It’s Time For Policy Push To Make Indian Agritech Accessible To Farmers

Background

Indian agriculture needs to adapt innovations to become sustainable and profitable for farmers. There are multiple challenges facing Indian agriculture including climate change, water stress, deterioration of soil health, price volatility and farmer’s lack of motivation to continue farming.

There are estimated about 150 million farmers in India with majority of them (more than 85%) owning less than two hectares of farmland. A farmer with average land holding of about one hectare earns gross income of about Rs. 100,000 to meet his personal, family and occupational needs. Farmer is often left with little surplus for productive investment into new age solutions.

As demonstrated by about 600 plus agritech startups, innovations can go a long way in improving farm economics with improved yield, reduced cost of inputs and empowering farmers to de-risk against commodity price fluctuations, monsoon failures etc. The growing breed of agri-entrepreneurs is working towards improving farmer access to markets, quality inputs, institutional credit, and insurance. Consumers also benefit in the process with improved access to safe, nutritious and affordable food. Industry and government gain with access to reliable, timely and accurate data for decision making and policy design for farmer welfare.

There have been several efforts at the central government as well as some state governments to take these innovations to farmers. In addition, there is effort made by some of the Foundations and Not-for-profit enterprises to support technologies which positively impact small holder farmers. All these efforts are welcome sign; however, a coordinated and synergistic approach can go a long way to amplify the positive impact on farm economics.

It is time the government drives the innovation agenda parallel to other agri reforms to make impact of reforms more productive. This article talks about current start-up ecosystem in Indian agriculture and need for enabling policy framework.

Current Status of start-ups in agricultural space in India

The agritech sector took its root in the last decade however it gained momentum in the last three years, driven by entry of high-quality entrepreneurs and increasing investor interest. There are estimated more than 600 post POC (Proof-of-Concept) agritech start-ups in the agricultural sector, most of them with vintage of less than five years.

Investors have pumped in close to $ 1 bn in upstream agritech deals over last decade and the momentum has started to pick up with over $ 600 mn invested in last 24 months. In all probability, agritech will continue to attract venture capital in the range of $ 500 mn to $ 1bn on annual basis in the foreseeable future.

Indian agritech start-ups are trying to solve multi-dimensional problems prevalent in Indian agriculture including low productivity, sub-optimal efficiency in supply chain, and lack of access to markets, institutional credit, crop insurance, quality inputs and market linkages. The top seven emerging innovation themes in Indian agriculture, horticulture and livestock are as follows:

i) Demand drive and tech enabled aggregation and distribution of farm produce from point of collection to consumption (examples: Ninjacart, Jumbotail, Bigbasket, Kamatan, Desai Fruits Venture, Farmlink, WayCool, MeraKisan, Kamatan, DeHaat, ShopKirana, SuperZop, Agrowave, Crofarm, Agribolo, Himkara, Kisan Network, Milklane, Fresh to home, Licious, Numer8, AquaConnect, City Mandi)

ii) Quality assaying of agricultural commodities through image processing and digitisation of transactional data, price discovery and traceability (examples: Intellolabs, Agricxlab, qZense, Raav Tech, InfyUlabs, Lateral Praxis, Occipetal, Amvicube, Nanopix, TraceX, Source Trace, Atsuya Technologies)

iii) Building near-farm storage, warehouse and processing units with access to post harvest finance and market linkage through digital and physical modes (examples: Our Foods, S4S Technologies, Agri Bazaar, Star Agri, Arya Collateral, Ecozen, Origo, Sohan Lal Commodites, Promethean, Inficold, Whrrl)

iv) Optimise the use of agricultural inputs and enable delivery to farmers based on farm and crop diagnostics (examples: Agrostar, BigHaat, Behtar Zindagi, Unnati, Gramophone, Freshokartz, AgriBolo, Plantix, Helicrofter, Hesa, EF Polymer, Frontier Markets, Bharat Rohan, Bharat Agri, E Fasal)

v) Reduce labour cost through mechanisation on the pay-per-use model and innovative mechanical tools (examples: Sickle innovations, Distinct Horizon, Kamal Kisan, Mera Tractor, Cellestial Tractors, X-Machines, Tractor Junction, Khetibadi, EM3, Agrirain, Flybird, Toolsvilla)

vi) Farmer advisory and data driven crop monitoring / precision farming / lending (examples: CropIn, SatSure, Mantle Labs, AgRisk, Skymet. Samunnati, Samaaru, FarMart, Jai-Kisan, PayAgri, Bijak )

vii) Environment-controlled agriculture using techniques such as vertical farming, hydroponics, aquaponics (examples: Futurefarms, Urban Kisaan, Absolute Foods, Kaze Living)

Its early days but there is a strong probability of convergence of above themes to build scale and optimise the cost of farmer access. Policy can be a significant enabler in this process as strong public ecosystem creation would significantly improve returns for the private capital to chip in.

Policy prescription for Indian agritech

The Indian agritech has demonstrated benefits to farmers and value chain players, however, the penetration of agritech solutions remains below 10% with about 14 million farmers adopting available agritech solutions. It’s time to democratize the agritech solutions among larger farmer community with enabling policy framework to make Indian agriculture sustainable, market driven, climate resilient and efficient. Another key impact which agritech models are likely to achieve is creating millions of jobs in the rural areas, which is one of the government’s key priorities.

In order to achieve this vision, there is need to build a thriving entrepreneurial ecosystem including policymakers, financial institutions, thinktanks, academia, industry, FPOs, farmer bodies, startups and investors in agriculture space to drive adoption of innovations in all aspects of Indian agriculture

Here is 10 point policy prescription for Indian agritech:

1. Build sandbox for agri-fintech solutions

The cost of capital in Indian agriculture is prohibitively high from farming to processing to distribution. Despite government’s USD 180 bn target for priority sector lending (PSL) to agriculture, about 70% of farmers do not have access to institutional credit, paying interest of 24% to 60% per annum (against 7% under PSL). Likewise, MSMEs including warehousing companies, processors and distributors which dominate the food supply chain pay high cost of working capital (15 to 18%).

The high cost of capital makes farming and value chain businesses unviable. Digitisation of food supply can make the data available to bankers, which can reduce banker’s risk and cost of capital. Many agritech and fintech startups are working in digitizing the supply chain to help bankers lend intelligently. We need a dedicated sandbox where both public and private sector banks can be incentivized to work with startups for building and piloting innovative agri / fintech solutions to scale them faster.

2. Develop climate-finance products

India is amongst the most water stressed and climate vulnerable countries in the world. A large part of Indian arable land can go dry in next decade or so if we do not pay attention to it. Solving for climate risk needs a holistic, collaborative approach through policy intervention, investment and innovation.

Indian agri tech community in last few years that are trying to address climate change risks including building climate-predictive data-driven models, solutions for resource conservation and reducing carbon footprints. However, the big question is why farmer would adapt these practices. One option is to build credit and insurance products which incentivizes farmers to adapt climate resilient solutions. The incentives to farmers could be in the form of interest subvention and reduce premium on loan and insurance products respectively. Regulators need to work with banks, insurance companies and startups to conceive such products.

3. Dedicated cell for agritech startups

Agritech startups often struggle to reach out to beauracracy and policy makers, specifically at the state level. For example, the current laws do not recognize agri-input ecommerce platforms for the purpose of distribution and storage of agri inputs such as seeds, fertilizers and agrochemicals. Startups in this space often find it difficult to expand their footprint because of lack of regulatory clarity on agri input ecommerce.

A dedicated cell at the state level would go a long way in facilitating continuous dialogue between the state government and the startups. Likewise, there are many other areas where such dedicated cell under the aegis of central / state governments can play a proactive role to help agritech startups. Three such areas are:

3.1 State governments through state agricultural universities and research centres can support start-ups for pilots and validation of technology. The validation from universities will help start-ups in course correction as well as in approaching the potential customers.

3.2 State governments can also play an important role in training and capacity building of village level entrepreneurs who can act as channel partners for agritech start-ups to make their innovations accessible to farmers in the state.

3.3 Another area which this cell can focus on is building high quality research papers related to innovations happening in India by start-ups in the field of agriculture. There are multiple areas which need in-depth research, for example:

• How innovations are impacting the farmer’s income?

• What are the challenges in farmer adoption of new-age technologies?

• What innovations in financing are needed to improve lending to small holder farmers?

• What are the challenges in creating a pan-India market for agri commodities?

There is a long list of research areas and many unproven hypotheses. Lack of well researched data makes decision making sub-optimal for policy makers, investors and entrepreneurs. The dissemination of research and knowledge can be done through workshops, reports, events as appropriate.

4. Centre of excellence for data science applications in agriculture

The secret sauce of data centric models in agritech lies in building machine learning and artificial intelligence (AI) models, which can predict events in advance with more accuracy such as any weather event, pest attack, harvest and crop yield, commodity prices. AI model also provide immediate, low cost, affordable portable, accurate solutions for measurement of soil moisture, nutrition, crop health, quality assessment etc.

One of the biggest challenges in scaling AI models is lack of access to good quality data. Most startups spend disproportionate effort and time on data collection rather than effort needed for data modeling. The government can attempt to build a public data repositories by collating already existing datasets that lie with government departments, research institutions and universities.

5. Piloting Agristack

Agristack is conceptualized as a public digital platform for ready, authenticated and almost instant access to farmers. This platform can be the hotbed for driving disruptive innovations in agricultural sector. The Government of India has already initiated work on AgriStack, under IndEA framework, called IndEA Digital Ecosystem in Agriculture (IDEA). Ministry of Electronics and IT along with Ministry of Agriculture are working on it.

Building AgriStack has to be a collaborative effort including governments (both federal and state) along with innovators. Use of technology in developing Agristack can optimise time and cost involved. There is clearly one-time investment in building this and then there will be recurring cost to maintain and continuously update it. Unlike IndiaStack, AgriStack will have dynamicity given multiple crop cycles and changes in farm boundaries over a period of time.

It is time for piloting multiple Agristack to formulate, test, design and build architecture; guidelines and modus operandi. Start-ups working on building digital tools such as satellite imagery, drones for mapping farms can develop relevant tech models. Ground truthing support for the purpose of identifying, validating and tagging cultivators / farmers to a farm needs to be provided and validated by the state governments.

The utility of the AgriStack once developed can be tested by inviting partners including banks, insurance companies, agri input and output companies and anyone who wants to build first and last mile access to the farmers. It is imperative that we need to make the platform open-source to maximise its utility. The extent of access needs to be discussed and decided jointly with the respective state governments.

6. Building incubation support for rural India

The significance of agribusiness incubation Centres in facilitating an ecosystem conducive for the growth of agribusiness enterprises is recognized worldwide. In India too, the work done by incubators such as CIIE.CO, Indigram Labs, A-Idea Naarm, Pusa Krishi, ICRISAT, Villgro and many others is exemplary, in nurturing hundreds of agri entrepreneurs. It’s now time to build rural incubators to motivate and support rural youth in build their own entrepreneurial models.

The state agricultural universities and Krishi Vigyan Kendras can be roped in to build such incubators. The government should lay down guidelines for selection of incubators, locations and provide support for training the incubator managers with focus on rural areas. Rural incubation models will truly democratize the startup ecosystem in India.

7. Catalytic funding for young agritech startups

Though Government of India is already investing into multiple startups through government supported incubators, we still need a high velocity catalytic fund for investments at the seed stage. There is enough depth in the ecosystem to absorb seed funding in the tune of Rs. 100 crores per annum, supporting about 50 to 100 startups every year.

This will not just accelerate the proofing of concept, product and market development but will also facilitate the pipeline for flow of capital into agritech ecosystem for the late-stage funds.

8. Incorporating agri entrepreneurship courses in agricultural education

The agritech sector needs top quality talent for scaling the models. There is need for nurturing talent at the college / university level itself. This can be made possible by incorporating courses on entrepreneurship in all agricultural streams.

Also given huge application of data sciences in new age models, a few courses on data analytics and machine learning could be made part of the curriculum. Internship with agritech startups could be another way to familiarize young graduates with startup culture.

9. Platform for startup – FPO – MSME connect

Evolution of Farmer Produce Organisations (FPOs) in India is at nascent stage. FPOs are filling important gaps in the supply chain with focus on aggregation of farm produce and linking farmers to markets. There are about 7000 FPOs in India, but only few have reached scale and commercial viability. FPOs in order to be successful need support in the form of financing, credit rating, capacity building, warehousing, primary processing etc.

Start-ups are best placed to build tailor-made solutions for FPOs in all these areas. We are already seeing many start-ups orienting their business models to cater to the needs of FPOs. The handshake between farmer and agritech entrepreneur will create unique win-win collaborative business models and FPOs have a huge role to play in making this happen.

The lead institutions like NABARD, SFAC can take the lead for coordinating partnership between start-ups and FPOs.

Likewise, there is hardly any interface between MSMEs and startups despite the fact both agri input and post-harvest supply chains are dominated by MSMEs. Many MSMEs can optimize their cost of sourcing and improve value addition in partnership with agritech startups.

Governments can facilitate dialogues and partnerships between FPOs, MSMEs and startups.

10. Tech integration in export linked supply chains

India’s exports of food and agricultural products are about $ 30-35 bn per annum. For India to meet its export target of $ 100 bn, it needs to integrate technologies related to quality assaying, certification, traceability, food safety and price discovery for building access and trust among importers.

There are enough tech solutions developed by startups which can solve challenges faced by the exporters. Agencies like APEDA can facilitate continuous interactions, dialogue and pilots between the startups and exporter of food products.

To conclude, the above ten point policy prescriptions can be game changer for Indian agritech, which in turn can benefit millions of farmers. It also complements government’s agri reform agenda. The multiplier impact of scaling agritech on rural economy could be huge in terms of creating jobs and providing livelihoods to rural youth. The marriage of agri reforms with agritech innovations is the prefect recipe for the longevity and sustainability of Indian agriculture.

The writer of the article is Hemendra Mathur, Chairman, FICCI Task Force on Agri Start ups. He is also a Co-Founder, ThinkAg and Venture Partner, Bharat, Innovation Fund. The article was already published on YourStory on 10th Jan 2021.