Pune, Mar 9: Spic's move to slash the cost of its neem-based pesticide may force the smaller players to do the same thereby, triggering a price war in the bio-pesticide segment.Spic has priced the pesticide at Rs 79 per litre. Smaller players will be forced to drop prices affecting their profitability, Ajay Bio-Tech Ltd chairman and managing director Abhay Phadke said.
The domestic bio-pesticide market, with sales of about Rs 10 crore has witnessed sluggish growth. Ajay Bio- Tech, with sales of Rs 1 crore will have to drop the price of its neem-based pesticide, Bio Phos, sold through Zuari Agro Chemicals from Rs 98 per litre to match the Spic price.
To hedge against the fluctuations of the domestic market, Ajay Bio Tech has targeted exports. Phadke said the company was in the process of getting registration and clearances from the Environmental Protection Agency (EPA) of the US, for the export of its neem-based pesticide. This would fetch a price of $5 a litre.
One way to remove the sluggishness inbio-pesticide market would be if the proposed ban on mono croto phos is implemented. This is the single largest selling pesticide in India and is banned in several countries. While the pesticide was not theoretically toxic, it has a mandatory seven-day waiting period after it is sprayed on vegetables which is not enforceable. This is the reason the government has been considering a ban on it. Should such a ban come about, it would boost the sales of neem-based pesticides.
Pointing out to the advantages of the US market for neem-based pesticides Phadke said trials for the company's product began in 1994 and is expected to be complete by 1999. This will allow Ajay Bio-Tech to launch the product in the US by May 1999.
Since pesticide testing and clearances are a long-drawn process, the company has introduced its product in Germany not as a pesticide but as a 100 per cent organic product. While the first order is not very large, Phadke said it has the benefit of being launched immediately.
Ajay Bio-Tech hasdrawn up plans to widen its product portfolio, limited to a bacterial fertiliser and a herbal insecticide at present, by introducing a bacterial insecticide based on naturally occurring bacteria. The Rs 3.75-crore project is likely to get a low interest loan (6 per cent) of Rs 1.75 crore from the Technology Development Board (TDB).
The company could go public with an issue of Rs 1.8 crore for its Rs 3.75 crore project, raising the balance, about Rs 20 lakh, internally. Phadke admitted that the public issue route was more attractive than private placement since funds were cheaper in the first method besides giving a wider investor base. However, the depressed state of the primary market could force them to use the private placement route. A final decision will be taken within a month, after IDBI submits its appraisal report. There will be no premium for the issue, he said.
