Agrochemical cos may get R&D sop

Leading domestic agrochemical makers like United Phosphorous, Dhanuka Group and Excel Crop Care as well as MNCs like DuPont, Syngenta and BASF could soon expect a surprise incentive from the government to boost their research investments.

The government is planning to extend a crucial research sop now given to the pharmaceutical sector to the agrochemical industry too. The income tax exemption to deduct one-and-a-half times the cost of research from the taxable income could come in the next budget. The ministry of chemicals and fertilizers and the finance ministry are discussing this proposal.

The benefit is proposed to all locally done research irrespective of whether it is a domestic company or an MNC. The scheme was to expire at the beginning of this fiscal but realising its importance in the pharma sector, the government extended it till 2010 in this year’s budget. There is also the proposal to extend the scheme to at least 2015 as research is a long-term project and companies need to have a clear idea about their budget.

The proposed incentive is very crucial for the agrochemical sector as the government is planning to give a three-year monopoly to MNCs on the costly research data that they generate for registering new products. Thus, domestic companies will not be able to copy the MNC product without their consent during this period.

This is likely to slow down the introduction of cheaper domestic versions of agrochemicals in the market. This is in addition to the product patent that is introduced in agrochemicals three years ago. Therefore, fiscal incentive is essential for attracting investments in pesticide research.

Besides, the government is also keen on improving agricultural productivity at a time industrialisation is consuming agricultural land and cities expand to rural areas. In the absence of a strong emphasis on research, the industry runs the risk of becoming just contract manufacturers for MNCs.

India’s more than Rs 6,000-crore agrochemical industry is the fourth largest in the world, after the US, China and Japan. The sector has been growing at more than 12% a year, while exports, which account for nearly half of the revenue, has been growing at about 25%.