India - Rs 8,000 crore seed sector braces for a hit as farmers shun cotton
Dated- 31 May , 2012 - India
India's Rs 8,000-crore seed sector is bracing for a hit because farmers shun cotton this summer after expanding the acreage for two consecutive years. Cotton prices have hovered around the minimum support price for most of the current season, putting farmers in distress.
BT cotton's loss in the battle for acres has enormous corporate interest because it rakes in a third of the seed industry's revenues. The seed industry has seen maximum private equity interest in the last three years compared to the rest of the farm input value chain. Initial trends show a decline in cotton acreage. According to the Haryana agriculture department, sowing in the state has been completed on 3.45 lakh ha area till May 25 this year as compared to 4.50 lakh ha sown by the same date last year, which is a decline of more than 23%.
Last year, cotton acreage in Haryana was at 6.03 lakh ha. This year, the state government expects the crop to be sown on 5.50 lakh ha, a fall of close to 9%. "As against our requirement of about 32 lakh packets, the availability of Bt cotton seeds is at 44 lakh packets," said BS Duggal, joint secretary, Punjab agriculture department.
In Maharashtra, the second-largest cotton producer, acreage is expected to fall by 1.15 lakh ha from 41.25 lakh ha last year to 40 lakh ha this year. "As against our requirement of 1.60 crore packets, the availability of seeds is at 2.10 crore packets," said SS Adsool, director-agriculture (inputs and quality control), Maharashtra government.
Top seed companies have confirmed the possibility of a fall in cotton acreage and its pressure on their margins. Companies selling non-branded seeds have to bear losses. "There are early indications of a reduction in cotton acreage. But by the end of the season, the acreage may even remain at the last year's level," said Ram Kaundinya, managing director, Advanta India.
The availability of seeds at four crore packets is more than the demand of about 3.7 crore packets. "As against the sale of about 70-75 lakh packets of Bt cotton seeds last year in north India, we expect a sale of only about 60 lakh packets this year," said MG Shembekar of Nagpur-based Ankur Seeds.
"Barring a top few brands, which are selling Bt seeds for a premium, there is a price war amongst seed companies. As a result, quality material is available to farmers at competitive rates," said Shembekar. Sushil Karwa, managing director of Pune-based Krishidhan Seeds, confirmed a cut in prices.
"It is mandatory for seed companies to sell seeds at the MRP fixed by the government. This means quality seeds as well as the poor ones have to be sold at the same price. The government should allow companies to price their seeds as per their market value," he added.