The Visible Hand: Can Agritech Succeed Where Years Of Policymaking Failed?

The invisible hand — a corner stone concept in economics — tells us that market forces help demand and supply reach equilibrium in a free market. Indian agriculture, though, is a mixed market economy where policy and market forces have so far failed to find solutions to long standing problems including supply chain management, market access and risk management.A battery of agritech companies believe they can make a difference. And investors are willing to bet on it.There are now atleast 450 agritech startups in India, said a July 2019 report by Nasscom. According to the report, agritech received about $248 million in funding in the first half of 2019, making it one of the fastest growing segments in technology.Entrepreneurs are increasingly seeing the agriculture sector as an opportunity, says Sangeeta Gupta, senior vice president at Nasscom. That, along with access to data, smartphone penetration and focused intervention from state governments to combine agriculture and technology, is bringing a change, she says..Come In! We Are Open For BusinessWhat is driving this optimism around agritech and its ability to make a difference?Rohtash Mal, chairman of EM3 Agriservices, which enables mechanisation of the crop production cycle on a pay-per-use basis, says that there is now an understanding that the ‘NGO mindset’ has led to a market failure in resolving agricultural issues. You have to unleash the entrepreneurial instincts of the the agricultural economy, says Mal, who served as the chief executive of Escorts Agri Machinery before launching his entrepreneurial venture.EM3 essentially works on the sharing model.Farmers can choose machinery for sowing, harvesting and crop management provided by the company. “It is cheaper to hail a cab a few times every month instead of buying a car,” says Mal while explaining why the model works for Indian farmers.Problems which seemed unsolvable till recently, can now be solved because of digital penetration and government deregulation, says Thirukumaran Nagarajan, co-founder and CEO of Ninjacart, a B2B fresh produce supply chain company. The company has built a network of 4,500 farmers and 9,500 retailers.The segment that Ninjacart operates in has emerged as a draw for investors, the Nasscom report quoted above said.Other startups trying to build a business out of the opportunities in agricultural supply chain management include Agrostar, which offers a direct-to-farmer digital app. The app allows farmers to procure agricultural inputs, using its app and India’s now-famous ‘missed call’ approach. Agrostar had raised $28 million in funding as of August 2019, according to data from Traxcn, a venture capital research platform.Cropin, which raised $8 million in 2018, is attempting to enable data-driven farming through its ‘SmartFarm’ platform. The idea is to provide real time insights on weather patterns and other aspects of farming, which can then help in more efficient decision-making..Data Is The New Water?.Not unlike other technology-based start-ups, the underlying premise of many of the agritech startups is the increased availability of data.Earlier, with millions of farmers scattered across villages, there was no data being generated, says Krishna Kumar, founder of Cropin. Every plot generates a huge amount of data on a daily basis — crop inputs, output and soil conditions. You can accumulate this data and increase the value you generate per acre by adopting the right practices for your farm and picking the timing of farm operations, Kumar explains.The company claims to have reduced the need for crop cutting experiments by 40 percent under the government’s PM Fasal Bima Yojana, on the basis of use of machine learning and artificial intelligence to predict farm yields. A crop cutting experiment is survey to estimate crop yields.Ninjacart turn uses data in a different way. It claims that its database helps forecast supply and demand trends and what prices of fruits and vegetables will look like in the short term. The farmer has an estimate of the off-take and only harvests that much, Thiru says.Startups such as Jumbotail have gone a step further and are attempting to solve demand side gaps as well. The startup enables kirana stores to use real time data for for product selection. The company’s app, according to co-founder Ashish Jhina, helps kirana stores stock products according to sales..The Access ChallengeEven if in theory the solutions being offered by agritech firms make perfect sense, putting them to practice in a scattered and fragmented market such as agriculture isn’t easy.Lack of awareness among farmers, fragmented land holdings and the informal and unorganised nature of the sector has meant that most companies have to spend time and resources to build a network. In agritech, there is no one size fits all, says Gupta of Nasscom.Mal agrees that it isn’t easy. A disproportionate amount of time and resources are spent on raising awareness and gathering attention, he says.Building the infrastructure and creating the capacity to handle volumes is hugely challenging, adds Thiru. Ninjacart has deployed representatives in every village they operate in. These representatives are from the village itself, he explains. They are educated by the company and, in turn, train farmers on advanced irrigation methods and explain the benefits of a tie-up with the platform.Several agritech firms are relying on partnerships to access farmers. Cropin has partnered with banks, fertiliser companies, seed companies, private companies which procure agricultural produce from farmers and the government.For agritechs to acquire clients, service them and ensure recovery of any dues from clients often tends go against their business model as they are inherently lean, says Ajay Kakra, executive director for agriculture and natural resources at PWC. Profitability and scalability will continue to remain a challenge unless there are intermediaries or platforms created by public companies or the government, Kalra says.The government can create digital experience centres and model agriculture villages, Gupta recommends. Mal believes that more public private partnerships are needed. The government needs to enter into more partnerships and work with private profit seeking entities, he says.

The Visible Hand: Can Agritech Succeed Where Years Of Policymaking Failed?

A battery of agritech companies believe they can make a difference. And investors are willing to bet on it.

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