Dutch companies develop special solutions for the Indian agricultural sector

Agriculture in India has faced major challenges for years, but climate change is only compounding the problems for Indian farmers. Can European technologies provide a solution or are they simply too expensive for the Indian agricultural sector? Dutch agricultural technology companies Omnivent and Incotec explain how they are advancing the Indian agricultural sector and making money in India.

Damage caused by climate change

India's agricultural sector is experiencing increasingly widespread adverse weather extremes such as prolonged drought, flooding and salinization of farmland. Late last year, heavy rains destroyed over 800,000 acres of agricultural and horticultural crops in the southern states of Tamil Nadu and Andhra Pradesh, while in the northern state of Kashmir, apple farmers saw their crops fail for the third year in a row due to early snowfall. Consequently, if global climate change continues at the same rate, crop yields in India are expected to drop by 30 percent.

Machinery, refrigeration, logistics & credits

Indian farmers also face a variety of systemic problems such as a lack of sophisticated machinery, difficulties in obtaining credit and logistical problems in marketing their produce. On average, 30-40% of the total crop is lost due to lack of cold storage facilities and/or refrigerated transport, which leads to lower income for the farmers. The Indian agricultural sector is in dire need of affordable solutions to all these problems.

Dutch companies develop special solutions for the Indian agricultural sector

Indian agriculture therefore offers great opportunities for European companies. There is a demand for knowledge that is abundant in Europe. The global specialist in agricultural storage technology, the Dutch company Omnivent, has therefore been active in the country since 2007.. The company began by giving workshops to arable farmers and other key players in the supply chain. "We talked to farmers about ways we could get the agricultural product to the end of storage in a good way," says Errol van Groenewoud, Omnivent's managing director. 

"This was not only useful for them, but also for our company. We learned a lot about the resources they had at their disposal and the farming methods used in India at meetings like this," says van Groenewoud. "We came to the conclusion that our European ventilation and storage products did not match the farmers' needs and that, if you want to capitalise on the growing demand for smart solutions, you have to develop low-threshold and efficient technology at minimal extra cost. We have therefore taken the simple fans that we sold in the Netherlands in the 60s and 70s for drying flower bulbs and adapted them to provide a good and affordable solution for Indian farmers facing high temperatures."

Developing products for India

Also The innovative seed enhancer Incotec soon after entering the market in India, came to the conclusion that while their seed enhancement technologies offered a great solution to the problems of local farmers, their prices were far too high for India. "To optimize our products for Indian crops and cultivation techniques, and especially to keep the price accessible, we decided to develop a product that was cheap for us to produce and that Indian farmers could apply to their seeds themselves," explains Erik-Jan Bartels, managing director of Incotec.

Market leader in India

Incotec is now the market leader in India in seed enhancement and sees a growing need among farmers for new technologies that can make farming methods more robust against climate change. "At the same time, a large proportion of Indian farmers still do not have the means to invest in innovative solutions, no matter how simple and cheap," says Bartels. "As a Dutch company, this should not stop you from taking the step to India. Indian agriculture must adapt to the major weather changes taking place there and although it will take at least a few more years before there is a real change, now is the time for companies to become active in India. India is a country where you have to invest time and energy before you can reap the benefits."

Take your time, it is worth it

"Doing business in India requires building good relationships with your customers," adds van Groenewoude. "So you have to take the time and have a local presence to be able to make that connection. Building a dedicated team in India that can fully focus on this is essential. If you stay at a distance and thus maintain a cold, businesslike relationship with your customers, you will never be successful in business in this country." 

Are you curious about the opportunities the Indian agricultural sector offers for innovative, European companies? Our sector analysis provides a comprehensive overview of key market statistics and growth prospects.

Did you know that India is the fastest growing agricultural machinery market in the world? 

Personnel in India: These are the rules you need to comply with

Indian labour laws are constantly changing. If you employ staff in India or are considering hiring staff in India, it is important to be well-informed about the latest developments in this field. We would like to give you an insight into Indian labour law.

Indian labour law

In India, the federal and state governments both have the power to legislate in the area of employment and industrial relations. In many Indian states, a Shops and Establishments Act has been introduced, in which the local government has enacted its own specific laws or adjustments to the federal rules. National rules therefore apply differently in these states, which can sometimes make it difficult for foreign companies to be compliant. 

A unique feature of Indian law is that there are different rules for different categories of industries and workers. Indian labour laws divide "industry" into two broad categories, namely factories (production units) and enterprises (non-production units). Workers are also divided into two broad categories: manual and non-manual, with manual worker defined as a person who performs manual, unskilled, skilled, technical, operational or administrative work.

The applicability of the various laws and the protection provided may therefore vary from case to case. Employers must also take into account the number of employees they employ in India as many laws apply based on the number of employees working for a company. Laws regulating labour relations prescribe the minimum conditions of employment such as working hours, wages, entitlement to leave, notice and termination rights, health and safety standards, etc. Employers are obliged to provide workers with the minimum rights required by law. It is recommended to include all important employment conditions in the employment contract.

Labour documentation is customised in India

It is crucial for Dutch companies to have employment documentation that is suitable for the intended purpose. The tendency is often to opt for consistency. Therefore, templates are usually copied that have already been used in other countries. This can put companies at risk of not fully complying with Indian law. A thorough review of contractual labour documentation, including company policies and manuals by an Indian lawyer is highly recommended to comply with Indian labour laws.

The four labour laws of 2021

Since 2014, the Indian government has been trying to bring more structure to India's labor regulations by reducing the 44 federal laws to four overarching codes. After years of opposition by opposition parties, four new codes were nevertheless introduced in mid-2022: The Code of Wages, The Industrial Relations Code, The Social Security Code and The Code on Occupational Safety, Health and Working Conditions. The purpose of the codes is to simplify the country's outdated labor laws and boost economic activity without compromising workers' rights.

1. The Code of Wages

The Code of Wages, as the name suggests, focuses on wages. At present, the Indian states still determine the minimum wages, which means that for the same job, different minimum wages apply per state. The Wage Code solves this problem by establishing a 'minimum wage' requirement. In addition, the Wage Code stipulates that men, women and other gender identities should receive the same remuneration for the same position or a similar amount of work.

2. The Industrial Relations Code
This code makes it easier for companies to hire and fire employees. Previously, companies with more than 100 employees had to request permission from the state government where the company was located in order to hire and fire employees. In addition, companies with less than 300 employees no longer need to have a so-called standing order. These are the detailed rules of conduct for workers working in industrial establishments, such as on entering and leaving the premises, working hours, wages, shift schedules, leave and attendance, provisions on misconduct, etc.

3. The Social Security Code
With this code, the Indian government is expanding the social security system and responding to the rapid development of the gig economy. The SS Code introduces some important new concepts such as "Aggregator" which is defined as a digital intermediary or a marketplace, where a buyer or user of a service interacts with the seller or service provider. 

4. The Code on Occupational Safety, Health and Working Conditions
This code incorporates and consolidates several important pieces of legislation on working conditions for employees into one comprehensive law. The OSH Code outlines the obligations of every employer in relation to its employees and the workplace. According to the OSH Code, the employer must provide welfare activities for the employees in addition to work.

Protection of women

The prevention of sexual harassment in India must be a part of the occupational health and safety policy adopted in companies, which includes preventive and, if necessary, punitive measures. The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("Act 2013") provides necessary guidance in dealing with such issues. Under this Act, employers are required to establish an independent grievance committee in the case of a complaint at every office or branch of an organisation with ten or more employees. If an employer fails to set up an internal complaints committee or violates the law, it can be fined INR 50,000, roughly EUR 600. A repetition of the offence may be punished by doubling the fine, writing off the entity or cancelling the entity's legal business licences.

In addition, most federal laws restrict women from working at night for safety reasons. If women wish to work at night, specific approval must be obtained from the relevant government authority. The employer must also provide door-to-door transportation and meet a number of safety-related requirements.

Privacy and data protection in India

The concept of privacy and data protection is at a nascent stage in India, especially when compared to the plethora of regulations and legislation in Western countries. In India, the Information Technology Act 2000 requires companies holding sensitive personal data or information to implement and maintain reasonable security practices and procedures. The explicit consent of employees, whose data is collected, stored or transferred, must also be obtained in accordance with applicable rules.

How do you set up a sound health and safety policy for your Indian branch?

India is heavily regulated because its labour laws focus on protecting the worker. It is therefore wise to seek legal advice before drawing up employment contracts and conditions. It is also advisable to seek practical advice on best practices so that the labour policy in your Indian office is not only legally compliant but also HR-friendly. Many foreign companies struggle with high staff turnover in India, which can be easily avoided by offering appropriate salaries and benefits in line with Indian regulations.

Are you unsure about your policies or whether you are complying with Indian regulations? Our local legal and HR specialists are always up to date with the latest developments and are happy to help you find the right solutions to your specific problem.

New budget plans for India favour foreign investors

India managed to attract a whopping $81.7 billion in foreign direct investment, or FDI, last year, the highest amount the country has ever seen. But India still needs much more investment, and so the government has an ambitious budget for the coming year, focusing on a major upgrade of India's infrastructure, the transition to a digital economy and clean energy, and making it easier and more profitable for foreign investors to do business. 

Key proposals

These are some of the key proposals in the new budget that will affect how foreign investors and companies do business in India:

Taxes

1. No change in tax rates for companies

The income tax rates (including surcharge and cess) for companies (domestic and foreign), corporations and limited liability companies remain unchanged, including the rates for the Minimum Alternate Tax (MAT) and the Alternate Minimum Tax (AMT).

2. Repeal of favourable tax rate on dividends received from foreign subsidiaries

Currently, dividends received by Indian companies from their investments in foreign companies are taxable at a reduced rate of 15%. Moreover, under certain conditions, these companies can avail of a special tax deduction if the foreign dividend received is further distributed. Under the new budget plans, this favourable tax rate of 15% will be abolished and the foreign dividend received will be taxed at the ordinary corporate tax rates. The deduction for further distributions remains.

3. Tax benefits for producers and start-ups

Newly established manufacturing companies and factories can benefit from the preferential tax rate of 15 per cent (plus surcharge and cess) for one more year. The scheme will be extended until 31 March 2024. Start-ups that qualify for the so-called tax holiday benefits can also avail of them for one more year, until March 31, 2023.

4. Submission of updated tax returns 

Previously, no changes could be made to a submitted income tax return, but with the new budget, this changes. To encourage voluntary tax compliance and filing of returns, taxpayers can file an updated tax return within three years of the end of the tax year, provided they pay additional taxes on undisclosed income. However, an updated tax return cannot be filed if it leads to a reduction in tax liability, a tax refund or an increase in the refund. 

5. Changes in withholding tax

Under the Indian tax code, the value of any benefit or fringe benefit received by a taxpayer in the course of his business is taxable as business income. The Budget 2022, therefore, proposes the imposition of a 10% withholding tax on such benefits or favours, requiring the person paying or providing such benefits or favours to a resident of India to withhold such taxes.

6. International Financial Services Centre (IFSC)

In recent years, India has introduced various tax breaks for entities based in the IFSC to make it a global hub of the financial services industry. A tax exemption is now announced for non-resident income from offshore derivatives or over-the-counter derivatives issued by an offshore bank, income from royalties, and income from portfolio management services provided by the IFSC, subject to certain conditions.

7. Deadline for submitting the monthly GST declaration

The deadline for filing monthly GST returns by foreign companies is brought forward to the 13th of the month (previously it was the 20th).

8. Input tax credit (ITC)

Budget 2022 imposes additional restrictions on the application of the ITC under the GST laws, making taxpayers even more compliant. 

The Indian tax system can become a real headache without the right local help. IndiaConnected has therefore put together this guide, which provides insight into the complex tax and financial system every CFO in India has to deal with, and which we can support you with at all times. From obtaining all necessary documents for your first export from the Netherlands to taking care of the entire back-office of your Indian entity, so you can always fully focus on your activities in India.

Export

1. Less benefit on import duties and more focus on Make-in-India

The new budget announces a phased review and partial elimination of nearly 350 duty exemptions to encourage companies to set up a manufacturing plant in India.

2. Special Economic Zones (SEZ)

To promote exports from India, the Special Economic Zones Act is being replaced by a new legislation that will bring the states together as partners in 'Development of Enterprise and Service Hubs'. The aim of these hubs is to improve cooperation between all major existing and new SEZs, make the best use of available infrastructure and increase export competitiveness.

The number of SEZs in India will also increase substantially in the coming year, with almost 40% of the approved SEZs yet to become operational.

Interesting opportunities for international companies in India

Defence
In the new budget, 25% of the 66 billion dollar defence budget will be made available for R&D in this sector by companies, start-ups and academia, providing opportunities to international players with innovative solutions. In addition, this investment is expected to create exciting opportunities for manufacturers in this sector based in India. In 2020, India changed its regulations for FDI in the defence sector and now allows investments of up to 74 per cent. 

Healthcare
The Indian government is expanding the favourable tax regime for manufacturers in this sector, with the aim of stimulating, among other things, the production of pharmaceuticals and medical devices. It has also identified the pharmaceutical sector as one of the key growth sectors and is supporting the sector with favourable policy measures. However, in the budget it leaves out the R&D segment of this sector, which is a missed opportunity. 100 per cent FDI is allowed in almost all segments of the healthcare sector. 

Digitalisation and technology
India's new budget shows the ambition to move towards a digital society and economy. As a result, almost every sector (digital currency, infrastructure focuses on EVs, e-passport, etc) will get a digital boost, creating significant direct and indirect opportunities for start-ups and companies, such as software, hardware and service companies. In the technology sector, 100 per cent FDI is allowed.

The Indian government also aims to boost the country's data centres and energy storage systems, charging infrastructure and battery systems. It wants to build a world-class data centre ecosystem by attracting investments from domestic and international players, thereby boosting this sector.

Agriculture
One of the sectors where the government is trying to make a big push for development is agriculture. A new fund has been announced that will support start-ups that lease agricultural machinery to farmers and provide companies with innovative, digital solutions to make their operations more efficient. Innovative solutions are also being looked at: such as using drones to help farmers with land registration. In the agricultural sector, 100 per cent FDI is allowed.

Are you curious about the specific opportunities that exist in the Indian market for your company or sector? Our local experts are ready to answer your questions.