As India prospers, itll have to grow 50% more food. Micro-irrigation is crucial to this….R N Bhaskar
Israel Makov, chairman of Netafim, the Israeli global leader in micro-irrigation, was in India a week ago.Netafim has a wholly owned subsidiary in India, headquartered in Vadodara, and is reported to have been growing rapidly. Makov is also chairman of Given Imaging, the pioneer and worlds leading provider of capsule endoscopy.He was formerly president & CEO ofTeva Pharmaceutical Industries Ltd, the biggest pharmaceutical company in Israel (whose subsidiary, Taro was in the news recently, after it was acquired by Sun Pharma). During his stint at Teva, he led the companys global expansion, managing over 12 acquisitions two of which were the largest M&A deals in Israeli history. Makov holds a B Sc in agriculture and an M Sc in economics from the Hebrew University, Jerusalem. In a free-wheeling interview he had with DNA he spoke of his challenges and his plans.Given below are some excerpts:
This is your second trip to India in the past 18 months.Quite clearly, India does figure quite high in Netafims global perspective.
True, interest in India is growing on account of two reasons.First because,five years ago, water was not on the agenda.Today it is on everyones lips.This realisation has not escaped India as well.As poverty begins to decline in India, more people will want more food to eat.India, in our view, will have to grow at least 50% more food over the next decade if it has to feed its people.Unfortunately, it has to do this with little improvement in water supply, and practically no increase in land.On the contrary, with urbanisation and industrialisation, land availability for agriculture will decline.
True, interest in India is growing on account of two reasons.First because,five years ago, water was not on the agenda.Today it is on everyones lips.This realisation has not escaped India as well.As poverty begins to decline in India, more people will want more food to eat.India, in our view, will have to grow at least 50% more food over the next decade if it has to feed its people.Unfortunately, it has to do this with little improvement in water supply, and practically no increase in land.On the contrary, with urbanisation and industrialisation, land availability for agriculture will decline.
This means that India will have no option but to adopt technology in agriculture – this means better seeds, and better agricultural methods.One of the most important strategies the government will have to adopt is to promote drip irrigation and micro-irrigation techniques, which allow you to grow more, use less water, less herbicides and have less environmental degradation.Drip irrigation is also clean technology.
And the second reason?
India has become an important market.This is because the growth for the micro-irrigation industry also because the growth of this industry has been extremely high.The industry in India has been growing at 12% each year, and we have been growing in this market at 25% year on year.But we think we need to push up this growth to 50% or even 100% annually.And we will. True the base is small.But the acceptance of this technology and our expertise has been phenomenal.That is why we believe India is an attractive market. We have grown in India to account for a 20% market share, up from around 15% a year ago.And we hope to increase this further.
India has become an important market.This is because the growth for the micro-irrigation industry also because the growth of this industry has been extremely high.The industry in India has been growing at 12% each year, and we have been growing in this market at 25% year on year.But we think we need to push up this growth to 50% or even 100% annually.And we will. True the base is small.But the acceptance of this technology and our expertise has been phenomenal.That is why we believe India is an attractive market. We have grown in India to account for a 20% market share, up from around 15% a year ago.And we hope to increase this further.
Netafim does not give out figures of its turnover or profit, either for any country, or even globally.But industry experts say that India has already become the biggest profit centre for Netafim
You are right.India has been an important market.Growth rates for the industry, and for us, have been quite high. But no, India is not yet the biggest profit centre for Netafim worldwide.But it is on its way to becoming the most important market for us.
You are right.India has been an important market.Growth rates for the industry, and for us, have been quite high. But no, India is not yet the biggest profit centre for Netafim worldwide.But it is on its way to becoming the most important market for us.
By when do you think it will become the most important market for you?
(Smiles) In about a years time.
(Smiles) In about a years time.
To do this will you be creating new products for the Indian markets?After all, Indias farms are generally smaller than farms in the US or in Israel.
What you say is not 100% correct.Indias farms are small, but they are not the smallest.And Netafim has worked with smaller farmers in the past. When we began in Israel, some 45 years ago, many of our farms were very small just around 2.5 hectares.Indias average farms are around 1.5 to 2 hectares.In China, the unit of farms is just one Mu which approximates 750 square metres.It is only now that the government in that country has begun allowing farmers to increase their landholdings by purchasing more land through a process of consolidation.Even countries like Mexico have seen small units.
What you say is not 100% correct.Indias farms are small, but they are not the smallest.And Netafim has worked with smaller farmers in the past. When we began in Israel, some 45 years ago, many of our farms were very small just around 2.5 hectares.Indias average farms are around 1.5 to 2 hectares.In China, the unit of farms is just one Mu which approximates 750 square metres.It is only now that the government in that country has begun allowing farmers to increase their landholdings by purchasing more land through a process of consolidation.Even countries like Mexico have seen small units.
But yes, in India we modified a couple of products.One of them was the unit for backyard farms that we have introduced for the tribal regions in Jharkhand, which has found tremendous appeal with local tribals. Adoption rates for this solution for farms of 1,000 square metres is very encouraging.
Then we have contributed to the formation of standards in India through the BIS (Bureau of Industrial Standards).
But these standards apply only to the hardware that we have helped develop for the world.We also offer software on how to use this equipment, based on crop, soil, and climate. And even the quality of water. We do tests and experiments around the world.And we do research in India as well.This allows us to create a pool of knowledge that India can draw on, and it helps agriculture everywhere.
How do you view competition in India?You already have Jain Irrigation, which is the biggest player in this industry in India, though globally Netafim is the biggest. New entrants are expected in this industry including Finolex, Coromandel and many others.
Yes, there is competition.But we face competition all over the world. And while some become big through acquisitions like John Deere (of the US) has we have generally preferred to grow on our own strength.
Yes, there is competition.But we face competition all over the world. And while some become big through acquisitions like John Deere (of the US) has we have generally preferred to grow on our own strength.
As for India, since growth rates for this industry are likely to be high, new entrants are to be expected.But we welcome this competition for two reasons.First, because it brings out the best in us, and raises the standards of our offerings to the farmers.Second, because the penetration of micro-irrigation is very low in India – barely around 3% of farmers.You, thus, need many more players to educate the market and spread the concept of drip irrigation.Competition helps accelerate the rate of penetration in the market. The number of end clients is very large in India.
Once the farmers know that this technology works, they will then begin looking for quality and value-addition.That is when many of them begin to switch over to us, because we just dont sell our systems.We also educate the farmers and also advise them on better ways to improve their income on an on-going basis. Consolidation will come in this industry as well, but many years later.But in markets where competition is high, the top two or three players are the ones who prosper.And we intend being there.
What are the factors that you think will spur high growth rates in this industry?
Farmers are generally very conservative people. And farmers, worldwide, do not have much surplus money. Agriculture remains one of the riskiest businesses if done the conventional way.And there are several things that could go wrong. The seed, the soil, the fertiliser, the herbicide. And finally, either too little or too much of sun, or too much or too little of water. What we do is to try help and reduce the risk in terms of water and soil, and also improve the farmers income (Netafim also helps reduce the risk of weather by promoting greenhouses, and has already got into this line of business in Andhra Pradesh and Gujarat, and has begun working with Himachal Pradesh recently).But to make the farmer move towards this technology, he must be incentivised. And, as everybody knows, subsidies incentivise demand.
Farmers are generally very conservative people. And farmers, worldwide, do not have much surplus money. Agriculture remains one of the riskiest businesses if done the conventional way.And there are several things that could go wrong. The seed, the soil, the fertiliser, the herbicide. And finally, either too little or too much of sun, or too much or too little of water. What we do is to try help and reduce the risk in terms of water and soil, and also improve the farmers income (Netafim also helps reduce the risk of weather by promoting greenhouses, and has already got into this line of business in Andhra Pradesh and Gujarat, and has begun working with Himachal Pradesh recently).But to make the farmer move towards this technology, he must be incentivised. And, as everybody knows, subsidies incentivise demand.
The Indian government is aware of this.And it knows only too well that more than social security what farmers actually need and want is a way to improve their lives.
Such a process benefits India in many ways.It is the best way to improve the life of farmers by enabling them to earn more.It addresses the problem of food security.It increases agricultural output, and hence the countrys GDP and farm incomes.
Drip irrigation is the biggest catalyst which gives the farmer a return on investment in two years, sometimes one year, sometimes two and a half. That is where subsidies come in.
Till now, from what we have seen, the governments management of subsidies for drip irrigation has been excellent. And we believe that the governments scale of operation will increase, partly because of food security concerns, and partly because it needs to ensure the prosperity of the very large number of people employed on.
You just mentioned that the penetration of micro-irrigation in India is just around 3% of all irrigated farm lands.Why has this remained so low?
Good question.Drip irrigation in India is at least 15 years old.But it was adopted by larger farmers first, who had the financial muscle and the vision to try out a new technology.As I mentioned earlier, farmers, worldwide, are a very cautious and conservative community, who do not like trying anything new in agriculture.The risks for them are extremely high.
Good question.Drip irrigation in India is at least 15 years old.But it was adopted by larger farmers first, who had the financial muscle and the vision to try out a new technology.As I mentioned earlier, farmers, worldwide, are a very cautious and conservative community, who do not like trying anything new in agriculture.The risks for them are extremely high.
Initially, the government did not promote this industry aggressively.And water was not uppermost on the minds of most governments.
But things began changing 10 years ago.As more people worldwide began talking about the impending water crisis, the Indian government too took note. And the last five years have seen the government move fast on this front.That is why it took a long time to get this 3% penetration. But the pace has quickened in the last 2 to 3 years. The government is moving fast.More resources are being put in to address the water issue. The industry is also growing.And we will continue to move faster.
But things began changing 10 years ago.As more people worldwide began talking about the impending water crisis, the Indian government too took note. And the last five years have seen the government move fast on this front.That is why it took a long time to get this 3% penetration. But the pace has quickened in the last 2 to 3 years. The government is moving fast.More resources are being put in to address the water issue. The industry is also growing.And we will continue to move faster.
What more do you think the government should do?
In my opinion, the government should encourage more states to make more projects for irrigation.Demonstration farms play a very important role in convincing farmers about the relevance of any technology or process.A lot more can be done in this respect.
In my opinion, the government should encourage more states to make more projects for irrigation.Demonstration farms play a very important role in convincing farmers about the relevance of any technology or process.A lot more can be done in this respect.
Second, it should work towards using part of community water, meaning surface water, for drip irrigation.Flood irrigation is not the best way to do farming, and that is the most polite way of putting it across. More efforts must be made to discourage excessive drawing of water from under the ground.
Third, much more of education of farmers needs to be done.And this is one of our key focus areas. After all, we dont create any change in the market structure in India.But we have created the market in the world.We have created the best practices.And we remain one of the cornerstones in this industry in India.
Third, much more of education of farmers needs to be done.And this is one of our key focus areas. After all, we dont create any change in the market structure in India.But we have created the market in the world.We have created the best practices.And we remain one of the cornerstones in this industry in India.
You have moved from the pharmaceutical industry to agriculture.How do you see the switch?
I had no problem. (chuckles) First of all, I too come from a family of farmers.My first degree was in agriculture.In the pharmaceutical industry, I oversaw growth in a company that dealt with generics.Agriculture is also generic in nature.What matters is introducing good manufacturing practices, educating the market. Lastly, many of our competitors in the generics market were Indians, and many of my future competitors will continue to be Indians.And it will be in India that Netafim will see its biggest growth.
I had no problem. (chuckles) First of all, I too come from a family of farmers.My first degree was in agriculture.In the pharmaceutical industry, I oversaw growth in a company that dealt with generics.Agriculture is also generic in nature.What matters is introducing good manufacturing practices, educating the market. Lastly, many of our competitors in the generics market were Indians, and many of my future competitors will continue to be Indians.And it will be in India that Netafim will see its biggest growth.