Agriculture start-ups: Breaking ground and filling the gaps

Source: The post is based on the article “Breaking ground and filling the gaps” published in The Business Standard on 19th September 2022.

Syllabus: GS3- Agriculture

Relevance: Agriculture start-ups

News: This article explains the functioning of farming sector startups in India.

What are the facts related to agri-start-ups in India?

They are new as compared to other sectors but have started to grow.

Services provided by them-

(1) They are providing consultancy and select services in fields like custom-hiring of agricultural machinery, including drones.

(2) They are promoting the sale and purchase of farm inputs and products through electronic platforms.

(3) They are providing advanced technologies to enhance the efficiency and precision of farm operations.

(4) They are also helping in water-resource management.

The agri-start-up ecosystem in India

The business models of most agri-start-ups are focused mainly on filling the gaps in the existing farming systems and their value chains to ensure optimal returns to farmers.

Many start-ups are working in agriculture’s allied fields such as dairying, poultry and fisheries.

Some of them are also collaborating with the government through public-private partnership mode to enhance the effectiveness of agriculture ministry schemes.

Out of the total startups in India, only 5% are in the agriculture sector.

The current value of these agri-start-ups is estimated at Rs 75,000-80,000 crore.

The turning point came during the pandemic. The investment in these startups have surged three times during the pandemic.

What is the financing scenario of these startups?

Earlier the financial institutions were wary of providing financing to these startups because of the risk associated with the agriculture sector. But now they have started to give loans to them.

Reserve Bank of India has now allowed commercial banks to treat loans of up to Rs 50 crore to agri-start-ups as priority sector lending.

What steps have been taken by the government?

The Finance Minister announced in her Budget speech this year that the government would set up a fund for agri-tech startups.

It will provide more resources through the NABARD to help agri-start-ups.

The government would encourage the use of Kisan drones for agriculture activities.

What are the challenges faced by these startups?

Their presence is uneven across the states. Agri-startups are generally more successful in states like Haryana, Uttar Pradesh, Rajasthan, Karnataka, and Maharashtra than elsewhere.

What steps should be taken by the government?

Central and state governments need to take steps to facilitate smooth functioning of agri-start-ups to diversify agriculture.

There is a need to diversify these startups from being largely service providers to producers and marketers of value-added farm products.