Oct222020
Posted by:admin
Modernizing Indian Agriculture through Innovations & Technology
The Green Revolution provided a much-needed push to Indian agriculture five decades back. It’s time now for a greener, wider, and more sustainable model of agriculture. Modernizing Indian Agriculture seems a formidable task. However, with the advent of a number of Agtech startups carrying the twig of technology, and, the interest from incubators and investors in agriculture, there is the hope of trotting up the hill in all its inclusivity. Can this hope turn into reality and transform Indian agriculture? A thought which encouraged us to mull over and deliberate with industry leaders.
A webinar, organized by Caspian Debt on the 10th of September, 2020 discussed “Modernizing Indian Agriculture through Innovations & Technology” with investors and entrepreneurs having deep and vast experience in the agriculture domain. The panelists were:
- Arindom Datta, Executive Director, Rabobank
- Subhadeep Sanyal, Partner, Omnivore Partners
- Purnima Khadelwal, Co-founder, INI Farms
- Ranjith Mukundan, Co-Founder, Stellapps
The webinar was moderated by Emmanuel Murray, Senior Advisor at Caspian.
The highlights of the Webinar are summarized below:
For decades, agriculture has been a key focus of economists for the simple reason that it contributes around 15% to the GDP of India, and provides livelihood to 700 million people. Over time, India achieved great milestones in terms of global leadership in the production of food grains, milk, and horticulture. But, the challenges of the Indian agriculture ecosystem still remain because of fragmented land holdings and inefficiencies. Arindom spoke of how improvements are visible at the gross level, in terms of food security, crop diversification, and exports. But at a granular level, things have become more complicated owing to climate change and water crisis.
Stakeholders in Indian agriculture are besieged by information asymmetry at various levels. Farmers have to grapple with a myriad of challenges because of a lack of information on the right inputs, weather data, and markets. At the same time, agro-processing companies struggle to take the right decisions owing to inconsistent data and data flow from the field, making it one of the most vulnerable and broken supply chains. Banks and Insurance companies shy away from offering their products and services to farmers because of the inability to map and make risk assessment models of highly complex variables present in the food and agri ecosystem.
Just as technology changed the face of banking, entertainment, telecommunication, and logistics, the right adoption of technology at the right place can transform the face of the Indian agriculture system. In this course, digitization of farmers and land records comes first, which needs to be embarked upon in a gigantic way. To increase productivity and farm incomes, an assortment of technologies like hybrid seeds, precision farming, big data analytics, artificial intelligence, geo-tagging & satellite monitoring, mobile apps, and application of farm management software at every stage in the agriculture process would play a role of utmost importance.
Therefore, it becomes imperative that the “culture of agreeing” to fate needs to be dispensed with, and replaced by today’s technology if giant strides are to be made in the field of agriculture.
The Indian food sector is a $ 400 Bn industry, and with existing challenges, there also exists an immense opportunity for innovation-led expansions for agtech players who can address the existing voids. The potential of the sector can be measured by the human resource base that are being attracted to it. It was interesting to note from Ranjith’s deliberation how Stellapps has driven innovation and efficiency in the dairy sector through technology and brought about IoT, cloud, and big data to modernize the dairy supply chain, digitizing over 2 million farmers who supply more than 10 million liters of milk annually, in an otherwise unorganized sector.
With a large number of variables directly/indirectly impacting Indian agriculture and the scale of volatility that exists in these variables, agriculture research is a haven for data scientists like Ranjith. Startups working in this domain are trying to build a robust assimilation model that helps generate farm-level insights. One such example is ‘Moopay’, a product developed by Stellapps that captures alternate data of farmers and helps them build a digital highway that a financial institution, dairy processor, or cattle nutrition company can use in their business operations.
Purnima, who co-founded INI Farms a decade back, probably when agtech was unknown, is into the marketing and supply chain of horticulture crops (specifically banana, pomegranate, and arils). She spoke about how right from when their journey started in 2009, they focused on two important aspects; quality and productivity, and that has helped them increase their own returns along with farmers’ returns. Purnima spoke of how technology plays a pivotal role in monitoring the quality of fresh produce, especially when one is selling in the global market. That is where the company kept on evolving systems and technology, that today provides traceability of the produce from the farmer-level to the end-consumer, providing consumers the footprint data of the journey of each fruit from pre-harvest, handling, packaging, transport to market shelf.
With the kind of talent that the sector is attracting, venture capital investors such as Omnivore and many others have earmarked funds dedicated to agtech companies. Subhadeep reminisced how he has been enjoying working with different agtech companies since 2011, starting small but having a vision of taking it to a larger scale with the help of technology. Best of human resources coupled with cheaper data availability and deeper smartphone penetration, startups are able to develop solutions that create value for every stakeholder involved right from the farmer to consumer. There has been a general shift towards adopting business models from B2B until 2014 to B2B2F now and credit must be given to a lot of entrepreneurs who, even with the dearth of seed or venture capital investments, slogged out from 2010 to 2014, and made effort to understand the complexity of the problems and develop scalable solutions. However, the situation has drastically changed in the last 5 years, with more than 50 funds looking to invest in agtech companies, including mainstream investors and half a billion $ invested over the last few years.
The fact that a majority of investments have been in downstream (post-harvest) as compared to upstream at the farm gate level was also discussed. Seeing the obvious challenge of food wastage arising from a fragmented supply chain and poor post-harvest facilities, Investors initially developed an interest in the business where the problem was easily discernible. Hence, the more private capital flow was seen in case entrepreneurs are able to sell the produce in a more efficient and optimal manner, by de-layering the supply chain, increasing the product shelf life, reducing wastage of the produce, and providing a market to the farmers. However, there have been heavy investments undertaken by Government research institutions in the upstream channel, such as into micro-irrigation addressing the issues of water stress and climate change. One such upstream domain where Omnivore has a very positive outlook and considers it changing the technology landscape as opposed to historical outlook is the field of agri-biotech, producing plants/species which are more resilient and nutritious. This will come in the wake of the water availability problem that India is foreboding. Around 90% of the water in India is consumed by the agriculture sector alone which in other countries stands somewhere between 60-70%. Around 2/3rd of the irrigation comes from groundwater and studies suggest that around 50% of borewells could go dry in the next 10 years.
Deliberating on different technology advancement that had taken place in South-East Asia and Africa, Arindom put across very succinctly that in the case of modern technology, other countries have performed significantly better, but in digital technology, India is definitely on the right track and ranks better than Africa and South-East Asia which are using western countries’ technology, that is not cost-efficient. In Agtech, per acre and per farmer technology cost in India is by far the most efficient and cheapest primarily because of the realization of scalability by the entrepreneurs rather than margins.
On exit opportunities for VC’s, all the panelists, including investors shared the same opinion. While VCs have the responsibility of returning capital to their limited partners, they should have a different outlook when investing in agriculture. One should be aware of the practical situation that exists on the ground and an investor investing in agriculture must take a long-term investment outlook (7-8 years), and should not compare with other sectors where one can probably see an exit in 3-4 years. There is also a lot more acceptance coming from corporates such as ITC, Syngenta, Godrej Agrovet, and others which were missing 2-3 years back. Corporates are also willing to collaborate with Agtech start-ups and panelists envisage some large exits happening in 3-4 years.
Advice to agtech startups and professionals:
- There is a need for building a high-touch and high-tech solution rather than going all tech. It is not expected from a new company to provide a full-stack solution to the farmer. Tech is just an enabler, so the key message is to understand what a farmer needs, and also presence on the ground, to be able to educate and increase the awareness at the farm level.
- Try building an ecosystem and go for co-creation instead of creating a solution on your own. Many entrepreneurs who are not from agricultural backgrounds might miss out on the intricacies of how different stakeholders make decisions.
- A lot of early-stage agtech startups face near death because of a lack of working capital. It is of utmost importance that startups stay in touch with the right kind of lenders who finance the asset-light model (sometimes even when they are cash negative) so that whenever the enterprise requires capital, they should not find themselves in the lurch.
- Do not over-promise when dealing with Corporates. It is really important to show numbers that can really be achieved.
In conclusion, in a country where over 60% of the population depends primarily on agriculture for their livelihood, heavy and constant investment in agricultural technology is indispensable. Israel, a small country as compared to India, has shown the world how the rightful application of science can bring about a massive change in the field of agriculture. Ours is a country in which nature has bestowed all the important ingredients required to cultivate the land. There is no doubt about the potential of our farmers, and if their hard work is coupled with technology, India can emerge as a champion in the field of Agriculture.
_______________________________________________________________________________
This paper is based on the discussions at the Webinar “Modernizing Indian Agriculture through Innovations & Technology” organized by Caspian on 10 September 2020.
