Action by government and agri-tech startups can revamp Indian agriculture: ETILC Members

Date:06-15-2021

By Nikita Rana, ET CONTRIBUTORS

The Indian agriculture industry is gearing up for record production volumes in the upcoming Kharif season. Despite a surge in Covid-19 numbers, agricultural produce was not hampered in 2020 and doesn’t seem to be slowing down this year either. The Union government is expecting an increase in demand from the farm sector and is making arrangements to supply seeds, fertilizers and pesticides in the required amounts.

However, this show of record high production is happening despite the legacy issues that Indian agriculture has been plagued with for decades. Poor mechanization, low farmer education and awareness, inadequate storage and logistical issues and small land holdings. The efficiency of the industry is also extremely low as it employs close to 60% of India’s population but contributes only 18% to India’s GDP. ETILC members from the industry have analysed which parts of the sector need to be introduced to finally make a difference.

“Agriculture sector urgently requires a holistic, focused national plan to be conceived and implemented in the mission mode for its improvement. In my opinion, the sector will greatly benefit from a comprehensive framework with clear articulation of roles for institutions, affordable technology and digitisation, tailored policies, extension outreach and technical training,” says Kalyan Ram Madabhushi, Chief Executive Officer - Chemicals, Group Business Head - Fertilisers & Insulators, Aditya Birla Group (Chemicals).

Agro-chemical company Dhanuka Agritech lays out a comparison with China and points out that even though India has great agricultural potential, its final output is low due to a lack of new technology pesticides and other agri-inputs including spray technology like drones. No original research is being done for pesticides in the country and whatever is happening worldover is happening in the EU, USA and Japan only.

Another major factor that affects the growth of the sector is the choice of the crops. There is a massive over production of grains like wheat and rice, which create very low value in comparison to high-value horticulture vegetables crops, fisheries, poultry and dairy.

“Horticulture and vegetable crops give more value addition to the farmers. There is a huge potential in horticulture and vegetable crops, but even now India only has 1.8% share in the global export market of fruits and vegetables. Government of India must realign its 715 Krishi Vigyan Kendras ‘KVK’ spread Pan-India,” says RG Agarwal, Chairman, Dhanuka Group.

Adoption of global best practices can yield very good results. Diversification to high value crops, farm mechanization, formation of farmer producer organizations and a shift to contract farming will prove effective. Indian agriculture is also extremely monsoon-dependent. Management consulting firm Roland Berger points out that only 38% agricultural area is irrigated in India, while 56% of agricultural area is irrigated in China. Even the enabling infrastructure in terms of credit, marketing , storage, etc. is far from adequate. All of these factors have resulted in our crop yields being much lesser than the global benchmarks. Despite allocating a large portion of our land and 80-90% of our water to agriculture - our yield in maize, rice, groundnut, pulses is 54%, 40%, 31% and 33% lower than global averages.

“One of the best examples is from Chiapas State, Mexico where within 5 years after a move to HVCs, the area under horticulture grew 3 folds and fruits produced started being exported to USA. It Involved organization of 3500 farmers into 75 cooperatives with intensive education and training. The regional population had net gain of INR 675 crores in the period 2007 to 2010,” says Saumitra Sehgal, Managing Partner, Roland Berger.

NABCONS believes that farmer education lies at the heart of the problem and should be tackled with the expert guidance of researchers and local cadres. But in principle there is no bridge between farmers and value chain owners. Subsistence farming which is the cause of poor yield and poor income has to be addressed with pooled activities that can result in bulk procurement and bulk marketing. Also, as a water deficient nation, export of crops such as rice which is water intensive needs to stop. There is a need to encourage the cultivation of millets, maize and pulses especially since the Indian government is still importing pulses and there is a desperate need to diversify Indian farm produce. While the government has initiated the right action, there is more to be done.

“To mitigate the unequal distribution of funds to the marginal farmers the government of India has initiated the PM Kisan Yojana came into effect on December 1, 2018. Under the PM Kisan Yojana, income support of Rs 6000 per annum is provided to all eligible farmer to support the farm activities. Secondly, the current agri-infra fund flag-ship credit facilities of the government of India will help in reducing the post-harvest loss of vital agri-produce in India,” says KV Rao, MD, NABCONS.

Among all the reforms that have been initiated by the government, the first was E-NAM, the ecommerce program that took all the mandies digital. The latest have of course been the 2020 farm bills which had been requested by many in the industry but opposed by a few states. The matter is currently pending in the supreme court. The Contract Farming Act was also a way to help farmers bypass middlemen and get into direct arrangements with companies. Another action taken by the government was to revive the Farmer Producer Organization Act from early 2000 which has gained traction and many FPOs have come up. The government has also launched schemes like Soil Health Card through which it will issue soil cards to farmers which will carry crop-wise recommendations. However, despite all these initiatives, issues in the erstwhile BIMARU states still remain and supply chains remain weak.

“In order to strengthen the supply chain link, we need to look at permitting the End User Companies to participate in the equity of the FPO, so that have their skin in the game as well, along with farmers. This will provide a more robust supply chain and assure the small and marginal farmers a buy back of their produce at all times”, says Vikas Jain, Joint Managing Director, PMV Maltings.

Apart from government initiatives, significant impact is being created by startups in the agritech space. Investors pumped in $500mn to Indian agritech concerns in 2020. It is estimated that $10bn will be invested in Indian agri-tech startups over the next 10 years. Currently, 3.8% or 1294 of the total recognized startups in the country are in this space as per the Economic Survey of 2019-20. Of these, 54% are classified as agri-tech while the rest are in the field of dairy farming, food processing and organic agriculture.

“For these startups to make a difference, an appropriate agritech ecosystem in the country will be required. The real challenge though will be to educate and encourage farmers to use the digital technology,” says Kalyan Ram Madabhushi, Chief Executive Officer - Chemicals, Group Business Head - Fertilisers & Insulators, Aditya Birla Group (Chemicals).

These firms are making headway in the areas of farm management, field monitoring, crop monitoring, yield mapping, equipment guidance, precision farming and implementation of automation and electrification. Agrowave, BharatAgri, Bijak and Ergos are some of the companies working on data-science led personal advisory, logistics and marketplace models. But these companies unlike the tech sector have longer investment cycles and have a high need for patient capital, a need that social impact venture funds are slowly addressing.