Indian economy is leap-frogging the traditional development model — from the farming to the services sector. While agriculture employs the masses, the services sector significantly contributes to the gross domestic product (GDP). A preference for employment in the urban areas leaves most farmers facing labor shortage.
Nevertheless, embracing mechanisation is challenging. While small farmers cannot afford to purchase equipment, the big ones do not want to worry about maintaining the equipment. Farmers seek a one-stop solution and only pay during the harvest season. The subscription models help overcome budget constraints, and the repayments can match the seasonal cash flows of farming. How can the small landholders afford and access technology?
The answer lies in embracing innovation. Sustainable food production requires transitioning from resource-intensive, high-input farming methods to long-term, outcome-based services. Thanks to agritech, even small farmers can adopt Farming as a Service (FaaS) as the panacea in emerging economies.
It attracts a new interest from stakeholders — governments, non-government organizations (NGOs), the private sector, and the venture capitalists funding the start-ups. A toll-free number and a mobile app connects farmers to the platform to place their equipment and services orders. Shocks of equipment breakdown and consequent unexpected losses are avoidable as the farmers pay only for the equipment usage service.
Digital agriculture aids farmers’ profitability. It uses digital devices, artificial intelligence (AI), and data analytics allowing farmers to make informed decisions to increase productivity and drive efficiencies. It uses high-tech tools to determine machine performance and satellite images to manage crop health and harvesting. That also involves farm machinery automation, robotics, connected weather stations, satellite data and sensors to monitor the crops, and logistics services to streamline supply chains. With the precision application of water and chemicals, digital agriculture acts as a game-changer.
The FaaS Ecosystem
The ecosystem of farmers, equipment and service providers, technology and financing firms, and consumers can thrive from FaaS. Since the farmers only know their seasonally varying requirements better, they act as partners and coproduce the service with the agritech platforms and mobile apps.
FaaS start-ups connect farmers and equipment owners to address the market opportunity for mutual benefits. They need to do well by doing good. FaaS utilises many business models, ranging from farm-to-warehouse, farm-to-mill, and farm-to-fork, linking farmers to the marketplace. Seeing a huge potential, even tech giants like IBM are betting big on the trend.
The FaaS models bring all the parties, i.e., the farmers, the farm equipment manufacturers, the cooperative, and the government, onto a single platform. While some agritech players provide equipment-oriented services at affordable prices, e.g., land preparation, crop harvesting, and management, Agribolo’s innovative servitised models such as farm-to-fork link the farmers with marketplaces, including banks and financial institutions offering lower interest rates. Since the government has been promoting drones for crop insurance surveys, maintaining land records, and spraying pesticides, widespread adoption requires affordable prices for a win-win solution.
FaaS attempts are still sporadic as the reach is limited to only a few states despite enormous potential and scope. Most startups face scalability issues. A few start-ups like Oxen Farm Solution and Gold Farm have already shut shop due to heavy funding requirements. Gold Farm’s platform could connect only around 250 booking agents and 500 tractor owners with farmers. Only the large business houses, e.g., M&M, operate countrywide.
Availability of cold chains for perishable farm produce transportation by road or rail is a bottleneck in India. Airlifting involves substantially high freight costs. There is a massive potential for tech-enabled firms offering cold chain solutions creating an enormous opportunity in infra-sharing. FaaS start-ups need different models in upstream and downstream services for scalability. An extended shelf-life will ensure fresher produce, reduced losses, and lower logistics cost.
FaaS promises to supercharge sustainable food production to solve global food scarcity problems. Empowering farmers and not just looking at them as a market is the need of the hour. Servitisation with digital technologies can establish farming as a respectable profession.
The writer is Professor, Marketing Area, Indian Institute of Foreign Trade