Opinion

Technological disruption of India’s agriculture ecosystem

Sushma Vasudevan/Simran Ahluwalia | Updated on October 05, 2021

While agri-tech is emerging across the value chain, key challenges such as limited funding for early-stage agri-tech firms, lack of structured data and limited adoption by farmers need to be overcome

Agriculture is a key pillar of Indian economy but continues to be beset with structural drawbacks. Average landholding size has declined from 1.15 hectares in 2010-11 to 1.08 hectares; with around 68 per cent marginal farmers and value chain of most crops continues to consist of multiple intermediaries. While production and supply chain inefficiencies abound keeping farmers small and marginal, the nation is catching up with global trends of both consumption (organic, healthy, convenience) and calls for sustainability. There is an immediate need for disruption in the sector led by technology, as it has potential to solve for problems of scale, reduce information asymmetry and allow for supply chain disintermediation to make farming more profitable, inclusive and equitable.

Around 1,000 startups have emerged in agri-tech with over $3 billion PE/VC investment in the last 10 years. This enthusiasm has also captured attention of large players like Olam, which is adopting precision agriculture, digital warehousing and traceability. Agri-tech is emerging across the value chain with players in agri-finance like Samunnati creating networking and information dissemination platform for FPOs, CropIn providing precision farming through yield prediction, weather-input based advisory, AgNext & IntelloLabs providing value chain infrastructure innovation through visual sorting-grading, quality testing and AgriBazaar providing e-platform for output trading.

However, the agri-tech space has not yet reached full potential with business models of players still under validation. Key challenges include limited funding for early-stage agri-tech firms, lack of structured data and access to it and limited adoption by farmers due to a fragmented customer base.

For the digital revolution in agriculture to reach its potential, we need to follow an ecosystem approach:

Concerted action by governments

Accelerate action on Digital Agristack: MoA has published a concept note on India Digital Ecosystem of Agriculture (IDEA) for commencing work on Agristack. The note advocates for an ecosystem approach with farmer at the centre — who takes informed cropping decisions empowered with precision agriculture and knowledge of the right time, place and price to sell the produce, while supply chain players also plan logistics on precise and timely information. Government must accelerate action on building this platform and bring out a data policy in agriculture to allay concerns about data privacy and exploitation.

Continue efforts on aggregation and outreach digital platforms: Over the past couple of years, multiple digital platforms have been launched by the Centre and States for farmers. While development of digital Agristack might take time, such efforts must be strengthened in the meanwhile. Example: MoA launched the FARMS app — to connect farm-machinery owners with farmers requiring machinery on rent or for purchase. The Tamil Nadu Government launched the Uzhavan app, which provides multiple services — including information on prices, subsidies, a corner for FPO products, etc.

Accelerate adoption of e-NAM along with overhaul of mandi ecosystem: Given the future of reforms is uncertain, mandis remain the only relevant marketplaces. e-NAM is a digital network with aim of on-boarding existing APMC mandis to create a unified national market for agricultural commodities. However, currently there are only 1,000 e-NAM mandis.

Low adoption of e-NAM can be attributed to requirement of amendment in State APMC Acts, lack of physical infrastructure, poor data connectivity, limited technical expertise and lack of awareness regarding benefits of e-NAM amongst farmers, commission agents and traders. Efforts must be undertaken to not only onboard more mandis but to also set up infrastructure like assaying, sorting-grading and warehouses, grade formation basis sorting grading, assaying to ensure value unlock, streamlining mandi processes to ensure utilisation and boosting inter-State trade.

Empower district and State teams to lead agri-tech implementation on-ground: To ensure last-mile adoption, efforts need to be undertaken to form State and district teams and train them on evolving agri-tech and ground-level implementation, connect them with agri-tech startups, evaluate economics, form sharing platforms, and setup block-level demonstration units.

Adoption by private sector

Become agri-tech champions and support adoption: Large FMCG players must adopt agri-tech and support upstream adoption by providing technical guidance, working capital support during initial years to supplier MSME units and farmers. Agribusinesses in the equipment space like warehouse, cold storages can adopt digital hubs and connect their units with agribusinesses, farmers, traders to enhance utilisation and provide guidance on regular maintenance.

Support development and scaling of agri-tech solutions: Large scale agribusinesses can sponsor agri-tech firms by acting as strategic investors, advisors and incubating promising ideas. They must leverage their experience across regions and crops to provide expertise and allot locations for pilot testing.

Mobile network operators to support with increasing internet penetration: While not all agri-tech solutions are internet based, it is a key factor for wider outreach. As of 2020, while around 67 per cent of urban population are active internet users, this metric stands at only around 32 per cent of total rural population. “Agri-tech centers” can be set up in district agriculture departments, where farmers can come to gather information till internet penetration reaches everyone.

Last mile outreach

Livelihood organisations, development institutions can help in last-mile adoption: Livelihood organisations must work closely with farmers, FPOs to undertake training in benefits, usage, investment planning and adoption of agri-tech. Example — a prominent medium and large farmer or a key FPO can be made block champion to help propagate adoption by other farmers, community investments can be encouraged to set up common-infrastructure, support partnership of FPOs with large mandis and help them set up and operate agri-tech infrastructure like visual sorting grading or digitally connected warehouses, etc.

Partner with district teams for execution: Livelihood organisations can adopt blocks and work alongside district teams to gain confidence of farmers, ensure information symmetry and guide them on ways of adoption to improve realisation.

The agriculture sector in India needs a massive push to reach the next stage of development and uplift livelihoods of the around 10 crore farmers and 25 lakh MSME units in the agriculture and food-processing sector that are dependent on it. Technology has proven itself to be a key disruptor in most other sectors and there is no reason that agriculture should be left behind.

Sushma Vasudevan is Managing Director and Partner, and Simran Ahluwalia is Senior Associate, BCG. Views are personal

Published on October 05, 2021

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