Indian Agtech: How Can It Make Agriculture Supply Chain More Efficient?

Hemendra Mathur, Venture Partner, Bharat Innovations FundBharat Innovation Fund believes that technology has the potential to unlock large emerging sectors such as agriculture, health, energy as well as enterprises and create unprecedented business opportunities for innovators with great ideas. The company works toward using people, capital, vast network and deep domain expertise to help companies that are transforming these sectors through their innovations.

Agritech in India is still nascent with participation from about 300-400 agripreneur trying to solve multiple problem in Indian agriculture supply chain. The combined revenue of all Agritech start-ups in India is probably less than $100 million which is drop in the ocean worth more than $ 350 billion. Despite the importance of agriculture to Indian economy, Agritech has received only $ 130 million of external funding across 60 odd deals over last four years which is less than 1% of venture capital investment in the country. Lack of access to small holder farmers to scale the innovations coupled with higher risk perception of the sector among investors has led to poor capital flow in the past. There is a need for strong public ecosystem corporate, policy makers, mentors and incubators to facilitate and derisk investment in the sector. The prevalent agtech solutions revolve around Efficiency, Data, Mechanization and Market linkages. While data innovations has gone pan-India and even global other innovation in agritech have followed penetration approach in particular geographies or crops. Integration of technology continues to drive these innovations but scaling would require strong supply chain linkages to go hand in hand with technology deployment.

The article discusses four major elements of Agtech innovation:
1.Supply Chain Efficiency: Agtech solutions have the potential to make supply chain more efficient. The solution such as farm diagnostic including mapping soil, nutrition requirement through scanner and detection of pest attack through mobile imagery can assist timely application of agriculture inputs including fertilizers and pesticides. This can reduce farm economics by reducing the use of inputs and improving farm productivity. Direct to farm model also enhance timely availability of necessary inputs. Startups like Agro star,
Bighaat, Gramophone, Unnati, Agronxt, Behtar Zindgi are trying to build business models to reach out to farmers directly with both online and offline presence. Most of them have incorporated farm advisory as part of building farmer connect and identifying farm input needs.

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2. Access to Data: One of the biggest challenges of Indian agriculture supply chain is access to timely and accurate data. Due to multiple layers in the supply chain, data get filtered, distorted and delayed. For example, one key challenge for the bankers in lending to this sector is the inability to do the KYC check of farmers and judge their credit worthiness. The solution lies in banks partnering with agtech start-ups who are capturing and analyzing weather, farm, soil and crop data which can facilitate decision making for bankers. Many of the startups are using satellite images to geotag farms, assess crop health and estimate output. They have also build algorithms for farm monitoring and analytics and use artificial intelligence to automate and improve predictably of yield/farmer income. This data is extremely useful for bankers to establish farmer KYC, make assessment on yield and potential income which can be used to estimate farmer’s credit worthiness. . This ultimately improves farmer access to institutional credit and reduce interest burden on farmers. On an average, a farmer in India pays approximately 15 to 20% of his income and about 50% of his gross margin as interest. A reduction of 30-40% in farmer’s interest burden is possible with the use of technology, data and analytics at the same time facilitating informed lending by bankers.

3. Mechanization: Mechanization includes both hardware and services. Remote irrigation controllers, machines for urea deep placement, rain guns, machines for grading and sorting, equipments for dehydration and cold storage are some of the examples of innovations around hardware development to improve mechanization in Indian farms. Some of the notable start-ups in this space include Sickle Innovations, Flybird, Distinct Horizons and Science for society, Khedut, Mitra, Tessol, Ecozen and Inficold. Innovations around services include business models operating on pay per use. Given more than 80% of farmers in India are small and marginal with limited ability to make capex investment, pay per use models has a huge role to improve access of mechanization.

4. Market Linkage: Aggregation of farm produce is a big missing link in the supply chain. Amul has demonstrated successful aggregation of farmers through cooperatives in milk supply chain. However, farm produce aggregation has been dominated by government regulated market yards or mandis. Mandi infrastructure has not kept pace with the growth in volumes. In addition, there are many pockets where density of mandis is low.

To conclude, innovations will change the way agriculture is done in India. It is high time that supply chain players including input and output companies, aggregators, retailers, processors, banks, financial institutions and insurance companies start integrating technology and adapting agtech innovations for the purpose of connecting with farmers, selling / buying, lending and insuring. Agtech innovations have the potential of transforming Indian agricultural sector. It offers unprecedented opportunity to both investors and entrepreneurs to be part of this transformation.