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Lather Venkatraman

The report says that foreign companies are targeting Indian seed companies for outright takeovers or for marketing alliances or contract production.

MUMBAI, March 24

THE seeds sector in the country, in the process of consolidation, will be driven by a critical mass in research and development, protection of intellectual property, management of inventory system and distribution strength, according to a report released by Rabobank International.

The ability to invest significant resources long term in research and development is critical. However, as the gestation period is long requiring huge funds, private seed companies tend to borrow technology through alliances or restrict themselves to marketing seeds.

``The strategic motivation for many tie-ups with multinationals by Indian organisations is to be able to draw on Western experience with highly developed technological products,'' the report said.

Rabobank believes that technology will provide long-term sustainable advantage to seed companies. Globally seed companies spend as much as 12 per cent of their sales on research and development.

The report has suggested that regulations and laws to safeguard the interest of the inventor of technology must be put in place.

As for managing inventory, companies should be careful to ensure that their number of varieties is manageable. ``Forecasting of demand for the forthcoming season is critical,'' the report said adding that this is difficult considering the climatic uncertainties.

The report said that fertiliser companies which already have a relationship with farmers and a distribution network, are best placed to tap the opportunity in seeds.

There are around 1,500 seed companies in the world, however, 24 of them hold 50 per cent of the commercial market. The total commercial market for seeds at present is around $30 billion. According to Rabobank International estimates, this business could triple to around $91 billion.

This increase will come from reaching out to the untapped markets in regions as Asia. Consumption in Asia is now rising at an annual rate of 1.3 per cent and has reached 43.2 million tonnes, rice accounting for 16 per cent of this. According to Rabobank's report, the world seed market is marked by major trends such as intensifying international competition, shorter product life cycles for new varieties, increasing R&D costs and complexity of biotechnology and increasing concentration within the food processing and retail sector.

In India, cereals dominate the seed market which also includes oilseeds, cotton and vegetable seeds. Commercial seed usage in India is marginal. Only about seven per cent of wheat and 13 per cent of rice seed planted in India are from the formal seed supply sector, the rest being farm saved seed. The report says that foreign companies are targeting Indian seed companies for outright takeovers or for marketing alliances or contract production.

Currently, the R&D spending of domestic seed players is way below global levels and will need to increase in the wake of regulations in plant variety protection. The report has indicated that Indian companies could employ R&D development strategies like chain integration, internal development, strategic alliances and acquisition.

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