A voice for startups

Agriculture : Startup Opportunities

Despite being the second most populous and the seventh largest country in the world, we still lack in adequate food production and seem incapable of feeding the populace. Poor supply chain management and inadequate infrastructural facilities are making the lives of people who live below the poverty line miserable. This definitely includes the farmers in our country.

India is called the agricultural power house of the world. It is the primary occupation for most people in our country and contributes about sixteen percent (16%) to the whole GDP. But lately, there have been many problems associated with this.

Although growth in agricultural productivity has risen from 40% to 500% in the past 40 years, the availability of food remains a problem for many households in India. Various studies indicate that 18% to 40% of this produce has been lost due to supply chain inefficiencies such as poor transportation system, inefficient chain of traders, absence of sheltered and cold storage facilities, and inadequate infrastructural facilities.

Infrastructural Challenges

Regarding the issues associated with transportation facilities, many of the Indian cities have imposed truck curfews, barring them from entering the city during day time. The trucks have to be parked outside the city, during which there is a long delay which causes fruits and vegetables to go bad. This accounts for a loss of over 20% of the produce during transit. The railway network is not suitable for the transit of food items as it does not provide end-to-end delivery in many cases. So the absence of organised logistics paves way for the delay in transportation of food from farms to the end consumer. There are a lot of middlemen involved which increases the time taken for the produce to reach the end consumer resulting in food wastage and price hike.

Absence of adequate warehouses is the most prominent issue that farmers face. There are two types of warehousing that are essential for the food produces. One is the sheltered warehouse type, used to store food grains like rice, wheat and cereals; dry produce. The other one is the cold storage facility which is used to store fruits and vegetables; wet produce. Across the country, there is insufficient warehousing capacity. Though the crop production has gone up significantly over the years, the number of warehouses has not increased. In 2010-2011, the food grain produced was 233 million metric tons. The storage capacity owned by the government was only 91 million metric tons. As a result, many crops had to be stored in the open space, exposed to the elements. Also due to the absence of pest control mechanisms, 20% of the food grains are destroyed by rodents every year.

Systemic Issues

Farmers do not have facilities to store the food produce in places they own. This is where middle men come in.

In India, farmers get 33.33% of the final price as compared to 66% in western countries.

Cold storage facility is important for storing fruits, vegetables and milk. The existing cold storage facilities are not enough to store the produce. Approximately a third of the food produce goes waste each year due to the absence of storage facilities. The absence of private players in warehousing is also a main concern. Most of the warehouses are controlled by the government and are not able to expand as per the demand. Government storage facilities are poorly maintained, which further contributes to loss of food produce.

Cold storage facilities are technically a little more challenging to build. They require continuous power supply and HVAC systems that can handle the cooling requirement. With the rise in solar energy, a self contained system might be a great solution in rural locations where power supply may not always be consistent.

The other main problem is pricing. Price of any commodity is determined by the actual demand and supply situation in the market. Commodity prices in India are influenced by various factors. Generally, the markets are far from most of the villages and therefore, the small and medium level farmers find it economic to sell their produce to the local intermediaries. Thus, intermediaries are an integral part of the supply chain of the agricultural produce.

This unreasonably long supply chain results in the steep escalation of the total cost, owing to procurement, transit and other taxes and service charges levied at various stages.

There are other intermediaries like Commission Agents, wholesalers, retailers under different marketing channels, through which the produce reaches the consumers. This results in low revenues to the farmers.

The APMC

APMC (agricultural produce market committee) is a marketing board established by the state government in India. It ensure that farmers are not exploited by intermediaries (or money lenders) who compel farmers to sell their produce at the farm gate for an extremely low price and all food produce should first be brought to a market yard and then sold through auction.

There are many problems being faced by farmers due to the restrictions imposed by the APMC Act. Even after receiving the produce, some traders delay payment to farmers for weeks or even months. If payment is made at the time of sale, then the trader may arbitrarily deduct some amount, with the excuse that he has not received payments from the other parties. To avoid tax, some traders do not give sale slips to farmers. As a result, it is difficult for the farmers to prove their income to get loans from banks.

On average, the farmer receives barely any money off of the final retail price whereas the middlemen receive double commission (both from seller and buyer), making consumers pay for this spread. Also, the middlemen do not pass the benefit to either side. During peak seasons, when they buy from farmers at low prices, they do not reduce the prices for the final consumers. At the same time, during seasons when consumer prices are high, the farmers do not get higher returns on their produce

Very often, one person played the roles of Money lender, traders, bankers etc. This all in one role of the middleman resulted in perpetual debts for the farmers. It is quite often seen that agents in an APMC get together to form a cartel and deliberately refrain from higher bidding. Produce is procured at a manipulatively discovered price and sold at higher price. Spoils are then shared by participants, leaving farmers in a lurch. Farmers have to pay commission fee, marketing fee, and APMC cess. Apart from this, many states impose Value Added Tax.  Also, agents have a tendency to block a part of the payment for unexplained or fictitious reasons.

Agricultural Produce Marketing Committee (APMC) Acts have prevented the creation of competitive conditions in the distribution of commodities and creation of a national market for agricultural commodities.

Creating a market driver model for managing demand and supply will break the strangle hold that the APMC act has created. This will also enable greater competition and a better price discovery mechanism for the farmers. It should also create the possibility for direct access to the consumer for the farmer.

Farmers do not have access to the knowledge of agricultural techniques. Agriculture extension services in most part of the country are pathetic.

There are several challenges involved in marketing of agricultural produce. There is limited access to the market information, literacy level among the farmers is low, multiple channels of distribution that eat away at the pockets of both farmers and consumers.

Financing

The government funding of farmers is still in its nascent stage and most of the small farmers still depend on local moneylenders, who charge high rates of interest. There are too many middlemen that disrupts the benefits that the farmers are supposed to get. Although technology has improved, it has not reached the rural areas. There is no organized and regulated system for marketing the agricultural produce.

Providing loans to the farmer at low rate of interest is necessary to free them from the clutches of local moneylenders. It is said that a farmer is born into debt, lives in debt and dies in debt. Right from the beginning of the life, poor farmers approach money lenders for getting money to invest in cultivation. These money lenders levy high rates of interest and take away a huge share of the income.

In case the crops fail due to natural calamities, the situation worsens, as the farmers will not be in a position to pay their loans. And ultimately, they are forced to sell their lands at throw away prices to the money lenders. It is essential to provide subsidized power supply and loans to the farmers as the expenses towards power consumption take considerable amount of investments. There should be stringent actions against black marketers and hoarders who buy the stocks from farmers at cheap prices and create artificial demand and then sell the stocks at higher prices.

As the literacy level among farmers is low, they still hold on to the old cultivating and farming techniques, which finally results in low production rate. There is a need to share the knowledge to farmers and introduce them to the more productive side of agriculture with the help of science and technology. Polyculture practices like crop rotation, soil amendment and other methods like Sustainable Intensive Farming, can actually increase the crop yield. Technology has developed an easy way to replenish the soil health. Soil steaming with the help of MSD (moeschle steam boiler) can be used to kill pathogens and pests of soil by increasing the temperature, which is an ecological alternative to chemicals for soil sterilization. Production techniques like vertical farming and roof-top farming can also be implemented.

Cultivating perennial crops once in a year can really prevent soil erosion, reduces compaction and enrich the quality of the soil. Keyline Subsoiling is the latest technique which is potentially very powerful in the places where there is less availability of water. Practicing Keyline Subsoiling in off-seasons can hold the land piece with soil nutrients than drying it up. Other organic farming techniques Green Manure, Compost, Biological Pest Control are to be practiced to harvest and cultivate best quality crops.

Considering and implementing the above mentioned ideas can light up the lives of farmers, but there is a lack in initiation on the Government’s part. On the brighter side, there are many instances out there where young as well as experienced minds of the country have found support and are revolutionizing the agriculture sector through their start-ups.

Startups

M.I.T.R.A. (Machines Information Technology Resources Agriculture) is a farm equipment enterprise which manufactures high quality farm equipment to motivate the future generations to take up farming and to make the farmers’ lives easy. Stellapps Technologies Pvt.Ltd, provides dairy farm optimization and monitoring services with special focus on small and medium size farms. Khedut Agro Engineering Pvt.Ltd, has a vision to deliver low cost farm equipment for seeding. Skymet Weather Services is an organisation which is involved in weather monitoring, prediction and providing agri-risk solutions.

AgroStar is a company that provides complete agronomical solutions for Indian farmers through their smart phones. Farmers can shop for their entire farm needs through AgroStar’s mobile app. They have reached more than 1 million farmers in India. IFFCO Kisan App is an informational portal for Rural India with specific services in Agriculture & Allied practices. Auxin Crop Consultants is an agricultural advisory start up, which enables farmers to post crops’ visual symptoms through a mobile application and get customised advisory support from the experts. They’re working towards creating Big Data for agriculture, which can be used for better decision making and prediction by agri-businesses and farmers.

Conclusion

There is no doubt that in any marketing scenario, profit maximisation is of essence. At the same time, marketing needs to be based on certain values, principles and philosophies such as offering fair prices to the farmers. Bringing necessary reforms coupled with proper price discovery mechanism through regulated market system will help streamline and strengthen the agricultural marketing.

Startups seek opportunities in areas which are critical for the user group that they seek to cater. Farming and agriculture is critical for the Indian economy. It has been functioning in the absence of efficiency for years. There is great value to be created if this efficiency could be imbued into the system. There are several opportunities that wait to be exploited.

Small scale farmers need to be knowledgeable of the market conditions, fluctuations, demand and supply concepts which are the core of any economy. Agricultural marketing can be made effective by the collective and integrative efforts from various quarters by directly addressing farmers, middlemen, researchers and administrators. It is high time we brought out effective strategies in agricultural marketing with innovative and creative approaches. It is imperative that the Government help emerging start-ups to revolutionise Indian agriculture. India can develop once the farmers are free from oppression and are thanked for their service to the nation.

Nikhil Srinivas

I'm currently pursuing writing, procrastination, and basketball (I'll tell you about the other stuff later). Oh, yeah, engineering too. I believe in trying new things and gaining new and unique experiences.
  • Prakash

    Kindly connect me with agri startups. seeking for opportunity in agri