Wednesday, July 11, 2012

Government Purchasing: Excited but Hard to Involve for Most Pesticide Enterprises

Since the Ministry of Agriculture of China (MOA) released the agricultural subsidy policy on 6 April, 2012, USD253.16 million (RMB1.6 billion) of subsidy has been allocated to 11 winter wheat planting provinces and areas in China to subsidize peasants' use of pesticides and foliar-fertilizer on winter wheat, with total planting area reaching 21.33 million ha., based on CCM International’s latest issue of Crop Protection China News.

The main reason for allocating such large amount of subsidy by the MOA in just two months is to ensure the high and stable yield of the winter wheat this year.  

Although the subsidy seems to be a tip of the iceberg of Chinese Government's agricultural budget made at the beginning of 2012, over USD194.41 billion, it is still a big cake for domestic pesticide enterprises.

Driven by the large profit in the subsidy, many domestic pesticide enterprises scrambled for the bid inviting of local governments. Some pesticide enterprises in other provinces and areas even made great effort to go cross-regional bid.
"We have paid great attention to the dynamic of government purchasing. We set the goal of achieving an order worth USD12.66 million when we got the information that the Henan Government was planning a government purchasing of USD63.29 million. Aiming to get the order, we set up a special team to prepare all the documents needed in the bid and tried our best to make all the procedures right," said a manager from Guoguang Agro-Chemical Co., Ltd., a large pesticide enterprise located in Sichuan Province.

However, even if enterprises are very excited about government purchasing and put a lot of enthusiasm on it, many of them still can't get involved, even for some large pesticide enterprises.
Owing to the cumbersome procedures of the bid inviting, lots of pesticide enterprises lack the experiences of preparing bid materials. As many pesticide enterprises located in different provinces went to other provinces for the bid inviting, they were forced to give up when they found that it was impossible to fetch the materials needed in a short time.
In addition to the cumbersome procedures and lots of bid materials needed, the high threshold set by local governments was also a big threat to the pesticide enterprises who want to gain the bid inviting, especially those medium and small sized ones.
Take the threshold of the bid inviting of pesticide purchasing by governments in Shandong Province and Henan Province for example. The two provinces invited public bidding by county-level authorities.

Suppliers should be independent legal entity with registered capital no less than USD1.58 million. Owing pesticide production license, pesticide registered license and product standard certification should be one of the main requirements and all these licenses should be valid. Pesticide products should get registered on wheat. Enterprises should issue qualification test report of provided products. Enterprises should own the quality control lab and five years of production experience of related products. And the capacity of the related products should exceed 1,000t/a.
Some provinces which invited public bidding by provincial authorities only allowed large and famous pesticide enterprises to participate.
Facing the high threshold set by governments, small-sized pesticide enterprises have to find their own ways to attend the bid. Aiming to meet the requirements, many small enterprises choose to co-found pesticide enterprises with manufacturers, large pesticide dealers, etc. Forming coalition bidder with qualified enterprises also can help them to participate.
As Chinese government's focus on the governments purchasing of pesticides increases year by year, domestic pesticide enterprises start to realize the importance of anticipating and achieving the bid inviting. It not only provides great profit but also a good marketing measure for a company's products due to the government's credibility. However, different from normal marketing channels, government purchasing seems to be a tough task for most of domestic pesticide enterprises. How to overcome the problems of less experience in dealing with governments, knowing well all the cumbersome procedures during government purchasing is now become the first puzzle for most domestic enterprises to solve.

Source: Crop Protection China News 1212

Content of Crop Protection China News 1212:
Government purchasing: excited but hard to involve for most pesticide enterprises
Glyphosate price rises against market trend
Large area in China attacked by drought
Full implementation of new pesticide policy in Hainan postponed again
MIIT releases new policy for renewal of pesticide production licenses
Zhejiang Wynca to set foot in seed industry
Shandong Dacheng ready for being backdoor listed
Jiangsu Kuaida to largely expand phosgene capacity
Jiangsu Lanfeng puts some new projects into production

Crop Protection China News, a semimonthly publication issued by CCM International on 15th and 30th(31st) of every month, aims to gain a deep insight into Chinese market, supply the latest market data and strategy support, analyze the newest legislation and policy and grasp the future market trend.

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