Ten years ago, United India Insurance came up with an insurance product for the aquaculture sector. But it failed to take off then as actuaries were unable to get the right product since they were not sure how to ascertain the risks of aquaculture farmers and mitigate them.
One of the reasons for the product not taking off was it did not have a data-driven approach. Hence, it had to fold up even without taking off. Now a decade later, things have changed with the world going digital and nothing being left untouched by digitisation with Chennai-based start-up Aquaconnect taking the initiative.
Launched four-and-a-half years ago, Aquaconnect has got a wealth of data intelligence that is now helping farmers to get new age aquaculture insurance products in tie-up with Alliance Insurance brokers. “We have helped create an insurance product which in turn can help farmers to reach out to banks for finance,” said Aquaconnect founder and Chief Executive officer Rajmanohar Somasundaram.
Aquaconnect is, in fact, an aquaculture platform providing end-to-end solutions to shrimp and fish farmers powered by artificial intelligence and satellite remote sensing technologies. “We provide four services — farm advisory, farm inputs marketplace, farm finance and insurance, market linkage,” Rajmanohar said.
In India, aquaculture is a huge business with $20 billion-worth fishes and shrimps being produced. Of this, $5 billion worth fish and shrimp products are being exported with frozen shrimp making seven lakh tonne of the total exports.
Besides, farmers also cultivate native Indian major carps (IMC) such as Rohu, Katla and Mrigal that are consumed locally in a huge volume. The value of native IMC produced could be $11-12 billion.
“Shrimp is a cash crop with aqua farmers going to a hatchery to buy post-larvae or baby shrimps and stock them in their pond. These ponds are typically of one acre with 5-6 feet deep water. The shrimp grows in 4-5 months and can grow up to 25 gm to reach the magical 40s count,” said Rajmanohar.
Exporters and the global market prefer the 40s count shrimp. This means each shrimp will weigh 25 gram and above and 40 such healthy shrimps make up one kg. “There are four parameters for the upkeep of the shrimp — water quality, feeding efficiency, health management and growth management,” the Aquaconnect CEO said.
These four parameters govern the growth of the shrimp and ensure if a venture turns profitable. “Feed management is important. At least 60 per cent of the cost goes towards feed management. For example, if an aqua farmer spends ₹8 lakh on his farm, then ₹5 lakh is spent for feed,” he said.
Again, there are 10 parameters such as alkalinity, salinity, ammonia content, green or yellow colour that determine water quality. It has to be optimal for the healthy growth and good size of the shrimp.
According to Rajmanohar, aquaculture is better than any protein production system since to get one kg of shrimp, one needs to give 1.1 kg or 1.2 kg feed, whereas it is double in the case of poultry, four times in the case of lamb and eight times in the case of beef.
“The challenge is how will farmers manage feed efficiency. Aquaconnect has built a management system and an advisory platform to improve farm efficiency. This ultimately ensures higher yield from pond and higher revenue for farmers,” said Rajmanohar.
Data-driven decision making
Aquaconnect’s first part of intervention comes in the form of solving the issue of lack of data and data-driven decision-making.
“Once these are available, it brings transparency to understand the problem and come up with a solution. It has come up with an app plus satellite-based remote sensing to gather data on the ponds. While the app provides data on how efficiently the farmer is managing his farm, satellite-based remote sensing provides data on how long shrimp had been cultured in the pond and how many seasons,” he said, adding that these details help his firm to work out solutions for them.
Aquaconnect’s advisory service covers improvement in feeding, reducing feed costs, disease risk and providing preventive maintenance advice. “We know exactly what and when a farmer needs feed or healthcare products, including pre-biotics. If a pond has higher ammonia concentration, we provide appropriate products through our stores,” he said.
Working capital needs
On the other hand, access to working capital is one of the most challenging aspects in aquaculture. “Banks are not interested in providing finance and this has forced farmers to depend on local feed dealers from whom they avail credits,” said Rajmanohar.
The dealers offer credit at a whopping interest charge of 30 per cent, which is one of the reasons why capital costs are high in aquaculture. “The interest is high because risks are high. Everything is under water. If something goes wrong, the whole crop is lost and could result in the farmer not paying back. This is an informal way of mitigating risk,” the start-up CEO said.
To overcome this, Aquaconnect has created data on the credit worthiness of farmers. This gives a fair picture of them to banks, financial institutions and insurance agencies. There are, however, two problems. One is underwriting the finance and the other problem is monitoring the portfolio.
“Such things can be done for agriculture but not for aquaculture. You need a comprehensive approach. We offer such a risk mitigation platform – with eyes in the sku (satellite) and boots on the ground (staff) – through Aquacred,” says Rajmanohar.
Software built platform
Aquacred is a software built platform getting data from satellite as well as Aquaconnect’s app with farmers. It sandwiches both data and provides insights to banks, financial services and insurance companies. “We got these pieces together now. It never existed two years ago,” he said.
Banks are wary of assessing the credit worthiness of farmers. Therefore, Aquacred platform was built to manage the credit risk. “The downside of this goes to the insurance firms. Farmers who want access to credit have to take an insurance policy that will cover the crop against natural calamity and diseases. So banks need to be concerned over non-performing assets only,” Rajmanohar said.
This has helped Aquaconnect to ensure credit flow to farmers through Bank of Baroda, Axis Bank, organisations such as Sammunati and non-banking financial companies such as BlackSoil Capital.
All these have led to Aquaconnect coming up with its fourth service of market linkage. “We ensure farmers’ access to good inputs through Godrej Agrovet and Tata Rallis. So, the last one should be market linkage to ensure farmers get a fair price for the quality produce,” the start-up CEO said.
Currently, middlemen dictate shrimp trade who reduce the chances of the growers getting a fair price for their quality produce. “Sometimes, there is no guarantee that the farmers will get payment even,” added Rajmanohar.
Therefore, Aquaconnect has got 10-15 buyers on board to purchase the produce and help provide same day credit to growers. “We also predict the harvest period through our platform and help connect growers with the right buyers on agreeable transaction fees and conditions,” he said.
Aquaconnect also helps buyers find the right quality and size shrimps through its data intelligence. Buyers are willing to pay a service fee for this. “Ours is not just a tech platform. There is human intervention too. It has set up call centres to help growers in Andhra Pradesh, Odisha, Gujarat, Bengal, Tamil Nadu and Kerala. These call centres have staff who speak in Hindi, Malayalam, Telugu, Oriya and Tamil,” he added.
“With the Covid pandemic speeding up digitisation, Aquaconnect now is working with over 30,000 farmers from about 10,000 farmers before the pandemic set it. “The digitisation has also been helped by the demographic advance of the farmers who spend ₹8-9 lakh per acre and own the latest 4G smartphones,” said Rajmanohar.
Aquaconnect faced challenges initially on fitting its product for different markets since there are different languages in the country. “But we are managing it well. It has helped us close our pre-seed funding of $2 million from organisations such as Omnivore, HATCH of Norway, Flourish of the US and Rebright Partners of Japan.
Reihem Roy, partner, Omnivore, said aquaculture is a sector with $20-25 billion hidden potential in the country with least focus. “People are aware of its potential but are not focussed on the sector. We understand the sector’s potential and hence are working with it. Aquaculture is an unorganised sector despite being export-driven,” Roy said.
Rajmanohar, lauding the Centre’s Prime Minister Matsya Sampada Yojana, said insurance should be made mandatory for the aquaculture sector to ensure credit access to farmers. This will also help them overcome unexpected losses such as the recent losses suffered by 600 farmers in Odisha due to floods.
“The Union and State government have to come together to provide affordable insurance to farmers with both these bearing 50-60 per cent of the insurance cost,” he added.