“…his speech is of mortgaged bedding, On his knee, he borrows yet, At his heart is his daughter’s wedding, In his eye foreknowledge of debt. He eats and hath indigestion, He toils, and he may not stop; His life is a long-drawn question, Between a crop and a crop.” – Rudyard Kipling on ‘The Indian Farmer’

The Masque of Plenty, 1888

It is a great satire of independent India in the post-modern world that Kipling’s agonising words from 132 years ago continue to hold true in 2020. The Indian farmer, especially the 85% smallholder group (<2 ha avg. landholding), is still perennially drowned in debt and is still living between a crop and a crop. The problems faced by our 150 million farmers (over 50% of the workforce) are many, amongst these the topmost are crop losses, indebtedness, license raj (hopefully we will get rid of it with the new ordinance), information asymmetry and low levels of technology penetration.

India, today, has a net sown area of 141 million hectares, 51% of India’s geographical area is already under cultivation as compared to 11% of the world average. Our annual food grain production of ~281 million tonnes is sufficiently higher than the annual domestic demand of ~260 million tonnes. Strangely, our per capita net availability of food has remained flat over the last 20 years. In 2019, we ranked 102nd in the Global Hunger Index, putting the endless (and fruitful) toil of the poor farmer in shame. The sector is crying for innovation and usage of modern techniques to drive efficiency and eliminate wastages in the entire agriculture value chain.

Since 2015, we have seen over 500+ Agri-Tech startups launched in the country, and over $500 million in venture investments flow into the ecosystem. While the sector is still in a nascent stage, the early signs of startup activity are highly encouraging, and funding in this space has been growing steadily. 2019 was a landmark year, with Ninjacart raising the first $100 million check in Indian Agri-Tech.

At Bharat Inclusion Seed Fund, we are especially interested in the opportunities present across the purchase of inputs, agri-fintech/crop loan financing, market linkage, and new-age distribution segments of the Agri value chain. Each of the parts of the Agri value chain is ripe for innovation, technology, and unique business models could help bring significant efficiencies in this industry.

Pre-Harvest (Purchase of Inputs + Crop Loan Financing)

The agriculture input products market — seeds, fertilisers, pesticides, is worth $7–10 billion with giants like Bayer, Coromandel, BASF, among others operating in the space. The attractive investment opportunities in the area lie in models organising the last-mile distribution and retail of farm input products.

• Franchising through Village-Level Entrepreneurs (VLE) can be a popular operating model of choice amongst startups equipping farmers with better inputs, extension, and market linkages. On average, a single rural franchise would cater to 500 farmers, covering 15–20 villages within a 10 km radius. With 100M+ smallholder farmers and assuming 40% total addressable market penetration of the franchising model, there is a market opportunity of setting up 70k-80k last-mile rural agri-input retail stores.
• Another shortcoming faced by farmers is the lack of knowledge about applying the inputs. Scientific, data-driven application of Agri inputs can lower farm input costs. Further, full-stack models can also charge an annual subscription fee per farmer for soil testing, sowing advisory, technical support, and market linkages. This digitisation of farmer purchase orders will enable better credit scoring and lending practices as well.

While the growth in credit flow in the Agri sector has shown promising signs in recent years, there are still significant challenges faced by farmers in terms of financing and lending. A sizable portion of farmers are still having difficulty availing low-cost institutional credit, and are left to be exploited by vicious local money lenders.

Here is the opportunity for FinTech to develop cash flow based financing models by integrating across the input to the market-linkage value chain and use technologies such as Machine Learning/India Stack to increase speed, reduce the cost of borrowing and remove uncertainties of collections from the lender’s perspective.

Harvesting (Crop Monitoring & Risk Assessment)

Crop yields in India are notably lower than in other countries. A ‘farm-data’ and ‘mobile-data’ revolution creates a fertile breeding ground for digital Agri-Tech startups. Some of the areas these startups can look at include –

• Monitoring — Drones, IoT sensors, GPS chips, satellite data, irrigation controllers to monitor crop and soil health.
• Farm Robotics — Autonomous robotic systems undertaking sowing, weeding, irrigation, and harvesting.
• Predictive Analytics — Digital intelligence models around the farm-input purchase, market prices, linkages, credit and insurance, and logistics.
• Water & Nutrient Efficiency — Models designed to increase the efficiency of resource usage and allocation.
• Remote Sensing & Geometric Information Systems — for identifying factors such as plant-specific moisture, nutrients, diseases, farm yields, soil nutrient levels, and soil survey maps.

The primary goal of these models is to de-risk farming by building a systems approach to agriculture, distributing inputs on a site-specific basis and maximising farm productivity & profitability through innovations such as IoT advisory, Agri SaaS, and Farm Robotics.

Post-Harvest (Market Linkage & New-Age Distribution)

Due to the perishable nature and low supply chain, 25–30% of output is rendered unfit for consumption annually, leading to an annual monetary loss of 12.3B USD in the supply chain. Here are some key models that can be explored in the near future by Agri-Tech:

• Farm-To-Fork Supply Chain — Tech-led end-to-end supply chain management of fresh produce from the farm/FPO right to the consumer/retailer. This can encompass a full-stack model with logistics, cold-chaining, payments, packaging, value-additions, etc.
• B2B Trading Platforms — Online B2B marketplace for wholesalers/traders to trade Agri produce and commodities with tech-driven services like financing, real-time prices, chat, accounting, logistics, and fulfilment. With the recent de-regulations in Essential Commodities Act and APMC Act, this segment is expected to enjoy free-market economies finally.
• Processing Technology for Farm Produce — Capabilities such as AI, image-recognition, computer vision tools for quality assessment, sorting, labelling of fresh produce, and digitisation can play roles in streamlining the post-harvest market linkage.

As the overall spending on groceries in the country grows, so do the opportunities for Agri-Tech startups to explore newer avenues of distribution. These avenues include –

• eGrocery: B2C — This avenue is already immensely popular in metropolitan cities, particularly amid the effects of the Covid-19 pandemic. Bigbasket and Grofers are popular examples of this model.
• eGrocery — B2B — This model includes online retailing of grocery items to businesses & retailers in wholesale/bulk. There are ample opportunities in this area, especially with models related to order management and fulfilment of Kirana stores. For example, ShopXhas a ‘Just-In-Time’ (JIT) inventory management system on its B2B2C business model to boost efficiency and reduce wastage. It gives its retailers access to premium brands, POS systems, inventory management, and online customers through its B2B2C app.
• Direct To Consumer (D2C) Brands — Online selling of processed fresh produce from near-farm storage centres for both local and international customers.

New progressive (de)regulations by the government around ECA, APMC, and Contract Farming along with the development of Agri-Tech across all journeys of the supply chain, be it pre, during, or pro-harvesting. These developments unfold a myriad of opportunities for startups to transform one of the backbones of the Indian economy and take it to new heights.