Agriculture policy in the era of digitalisation seems to have gained salience in the Union Budget. The budget for agriculture has muddled smart farming with agri-tech start-ups and farmer producer organisations (FPOs). It is a welcome move amidst the pandemic-induced downturn and repealed Farm Acts.

However, there is only a marginal increase in budgetary allocation of ₹1,24,000 crore for 2022–23 from ₹1,23,017.57 crore in 2021–22 . Also, the component-wise budgetary allocation is unclear.

Therefore, review of, and reflections on, the budgetary allocation for smart farming and agri-tech start-ups are necessary for effective policymaking.

First, smart farming deserves mention as it increases farm productivity and enhances the efficiency of farming system. ‘Kisan-drones’ will be utilised for spraying insecticides, soluble fertilisers and nutrients, as well for monitoring the crops and livestock at various stages. Drone farming will replace manual labour in field operations that can result in unemployment of migrants.

Second, blockchain can help digitise land records with the help of sensor-based devices in a geo-referenced farm or landscape level. Digitised land records will help the government rationalise subsidies and schemes’ benefits, and insurance claim settlement to farmers.

Third, notwithstanding the potential of smart farming, how smallholders will use drone or unmanned aerial vehicles in fragmented landholdings and improve their incomes need empirical exploration. For example, using aerial robotics and mapping technology, vDrone, a start-up founded in 2017, charges ₹400-800 for an acre of land and caters to 500-odd farmers in Karnataka. The government, based on Drone Policy 2021, can regulate licensing, pricing and allow the start-ups concerned to render drone technology to farmers’ field.

Fourth, the application of drone technology may be relevant for large farmers who own more than 10 hectares of land or engage in a cluster farming. Their intention to adopt drones is reasonable for a positive benefit-cost ratio. In India, only 45 per cent of farms use agricultural machinery and farm implements. Drone application, therefore, might remain a distant reality in the presence of limited farm mechanisation and low per capita landholding.

Fifth, platform businesses in agriculture may rise over time as the market potential of the agri-tech business was $24 billion in 2019–20, as per an EY report. Going by the investor funding disclosures between 2013 and 2017, 59 per cent of start-ups (less than $1 million funding) are in the seed stage, and only 9 per cent ($5-20 million) are in the growth stage. Hence, 40-50 agri-tech entities can cater their products and services to about 1-2 per cent of the farm population.

Given the market potential and market share ($200 million) of agri-tech entities, the government needs to frame the modalities of digital agriculture, integrating input and output agricultural markets, and state governments and lead firms, and complementors can be invited to participate in chalking out a state-wide policy for the conduct of platform businesses.

Sixth, finance is the most crucial element of a successful business venture. In the Budget, the allocation of a ₹60-crore fund with a blended capital co-investment model would finance start-ups for agriculture and rural enterprises, focussing on the farm-produce value chain. NABARD will facilitate the blended capital model through refinancing the eligible start-ups.

Policy dimension

Digital technologies with full-stack solutions, namely AI-ML, computing devices, and big data analytics should improve the measurement of correlations between farming inputs and policy-relevant outcomes, such as reduced emission of greenhouse gases and climate-resilient smart farming (Ehlers, Huber, Finger, 2021).

Additionally, digital technologies should enhance the location-specificity of instrument choices and designs through digital monitoring and database integration across data domains. These can help identify pollution levels, usage of inputs, and provision of information and ecosystem services. There is no allocation in this component (Ehlers et al., 2021).

Farmer organisations need to be aware of using technology solutions rendered by 450-500 start-ups, namely big data analytics, value chain or market linkages, Farming-as-a-Service, IoT-based communication for monitoring and tracking, and engineering-led innovations for cost-effective farming. An institutional agency is necessary in linking platform-based agribusiness firms with farmer organisations.

The utilisation of grants or technical assistance funds can enable farmer organisations learn the nuances of agri-tech firms and what services they need to strengthen planting, distribution, and marketing.

The stated policy dimensions are critical to nurturing a smart farming ecosystem, designing platform content or forms, and promoting a systematic intervention and context-specific scaling in the farm sector.

The Budget must be explicit on component-wise budgetary allocations, especially for smart farming and platform-integrated agribusiness.

Dey is Chairman of CFAM, and Srivastava is research associate, IIM Lucknow. Views are personal