* Job creation scheme sucks workforce from agriculture

* Herbicides cheaper, quicker option than labourers

* Companies see herbicides taking greater share of sales

Herbicide demand in India is rising sharply and could double in the next three years as an acute labour shortage makes them a cheaper option and a rally in farm goods prices prompts farmers to grow crops with extra care.

Sales of herbicides could touch 24 billion rupees ($530 million) by March 2014, industry officials and analysts said, boosting firms such as Monsanto India (MNSN.BO), United Phosphorus (UNPO.BO), Insecticides (India) (ISIL.BO) and Rallis India (RALL.BO) -- a unit of Tata Chemicals (TTCH.BO).

In India, farmers traditionally employ labourers to remove crop-hurting herbs and weeds, but a rural jobs scheme introduced in 2005 is creating employment opportunities outside the agriculture sector, leading to a shortage of farm workers.

After the introduction of NREGS, deploying labour to remove weeds and herbs in farms has become costly, Pradip Dave, president of Pesticides Manufacturers and Formulators Association of India, told Reuters, referring to the government job scheme.

This has made farmers opt for herbicide sprays. Herbicide sales were about 7 billion rupees some three years back and the growth was moderate, but the demand is picking up fast.

Herbicide sales are seen rising 25 percent or more every year, he said, adding: The trend would continue as labour shortage would be a long-term problem.

Herbs and weeds grow on farms and suck water as well as nutrients from the soil. Though they are not fatal to crops like pests, they affect the health of crops. Herbicides are sprayed to kill weeds, without hurting the main crop.

LABOUR SHORTAGE

Getting labourers is becoming difficult every day. And daily wages are also going up. So it makes sense to use herbicides instead of putting labourers for weeding operation, said Vishwanath Patil, a 44-year-old sugar cane farmer from Kolhapur district in the western state of Maharashtra.

Patil estimated that to maintain an acre of weed-free sugar cane crop requires spending of 3,500 rupees on herbicides, against a cost of over 10,000 rupees needed for labourers.

The NREGS wages are a minimum 100 rupees a day and that has made the difference, Rajesh Agarwal, managing director of Insecticides (India), said.

Insecticides (India), which sells herbicide brands like Kaiser, Racer and Pendamil, sees herbicides contributing about 30 percent to its overall revenue of 7.5 billion rupees in FY12 from 20 percent, he said.

A price rally in agriculture commodities was also a key reason behind rising use of herbicides, said Anil Kakkar, director, Crop Care Federation of India.

With farmers getting higher support prices for key crops such as wheat, rice, cotton and sugar cane amidst a rally in farm goods prices in the world market, they are ploughing back a part of the income on fertilisers and pesticides, Dave said.

Patil, the farmer, says eight labourers take up to two weeks to clear an acre of land, while herbicides application can be done in a day with the help of two labourers.

Big herbicide manufacturers say they see sales in the segment zooming.

Rallis India Managing Director V. Shankar told Reuters in December the company was planning to introduce new products in the segment as herbicides demand would see a sharp rise.

Farm labour shortage is likely to stay here for a longer time. It may even get worse. So for pesticide companies, herbicides segment will emerge as a key growth area, Dave said. ($1= 45.3 Indian rupees) (Editing by Krittivas Mukherjee)

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