolidated Limited
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Flow of Presentation
Magnitude of food insecurity
Indian agriculture at crossroads
Productivity constraints before Indian Agriculture
Initiatives addressing the productivity challenge
Value added fertilisers productivity & value
enhancer
Value added fertilisers Marketing Challenges
Strategies & Path forward
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Magnitude of Food Insecurity
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2009 World Hunger Map
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Number of Undernourished in the World
Non-affordability
bigger issue than
non-availability
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World Food Demand Supply
A third mouth to feed by 2050
World population projected at 9.1 bn from the current
6.8 bn
70% more food production required by 2050
Demand for cereals projected at 3 bn MT
Current production at 2.1 bn MT
90% of the growth in crop production to come
from higher yield and increased cropping
intensity
Source: FAO
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7
Global Food Security Status
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6
8
10
4
12
14
6.8 bn people
2.1 bn MT cereals 3 bn MT
cereals
9.1 bn people
World Arable Land
Source: FAO
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India Hunger Map (IFPRI) 2008
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India Food Security Status
Source: Census of India, Fertiliser Statistics, GoI Economic Outlook for 2009-10
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India Food Demand Supply Projection
Source: Working paper 209, ICRIER, March 2008
Projected Supply Demand Balance of Total Cereals in India
2.6% CAGR 1.5% CAGR
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Indian Agriculture at
Crossroads
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Indian Agriculture A Snapshot
Most populous nation by 2030 1.35 bn
74.7% population live in Rural India
64.3% of Rural population depend on agriculture (39.4% Self
Employed and 24.9% Agricultural Labour)
Fragmented land holding
Average land holding size at 1.06 ha in 2002-03 from 1.34 ha in
1991-92 and 1.67 ha in 1981-82
70% of marginal (< 1 ha) & 16% small holdings (1 to 2 ha)
Increasing land degradation
57% of land is under some form of degradation
Land diversion
Rapid urbanization, Special Economic Zones
Irrigation
39% of cultivated area (Total area: 192 mn ha)
Source: Census of India 2001, SAARC Coastal Management Center
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Indian Agriculture Growth
Source: Economic Survey 2008-09, GoI Economic Outlook for 2009-10
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Stagnating Gross Cropped Area
Source: FAI Statistics 2007-08
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Stagnating Area under Irrigation
Source: Fertiliser Statistics 2007-08
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Diminishing Response from Fertiliser use
Source: Fertiliser Statistics 2007-08
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The Productivity Challenge
Rapid productivity growth needed to meet the food requirement
0
500
1000
1500
2000
2500
3000
1991 2001 2002 2003 2004 2005 2006 2007
K
g

/

h
a
Wheat
Rice
Cereals
Oil
Seeds
Pulses
Source: Economic Survey of India 2007-08
Productivity Constraints before
Indian Agriculture
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Productivity Constraints
Low seed replacement rate
Absence of comprehensive, location / crop specific
nutrient recommendations
Lopsided and imbalanced fertiliser use
Inadequate use of secondary & micro nutrients
Lack of dependable soil & water testing facility
Limited use of organic sources
Low level of farm mechanisation
Ineffective extension services
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Lopsided Use of Fertilisers
Current NPK ratio is strongly in
favour of N and higher than the
magic ratio of 4:2:1
It is difficult to get to the origin of
this magic formula but, it does not
take into account the real factors
that determine fertiliser needs of
any crop.
Crop, Variety & Yield potential
Root system of the plant
Soil inherent fertility status
Nutrient uptake pattern
Nutrient use efficiency
N P2O5 K2O
1951-52 7.9 0.9 1.0
1961-62 8.9 2.2 1.0
1971-72 6.0 1.9 1.0
1981-82 6.0 1.9 1.0
1991-92 5.9 2.4 1.0
1992-93 9.5 3.2 1.0
2001-02 6.8 2.6 1.0
2005-06 5.3 2.2 1.0
2006-07 5.9 2.4 1.0
2007-08 5.5 2.1 1.0
N:P2O5:K2O
Year
Source: Fertiliser Statistics 2007-08, FAI
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Lopsided Use of Fertilisers
There exists a wide variance among the states with regard to NPK
consumption ratio and most of them are far away from the magic ratio of
4:2:1
There is urgent need for determining balanced formula for each crop in a
specific region based on soil test data.
Source: FAI Statistics
Inadequate use of Secondary &
Micronutrients
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Sulphur 4
th
major nutrient after N, P & K
Sulphur has been established as yield and quality driver nutrient.
Yield increase from sulphur application has been reported to be
32% in groundnut,
30% in mustard,
25% in Soybean & wheat,
20% in green gram & sunflower,
17% in rice, and so on.
Sulphur results in 3-9% increase in oil content in major oilseed crops.
Sulpur uptake can range between 5-80 kg per ha depending on crop,
yield and cropping intensity.
Sulphur uptake per MT of grain production is
3-4 kg in cereals,
8kg in pulses and
12kg in oilseeds
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Sulphur fertility status in Indian soils
During early 1990s sulphur deficiency was estimated to
occur in about 130 districts
Subsequent fertility check by ICAR system based on
60,000 samples revealed 240 districts to be S deficient
45% districts with more than 40% samples deficient
40% districts with 20-40% samples deficient
15% districts with less than 20% samples deficient
Similar findings were revealed from TSI-FAI-IFA project
(1997-2006)
Sulphur deficiency is a critical problem in 40-45% districts
translating into 57-64 million ha of net sown area
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Sulphur (S) Fertility Map of India
Data Not available
< 20
20 25
25 30
30 35
35 40
40 45
> 50
Percent deficient sample
Source: Dr M V Singh, IISC, Bhopal (Recreated)
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Micronutrients Macro Impact
Although required in small quantities, they often become
major limiting factor for obtaining yield when soils are
deficient.
Most soils in India suffer from deficiency of one or the
other micro nutrient.
Intensive cultivation of high yielding varieties of paddy
and wheat resulted in Zn & Fe deficiency in paddy and
Mn deficiency in wheat.
Analysis of soil and plant samples indicated that 49% of
soils in India are potentially deficient in Zn, 12% in Fe, 5%
in Mn, 3% in Cu, 33% in B and 11% in Mo.
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Zinc (Zn) Fertility Map of India
Source: Dr M V Singh, IISC, Bhopal
Almost the entire country is
facing Zn deficiency
Central highlands, deccan
plateau, Kathiawar
peninsula, Eastern ghat
uplands, Northern plains
covering areas of
Maharashtra, MP, TN, AP, UP
are heavily deficient in Zinc
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Copper (Cu) Fertility Map of India
Source: Dr M V Singh, IISC, Bhopal (Recreated)
Western ghats, west coastal
plains, western himalayas,
eastern ghat uplands and
deccan plateau regions are
deficient in copper
Data Not available
< 1.0
1.0 2.5
2.5 5.0
5.0 20.0
> 20.0
Percent deficient sample
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Iron (Fe) Fertility Map of India
Source: Dr M V Singh, IISC, Bhopal (Recreated)
Eastern ghat uplands,
deccan plateau, eastern
plains, western plains, kuchh
peninsula, western
himalayas, deccan plateau
soils are deficient in Iron
(Fe).
Data Not available
< 1.0
1.0 5.0
5.0 10.0
10.0 15.0
> 15.0
Percent deficient sample
Addressing the Challenge
Current Initiatives
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Government Initiatives
National Food Security Mission 2007
Increasing production through area expansion and productivity
enhancement in a sustainable manner
Bridging the yield gap through dissemination of improved
technologies and farm management practices
Financial outlay of Rs 48.8 bn
National Project on Management of Soil Health & Fertility
2008
To facilitate and promote Integrated Plant Nutrient Management
To strengthen soil testing facilities
To promote soil health management through use of organic
manure, bio-fertiliser and micronutrients
Investment outlay of Rs 4.3 bn over the next 5 years
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Government Initiatives
Micro Irrigation Task Force 2004
Micro Irrigation to be the pivotal element of Integrated water
use and farming system
Target to cover an area of about 14.0 mn ha under MI by 2011
National Horticulture Mission 2006
End to end approach for forward and backward linkages
Promoting multi dimensional reform in
Research, Production, Post Harvest management, Processing &
Marketing
Mission to double horticultural production to 300 mt by end of
2011-12 from the level of 152 mt in 2001-02
Warehousing (Development & Regulation) Act, 2007
Setting up of rural market infrastructure
Establishing warehouse receipt as negotiable instrument
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Industry Initiatives Market access
Contract farming
Providing farmers assured market & better value for their produce
Examples: Pepsi, KRBL, DSCL
Organised retailing
Output: Better market access, removal of intermediaries and value
appreciation for quality produce
Examples: Reliance, Spencers, More
Input: Access to fair priced quality agri-inputs backed up with crop
advisory services
Examples: HKB of DSCL, TKK of TCL, Mana Gromor of CFL
Efficient price discovery
Removal of information arbitrage
Examples: ITC e-choupal, MCX, NCDEX
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Industry Initiatives Boosting Productivity
Result oriented agri-extension activities
Village adoption programmes for integrated development
Agriculture advisory services for focus-group farmers
Examples: SKVP by DSCL, Cheyuta by CFL, Uttam Bandhan by CFCL, IFFCO
Delivering improved agri-inputs
High performance hybrid seeds from companies like PHI (DuPont),
Monsanto, ProAgro (Bayer), SBGI, etc.
Technology advancements like Bt cotton has transformed the farmers
condition
Moving beyond bulk fertilisers
Increased emphasis and focus on value added fertilisers containing
secondary & micro nutrients, fortified fertilisers, customised fertilisers,
water soluble fertilisers, liquid fertilisers etc.
Micro irrigation systems and fertigation for higher water & fertiliser use
efficiency resulting in higher yield
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Value Added Fertilisers
Yield Enhancers
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Need for Value Added Fertilisers
Stagnating productivity inspite of increased use of Bulk fertilisers
containing primary nutrients
Changing focus in production (Maximise value, not only yield)
Disease/pest & other stress resistance
Apearance, size, taste & nutritional value of final produce
Increasing preference for quality parameters
Productions being planned for different market segments with specific
quality requirements
Area under high value crops on the rise
Fruits, flowers, exotic and off-season vegetables often have specific
nutritional requirement
Increasing focus on Balanced plant nutrition
Crop and region specific nutrition solutions based on soil test data
Changing Crop growing conditions
Availability as well as quality of soil & water are fast changing
Noticeable change in climate pattern across geography
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Fortified / Coated Fertilisers
Useful tool of combining micronutrients with commonly
used bulk fertilisers. Some examples are:
Zincated urea
Boronated / Zincated SSP
Neem Coated urea (Slow release)
DAP and NPK complexes fortified with Zinc / Boron
Government support in terms of promoting use of
fortified fertilisers and cover the increased production
cost on subsidized fertilisers
Produce fortified/coated fertilisers upto 20% of the capacity
Charge 10% higher MRP on Zincated Urea and Boronated SSP
Charge 5% higher MRP on fortified/coated fertilisers other than
above two
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Customised Fertilisers
Site & crop specific fertilisers customised for optimum
crop nutrition
Favourable government guidelines for Customised
fertilisers
Permission only to companies with more than Rs 500 Cr turnover
Manufacturer should have own soil testing lab with a capacity of
minimum 10,000 samples per year
Subsidised fertilisers (own / other manufacturer / imported) can
be used as raw material and shall be eligible for subsidy
Free pricing structure to be decided by the manufacturer
Proposed nutrient based subsidy might render these non-viable
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Water Soluble Fertilisers Differentiated Value
High Purity
These fertilisers are in the purest form of the product and hence
deliver maximum use efficiency
Driven by R&D
Strong research work behind developing theses products
Lower doses
In contrast to bulk fertilisers, these are applied in smaller
dosages (3-4kg MKP per ha through foliar application as
nutritional supplements during critical growth stages)
High Benefit-Cost Ratios
Right product at right stage of application in right dose results in
substantial yield enhancement
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Water Soluble Fertilisers Indian Market
Estimated Indian market size: 40,000 MT
Rapid growth during 2004-05 to 2007-08 period
International prices and adverse agroclimatic conditions curtailed the
growth during last 2 years
Estimated to come back on the growth path by 2010-11
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WSF Market Shifts
Geography
Traditional markets of
Maharashtra, Karnataka
New Markets
AP, Punjab, Haryana, MP, UP, G
ujarat, Rajasthan, West Bengal
Crops
Conventional crops such
as
grapes, pomegranate, flo
wers
Crops like
Cotton, Potato, Vegetables, Gr
oundnut, Wheat, Paddy
Products
Over used products
NPK19:19:19, NPK13:0:4
5
Newer products namely
NPK0:52:34, NPK12:61:0, NPK2
0:20:20, Calcium Nitrate
Application
Primary method of
fertigation
Rapid growth from Foliar
application
Marketers
Limited no. of players like
Rallis, NFCL
Major Fertiliser players with
basket of agri-inputs like
DSCL, CFL, CFCL, TCL, Deepak
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Shift in Approach
Ensuring rapid adoption of value added fertilisers
requires concerted efforts aimed at
Increasing awareness and knowledge
Developing customised solutions
Demonstrating value enhancement
Service Orientation
Commodity selling to Concept Selling
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Value added Fertilisers
Challenges in India
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Value added Fertilisers - Challenges
Imported under OGL Large number of players
Disintegrated and disorganised sector
Negligible Domestic
Production
Process under FCO is lengthy
No marketing protection for the introducing company
New product
introduction
WSF as unattractive proposition due to high cost
Farmers mindset to view quantum vis-a-vis value
Subsidy on Bulk
Fertilisers
Prohibitively high duty on Calcium Nitrate, Mono
Potassium Phosphate & Micronutrient formulations
Heavy customs duty on
some products
Micro irrigation systems primarily being used for
irrigation rather than fertigation
Limited / Slow spread of
Fertigation
No concentrated effort by state run extension
systems or private agencies on use & benefits of WSF
Low awareness among
farmers
Negligible research work taken up on WSF products
Scattered and non-useable form of data & knowledge
No knowledge repository
on WSF use & benefits
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Value Driven Service Delivery
Strategies & Path Forward
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Segmentation The starting point
Multi dimensional segmentation
Location
Established markets like Maharashtra, Karnataka Vs new ones like
UP, Rajasthan, Punjab
Crops
Traditional crops like groundnut, wheat, cotton, potato Vs high value
crops like pomegranate, grapes, flowers
Consumers
Organised consumers like sugar mills, plantations Vs Common
farmer
Method of application
Soil application Vs Fertigation Vs Foliar application
Multi
dimensional
segmentation
Clarity in
objectives &
goals
Better resource
planning &
Implementation
Successful
Strategy
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1. Project Approach (Crop Solution)
Selling value added fertilisers as part of complete crop nutrition
package for any particular crop
Focus shift from selling a product to selling complete nutrition
solution
Involves developmental work both in pre and post season periods
(presence throughout crop life cycle)
Centre of the focus is Crop and strategies built around that
Involves micro level planning in terms of
Segmenting the market in terms of crop acreage and potential
Identifying the target segments and mapping of service points
Manpower deployment with demarkation of operational area
Setting a quantifiable objective and listing of activities
Drawing out implementation & monitoring schedule with route charts
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Illustration 1: Potato in Western UP (Project Approach)
Approach
Integrated promotion of nutrient
management (both for additional
yield and disease tolerance)
Dedicated and trained
manpower involved in one-to-
one contact with 10,000
farmers, covering 100,000 acres
Impact
Average 25% yield increase
Adoption in 50,000 acres
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2. Cluster Mode Promotion (Round the year)
Working throughout the year in a
cluster of villages
Follow the entire crop rotation for a
basket of products
Present a common face of the
organisation through permanent
field staff.
This approach envisages the
benefits of working consistently &
closely with the farmer
It helps to build confidence &
stronger bonds with the farmers
and results in a stronger brand
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3. Alternate Crop & Method of Application
Myth 1: WSF is used only under micro
irrigation systems
Foliar applications of right product at
right stage in right dose have yielded
significant benefits
Myth 2: WSF is used only in high value
fruits & vegetables or crops grown
under controlled environment
Application of WSF products in
traditional crops like wheat, peas,
cotton, etc have yielded convincing
cost-benefit ratio
+ Ca - Ca
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4. Cross Selling (Collaborative approach)
Collaborating with marketers of micro irrigation systems
Develop and capture a captive market
Repeat contact & reminder value through after sales service of
MIS
Marketing tie ups with seed and pesticide companies
Packaged offering with new generation research hybrid seeds
Holistic packaged crop solution approach
Derive maximum benefits from the common trade channel for a
win-win situation
Arrangements at points commonly visited by farmers
Tie ups with fuel pumps and tractor service centres
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5. Extra mile reach
We need to think beyond the common ways of reaching
farmers such as visit by field staff, jeep campaign, farmer
meetings in villages
Some suggested ways are:
1. Multi-level marketing:
We can involve rural youth, progressive farmers and opinion leaders
with proper training inputs for developing a network marketing
framework
This would use the best method of peer convincing and may prove
to be highly effective tool
Value added fertilisers being less voluminous, may not pose logistic
constraints
2. Shop at doorstep:
Spot selling / mobile shop / shop at doorstep probably seems to be
not far off and can be seriously explored
It can be economically clubbed with jeep campaigns
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6. Leveraging ICT tools
Product Designing
Use of advanced tools such as satellite imaging to study the soil
and crop nutrition status
Designing location / crop / situation specific customised
fertilisers using these information coupled with soil test data
Product Delivery & Communication
Collation of scattered pieces of information and knowledge
about any area, crop, growing conditions, soil nutrient status, etc
Farmer self-service ICT interfaces providing crop nutrition
package specific to his farm location, previous crop, intended
crop, desired yield, number of irrigation, etc.
Farmers help desk as well as text / voice messaging through
mobile networks
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7. Public Private Partnership
Public private partnership can be instrumental for faster adoption
and use of value added fertilisers in farming
Some examples of PPP initiatives in the fields of:
Promoting micro irrigation
Gujarat Green Revolution Company Limited formed by GSFC, GNVFC, GAIC under
supervision of Government of Gujarat
Building soil testing infrastructure
National Project on Management of Soil Health & Fertility facilitates private
players to set up soil testing laboratories and extend subsidy support
Research and promotion of value added fertilisers
Such initiatives would help identify more effective fertilisers and to develop
customised nutrient solution
In a more futuristic view, we should aim at developing a KPO organisation to take
care of knowledge & information related to soil fertility, crop nutrition and other
farming related information
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Conclusion
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In Summary
Imminent food insecurity before India
Growth in gross cropped area & irrigated area hitting a plateau
Population on constant rise
Productivity of major foodgrains stagnating
Value added fertilisers are potential yield enhancers
Diminishing response from use of traditional bulk fertilisers
Field results from application of WSF are encouraging
Farmers are concerned about cost economics
Appreciates better value & not averse to paying more
Crop specific approach works better
As against focus on particular product, complete solution for the crop and its
cost economics is a better approach
Market development requires all round Commitment
Promoting value added fertilisers need dedication, commitment and passion
Benefits need to be clearly demonstrated & communicated
Farmer pull rather than trade push works well in long run
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Path forward
Differential value driven marketing approach
Use in traditional crops would expose the huge hidden market potential
Crop focused nutrient solution approach
Concentrated pre & post season work throughout the crop rotation
Government Support (Conducive policy environment)
Simplification of new product registration process
Rationalisation of customs duty on specialty fertilisers
Knowledge & infrastructure creation through public private
partnership
Location specific crop package of practices
Certified crop advisors
Development of Crop Zones
Collaborative Approach
Involvement of Government, Industry and national / international bodies such as
IFA, IFDC, FAI for building a robust extension support system
Target oriented implementation
Backed by strong evaluation & monitoring systems
THANK YOU
sovan@dscl.com