Post-Covid, Gujarat dyes and agrochem sectors go for backward integration

Be it raw materials in fertilisers or crop protection, firms are adding plants or enhancing capacities to become self-reliant and looking to achieve multiple levels of backward integration

From global freight crisis to growing international shift from China to India, the dyes, intermediates and agrochemicals sector in Gujarat is finding ample reasons post Covid-19 pandemic to aim for backward integration in their bid to reduce dependence on imports.

Be it raw materials in fertilisers or crop protection, companies are adding plants or enhancing existing capacities to become self-reliant and looking to achieve multiple levels of backward integration.

For instance, dyes and intermediates major Kiri Industries Limited is investing around Rs 2,900 crore as it goes for backward integration. According to Manish Kiri, promoter and managing director of Kiri Industries, 75 per cent of various derivatives of benzene, aniline and nepheline are currently imported in India from China. However, the company is looking to manufacture the same to reduce dependency on China.

"The major objective (for backward integration) is to fulfill demands of the domestic market in addition to our captive consumption. We have all approvals and land in place even as world renowned providers are being tied-up to bring new technology to India," said Kiri while adding that a combined capacity of about 800,000 metric tons is being added. The market size for these products is estimated to be around $400-500 million.

Similarly, agrochemicals and crop protection player GSP Crop Science also plans to manufacture 100 percent of certain raw materials that are currently imported from China to the tune of 30-40 per cent.

"We are adding plants for manufacturing raw materials in agrochemicals to be sold at reasonable prices. Countries are turning to India from China, especially in agrochemicals. Today, we are adding two new plants in Dahej, of which one will manufacture intermediates. Our target is to reduce our dependence on China to zero. Currently, we import 30-40 per cent from China. In the next three years, we want to manufacture 100 per cent of our products indigenously for which we are adding plants. One plant for intermediates and the other plant will manufacture raw materials," said Bhavesh Shah, managing director of GSP Crop Science.

According to Shah, the expansion plan being implemented will help GSP Crop Science achieve backward integration of up to five levels. "Products almost from ground up to customers' hands will be manufactured by GSP."

Since last year, the chemicals and fertilisers ministry has identified nearly 80 chemicals where import substitution could be achieved, of which almost half of these chemicals are imported in share of anywhere between 70 per cent and 100 per cent. In fact, state-owned Gujarat State Fertilizers & Chemicals Ltd (GSFC) has identified 21 chemicals from the list to manufacture in India in an attempt to make the fertilizer-based chemical sector self-reliant in the country.

Of the 21 identified products to be manufactured as part of import substitution, 11 are pharma and biotech intermediate products, one commodity product, one fertilizer and the rest are chemical products. For instance, the company is already manufacturing and selling locally-made calcium nitrate, an erstwhile 100 per cent imported water-soluble fertilizer.

Meanwhile, the crop protection market in India's agrochemicals sector is estimated to be valued at $ 3 billion and is expected to touch $4 billion by 2025. In comparison, the global market is valued at roughly $72 billion with Brazil being the largest market at $12 billion, according to industry estimates.