[Kurukshetra January Summary] Agri-startups and Enterprises – Explained, pointwise

Introduction

India has become the third-largest start-up ecosystem hub. India is home to the highest number of unicorn startups after the US and China. Among them, Agri-startups are providing relevant and innovative solutions to a number of challenges faced all across the agricultural value chain.

These Agri-startups have been connecting the missing link between the farmers, input dealers, wholesalers, retailers and consumers; connecting each of them and providing strong marketing linkages and quality products on time. Further, these Agri-startups are not only creating new employment avenues but are also leaving a ripple effect on the socio-economic fabric of the Indian demography in which they are operating.

Why Agri-startups are essential?

The agricultural sector contributes to more than 15% of the country’s GDP. Also, it is one of the biggest employers, with approximately 70% of the rural population employed in the agricultural space.

However, the sector has been considerably slow in the adoption of technology, largely due to insufficient penetration and those engaged in agriculture being unaware of existing technological advancements.

Apart from this, the vast unorganised credit structure and absence of proper market linkages add to their woes by contributing to their meagre income. This is where agri-tech startups come into the picture.

About the status of Agri-startups in India

India continues to be among the top six countries globally, with the highest number of deals in agricultural technology. (The US, Canada, the UK, Israel and France comprise the other five countries.)

Currently, 3.8% or 600+ of the total recognised startups in the country are in the Agri-startup space as per the Economic Survey of 2019-20. Of these, 54% are classified as agri-tech while the rest are in the field of dairy farming, food processing and others.

In 2020 alone, over 20 agri-tech startups have together raised more than Rs. 920 crores across venture debt, equity and conventional debt rounds. It is estimated that $10 billion will be invested in Indian agri-tech startups over the next 10 years.

Few prominent startups include SatSure (The solutions of this startup are being used by the Andhra Pradesh government, large banks and insurance companies in India), Fasal’s microclimate forecasts, Aibono (provides precision farming technologies backed by real-time synchronisation of supply and demand), Cropin (provides a full suite of farm management, monitoring and analytics solutions through its new product called ‘Smart Risk’), etc.

What are the reasons for the rise in Agri-startups?

First, India’s digital ecosystem is witnessing healthy tailwinds such as affordability and availability of high-speed internet and maturing digital content ecosystem e.g., more than 25% of farmers in India today have access to smartphones.

The confluence of these factors presents an exciting opportunity for innovation in agriculture, wherein market players can leverage next-generation technology such as data digitisation, data platforms data analytics, Artificial Intelligence (AI), Machine Learning (ML), the loT and Software as Service (SaaS) to disrupt the status quo in agri-startups.

Second, increasing demand for innovation in agriculture and declining last-mile delivery to farmers has increased pressure on extension services which must be re-engineered to a new role focused on organising user/producer groups, linking farmers to markets, engaging in research, planning and technology selection, enabling changes in policies and linking producers to a range of other support and service networks. This role is being played by agri-techs.

Third, huge vacancy levels in public extension systems, particularly in remote and disadvantaged regions have further constrained the extension support and services to the farming community. Hence, the Agri-startups utilise these gaps in support and services.

How Agri-startups are disrupting agriculture and empowering farmers
digitally?

The agriculture industry is classified into 4 broad divisions. 1) Agri-inputs, 2) Agri-financial services, 3) Food processing companies, and 4) Farm mechanisation. With the advent of agri-tech startups, these divisions have seen several fundamental changes in the way they function. These include,

a) Agri-startups with novel technologies such as Al, ML and data analytics are making it easier for farmers to improve their methods of farming such as identifying the right crop to be sown for better yield. b) Offering mechanised equipments that are potentially unaffordable for farmers to purchase, on a rental basis thus making the equipment readily available to farmers. c) Agro-based mobile applications make it even more convenient for farmers to access information, d) Enable farmers to have direct access to the market without the need of intermediaries, leading to an increase in their income. e) Help to access formal credit: Agri-startups facilitate financial inclusion by enabling farmers to upload their records digitally and apply for credit.

Further, Farming-as-a-Service model (FaaS model) is also emerging as the future of agriculture. This model offers innovative solutions for agriculture and allied services through a subscription-based or pay-per-use model which enables stakeholders to make effective data-driven decisions to help boost productivity and efficiency.

How is the Government supporting the Agri-startups?

The Government of India has taken several initiatives to boost support to the agri-startups. These include,

Government schemes like the setting up of the National Centre for Management and Agricultural Extension in Hyderabad (MANAGE) and the Department of Science and Technology have given a tremendous boost to Agri-startups. The focus area of the DST has been on accelerating agri-tech startups by providing mentoring, industry networking and investor pitching guidance.

According to a NASSCOM report, the Indian Government specifically supports agri-tech startups through its Startup India Program.

Startup India Seed Fund Scheme (SISFS): The scheme aims to provide financial assistance to startups.

Ministry of Agriculture and Farmers’ Welfare is supporting the startups through initiatives like the Agriculture Grand Challenge which further validates Agri-startups.

Department of Agriculture, Cooperation and Farmers Welfare (DACFW) has launched a new component called ‘Innovation and Agri- Entrepreneurship Development’. It has been launched under the Rashtriya Krishi Vikas Yojana (RKVY-RAFTAAR).

Apart from that, the other programmes include

a) The Department of Biotechnology runs Biotech Parks and incubators programme, b) NITI Aayog runs a comprehensive Atal Innovation Mission, c) AGNIi-Accelerating Growth of New India’s Innovations – under the Office of Principal Scientific Adviser, d) DigiSaksham, e) Ministry of Development of North Eastern Region has launched Initiative for Development of Entrepreneurs in Agriculture (IDEA) which intends to promote agri-business, f) Start-up Accelerators of MeitY for pRoduct Innovation, Development and growth (SAMRIDH), g) Dairy Entrepreneurship Development Scheme under Department of Animal Husbandry, Dairying and Fisheries.

What are the challenges faced by Agri-startups?

In a market worth more than $350 billlon, the combined revenue of all agri-tech startups in India is estimated to be less than $100 million. This is due to various challenges like,

1) Small and scattered landholdings of farmers reduce the scope of technology scale-up, leading to poor cost-effectiveness, 2) Rate of return on technology investment has not proven very profitable in case of agri-tech startups as compared to other IT-based startups, 3) Agri startups and enterprises are finding it hard to retain technical talent working in this sector, 4) Technology adoption and penetration is a very slow process which certainly diminishes investors’ interest. 5) High-priced technology solutions are unaffordable for a large user group, i.e. small and marginal farmers, 6) Most of the technology solutions available are not localised to emerging markets, 7) Making farmers adaptive to the required skills for working on advanced technologies requires significant effort, 8) Facilitating the adoption of proven technologies through subsidy is yet to gain momentum, 9) Regulations, though favourable, are complex in nature.

What should be done to promote Agri-startups?

First, there is a need to develop mobile training programmes for the capacity building of farmers and help them adapt and adopt to new technological advancements.

Second, increased and timely support to early-stage startups will boost agri-tech startups in India.

Third, there is a need for corporate and government accelerators to help agri-tech startups. This is because only 9% of all funding in the last 5 years was focused on growth-stage startups. For this, large companies need to effectively collaborate with startups.

Fourth, the government need to set up agri-tech-focused incubators and grants.

Fifth, Karnataka alone is home to 70% of agri-tech startups. The other states need to come up with favourable policies to attract startups and investors similar to Karnataka.

Sixth, banks and financial organisations need to offer more creative models of financing for farmers, entrepreneurs, incubators, and accelerators.

Seventh, in order to make agri-startups successful, it is crucial to enable seamless hybridisation of relevant technology by building a promising ‘new-age distribution model’. Agri-startups have to reorient and customize their models for a sector that has low technology adoption rate.

In conclusion, technology is just one component; an evolved distribution system with a human touch is what will make the agri-startup models scalable over time. Agri-startups are poised to play a vital role in increasing the productivity of the agriculture and allied sectors and power Indian economy’s structural transformation. Government should create an enabling environment for them to thrive.