Should Agritech Startups Revamp Tech Solutions Amid COVID-19 Pandemic?
The potential of the agritech industry and the prospects India offers in the agriculture and farming landscape have proved their worth for the economy and employment.
Traditionally, India has been an agriculture-based economy, with industries such as chemical, retail, consumer packaged goods, and e-commerce thrive in it. The industry alone contributes 16% of India’s gross domestic product (GDP), employing 43% of the workforce, as per the 2020 EY report.
Emerged around the last decade, the agritech startup ecosystem has been actively involved in disrupting the immense capacity of the agriculture sector – by collaborating agriculture with the latest technology.
Impeding Issues of Farmers and Business
The sector is rife with constraints and faces numerous and long-prevailing structural challenges in realising its full potential. Impediments like several inefficiencies and lack of transparency, multiple intermediaries, or middle-men spread deep in the value-chain system over many years.
These intermediaries contribute to the weakening of farmer’s income, rendering the farmers in intricate financial debts. It is crucial to realise that small and marginal farmers form the lion’s share (86%) of India’s farm holdings. Therefore, Indian agriculture must bring inclusive solutions to challenges that meet the needs of the small and marginal farmers. Approximately, 80% of Indian farmers have an annual take-home income below Rs 70,000, as per the media report.
Consequently, farmers have been deprived of access to agriculture value-chain services due to the small-ticket size of transactions. The labyrinth of layers between farmers and businesses intensifies the complications. Inadequate access to credit, marketplaces and technology are some of the other issues this sector struggles with.
When nearly 50% of the Indian population is occupied in agriculture pursuits, income from farming is vital in driving consumption. Supply-chain logistics plays a crucial role in delivering products to consumers, irrespective of industry. This is critical for agri-products that are perishable. The nationwide lockdown due to the Covid-19 pandemic caused a severe shortage of labour, transport blockage, and limited market access, putting thousands of farmers in a lurch. Agritech companies bridged the farm to fork divide, especially during the months of the nation and worldwide lockdown due to the Covid-19 pandemic.
Agritech Startups operating in the sector
“Covid-19 and the lockdown have hit the core logistics and supply chain in agriculture in ways which were not measured in traditional distribution setups, and they were technologically insufficient to overcome this situation. Many agritech companies came up with innovative ways to help farmers and save their crop and harvest from complete loss and in this, they also gained farmers’ confidence,” Ananda Verma, co-founder, Fasal said in a media report.
Fasal uses cutting-edge technology to help farmers take farm-level decisions. Information is collected through its AI-powered IoT-SaaS platform that captures real-time data on crop growing conditions from on-farm sensors. Fasal delivers specific actionable advisories on farm and crop to farmers via mobile app in local languages.
The potential of the agritech industry and the prospects India offers in the agriculture and farming landscape have proved their worth for the economy and employment. “DeHaat improves the livelihood of Indian farmers irrespective of the land size and cropping pattern. Today, more than 500 agri-business companies are getting direct access to 220,000-plus farmers. Output players realise a significant reduction in post-harvest loss along with the increased scope of customisation in terms of packaging and at the same time, agriculture input players get a transparent channel for farmers’ feedback for their products,” said Shashank Kumar, DeHaat co-founder.
The agritech company uses AI-enabled technologies to provide end-to-end services and solutions on supply-chain and production to the farmers.
Agritech startup Bijak is a marketplace platform for agri products that connect the various stakeholders like the farmers to traders in the ecosystem to locate and network with each other. To bring transparency and accountability, it implements a rating system for buyers and suppliers based on their transaction patterns. “The platform is also bringing in digitisation of physical mandis, artiyas (commission agents), loaders, and processors by providing them an online interface,” Nukul Upadhye, co-founder said in a media report.
Recent Changes in Farm Laws
In a view of the ongoing farmers' protest in the country over new farm laws, farmers want the central government to either scrap the three new legislations or ensure them the minimum support price (MSP) for their crops by establishing a new law.
Farmers are objecting against two Farm Bills which India’s Rajya Sabha (Upper House) has recently passed. The first bill is the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020. This enables the farmers to sell their crops and other productions outside the Agricultural Produce Market Committee (APMC) controlled markets. The APMCs are controlled and operated by the government market yards (mandis). This gives farmers myriad choices about who they want to sell their food productions.
The second bill is the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, which creates conditions for the establishment of a structure for contract farming. The farmer and an appointed buyer can reach a deal before the production takes place.
Both bills have already been passed in Lok Sabha (Lower House), however, there was a massive uproar when these bills were introduced in the Rajya Sabha, where later the bills were finally passed via voice vote.
Focus Areas For Agritech Startups
Agritech startups are functioning in a market with an estimated potential of $24 billion by 2025. With a growth rate of 25% year-on-year, there are more than 450 startups in India’s agritech sector, reported in Agritech in India – Emerging Trends in 2019, by NASSCOM. In recent times, the Indian agritech sector has experienced direct investments coming from sector-specific and global investors in agritech startups.
The sector has obtained funding of over $248 million with a huge growth of 300% from previous years. Taking a cue from this trend, 48% agritech founders are confident to have the next agritech unicorn, soon. As the number of startups and investments are increasing, this sector is also seeing varied private-public partnerships.
Agritech has unlocked opportunities of market linkages - farmers’ products are sold directly to the consumers, digital agriculture, provide improved quality of tools to farmers for better production, giving real-time access and transparency to data and giving financial support are some of the main areas where agritech startups have made a significant contribution. Extensive adoption of technology, through digital platforms, analytics, artificial intelligence (AI), machine learning (ML) and Internet of Things (IoT) is key for transformation in Indian agriculture.
Covid-19 thrust the world into a sudden unprecedented situation. Prolonged months of nationwide lockdown to contain the deadly virus from spreading crippled all movement. As businesses and the economy got a jolt, agri workers and fresh perishable products were the worst hit. An otherwise grim situation was sunny-side-up for agritech sector. Agritech startups who were on a gradual upward swing pre-pandemic played a major role in redeeming the agri workers and their produce from further perils. The pandemic was also a quick realization for the startups to further improve the technologies and observe and innovate to thrive in one of India’s most complex agriculture industry. Agritech startups could improve and benefit by focussing on some key areas.
Market Linkage and Supply Chain: Innovations to facilitate farmers with a well-timed and accurate estimation of sowing and harvesting in coordination with consumer demand patterns. The agritech sector has paved the way for numerous market opportunities in India. Particularly, in developing and enhancing market linkages.
Enabling taking farmer products directly to consumers, digitising agriculture, ease of access to real-time information for farmers, more transparency throughout the value chain, supplying better-quality equipment to farmers to increase yields and providing micro-financing options to manage risks. The supply chain system is the backbone of agri sector. For agritech startups upgrading the supply chain system is a major focus area. This helps the farmers get a better price for their products and increase their share in profits from crop sales.
Big Data: Development of farm-specific, data-driven diagnostics to ascertain soil and crop condition. Efficient use of drones or tractors to collect data directly from the farm fields to analyse agri-relevant risk. Widespread use of smartphones and applications helps farmers decide their farming activities which propels productivity and revenue while reducing unit costs.
Farming as a Service (FAAS): Prolonged gestation periods are a normal feature of the agri sector which relies on nature. For an average farmer purchasing modern types of equipment is largely unaffordable. Renting solutions allow farmers to procure the equipment when required at an affordable price and reduce their cost burden. Agri equipment renting by startups is a lucrative prospect that has shown market traction.
Fintech for Agri-workers: Farm income is predominantly in cash and there is a time gap until the farmer deposits the amount in the bank. Often, the cash-in-hand gets fully or partially spent on recurring expenses. There is wide scope for fintech startups who can develop digitization solutions for farmers to receive money through payment gateways linked to their bank accounts. Simultaneously building credit profiles of funders and lenders.
IoT for Farmers: Concepts like high-precision crop control, data collection, automated farming techniques will eliminate inefficiencies and boost the productivity of the agri sector. Internet of Things solutions such as data on crop yields, rainfall patterns, pest infestation and soil health can be used to enhance farming techniques in the future.
By and large, the Indian agritech sector has immense un-disrupted potential. The Agritech sector has arrived at that inflection point where it is picking-up momentum among venture capitalists and government grants. Agricultural industry is significant in India’s economy and tech start-ups are playing a critical role in alleviating the farmers from years of burden with various digital solutions like artificial intelligence, the internet of things, Big Data analytics and engineering innovations. Transparency and operational efficiencies being initiated and executed are changing India’s agricultural ecosystem.
The Way Forward
The pandemic emerged as a silver lining for agritech startups. This setback for the Indian economy, agriculture and allied industries was a silver lining in the pandemic crisis. As the Indian economy experiences the severe impact of COVID-19, good rainfall brought robust crop produce giving a hopeful respite in unprecedented times. A 2020 CRISIL research calculated better agri-production leading to a 3-5% rise in per-hector farm gate prices of crops further, leading to an increase in cultivation and farmers’ income.
“India’s agriculture sector is advancing steadily towards its digital transformation and the startup ecosystem is playing a critical role here, bringing innovation and disruption in much-needed areas. Adoption of technology in agriculture has always needed a structured institutional focus and technology firms are trying to break into the agricultural landscape using newer business models,” Debjani Ghosh, President NASSCOM had said in a media release.
While the government’s policies on removal of stock limits, liberalisation of sale of produce across the country and formalisation of contract farming are expected to give incentive to the sector by encouraging private investments and help achieve a target of increasing farmers income by 2022.