Agritech Startup for Smallholder farmers

Context: Atal Innovation Mission (AIM) under the NITI Aayoghas released a report on agritech startups.

About Agritech Startups

Startups in developing and emerging economies have experienced rapid growth and successfully provided digital solutions to address several developmental challenges. Agritech startups are startups engaged in various stages of agriculture sector.

Indian agritech start-up sector, even though it has not unlocked its full potential, is way ahead of many countries. More than 330 well-funded matured agritech start-ups spread across sub-sectors like supply chain, e-commerce, precision agriculture, quality management, and financial services. The business models of these start-ups are built around smallholder farmers.

Examples of startups: Boomitra, Ecozone, Skymet, Agrosonic, and Satsure have a presence in different needs,

Characteristics of smallholder farmers

  • Small and fragmented landholdings 
  • Sustenance of small market surplus & distress selling
  • Traditional production system
  • Poor access to market and often dependent on middlemen and multiple intermediaries.
  • Limited/No access to formal & productive finance.
  • Limited diversification and mechanisation.
  • Low productivity and low quality produce.
  • High risk of crop loss.
  • Post-harvest loss due to poor supply chain.
  • Low value capture and lower net realisation of farmers.

Challenges faced by smallholders farmers

FARM INPUTSSeedLack of access to quality seeds at reasonable prices, dependent on local stores for seed quality.
FertiliserHigh price of fertilisers, non-availability of fertilisers.
CreditNo credit, limited access to formal credit from formal sources, often dependent on input suppliers for credit.
Farm machineryTraditional equipment used for farm operations.
PesticidesQuality pesticides or insecticides not available
PRE-HARVESTKnowledgeEmploy traditional methods of production. Not aware of scientific production method.
DiseaseNot able to identify diseases and pests or do not know solutions to overcome it.
Crop-selectionLimited varietal knowledge, no know-how about climate smart agriculture, grow what everyone grows.
HarvestUnscientific harvesting leads to poor quality of produce (Underripe or overripe produce with low quality and low shelf life).
HARVESTPost-harvest lossesLoss in transportation & storage.
Access to marketSell-their produce to local middlemen.
Access to agriculture infrastructureLimited facilities for storing and primary processing of their produce.
Access to creditNo access to credit to meet their post-harvest requirement. Often result in distress selling.
ProcessingNo linkage with processors for assured market. 
CLIMATE CHANGERisk managementLow uptake of crop and livestock insurance, lack of awareness about insurance products.
Climate changeLow adoption of climate smart agriculture like zero-tillage or natural farming to manage climate risks.

Opportunities for Agritech startups

  • Large number of smallholdings: Agritech startups can create a disproportionate impact in the lives of smallholder farmers by providing access to credit, insurance, inputs and market linkage at reduced cost with greater linkage. These start-ups can interact with millions of farmers across diverse geographies. 
  • Impact of climate change: With the rise of AI and ML tools coupled with satellite imagery, weather predictions have become increasingly accurate. Thus, climate change allows agritech companies to mitigate weather related risks and advise on climate resilient agriculture practices.
  • Increased mobile internet & smartphone penetration: The number of mobile internet users and smartphone users have increased significantly particularly among younger generations, but affordability remains an issue. This can be exploited by agritech startups to digitally connect with smallholder farmers and offer their unique and innovative solutions.
  • Consumer behaviour: Consumer preference for clean, chemical-free and sustainably sourced food has increased with urbanisation and income with consumers willing to pay the premium. Agritech startups can solve issues related to producing clean and chemical free products, supply chain issues and traceability. This will also help smallholder farmers to produce sustainably by adopting best technology and assure consumers that their products are clean, fresh and sourced sustainably.
  • Increased support from government & incubators: Governments and other stakeholders are increasingly offering support to startups with various schemes and other support. 

Agritech solutions in various areas of agriculture

InputsDigital platform based livestock & farm management – centralises, manages and optimises production activities.Digital app based procurement aggregation to reduce fixed costs and customer service.Data-driven marketplace linkage price discovery.App based expert agronomy advice.Remote and proximity sensing for crop monitoring.Satellite based estimation of harvesting time & period.Digitising production, procurement & cold chain management through IoT.Automatically adjust irrigation volume based on soil moisture, climatic conditions and volume.Drone/UAV surveillance.Digital finance in agriculture.
Farm ProductionStandard package of practicesAlert log & management (pest infestation, diseases)Soil testingSatellite & weather input based advisoryReal time crop reports & insightsGeotag based accountability, predictabilityAdherence to compliance & certificationLivestock & farm management software
Post-harvest/ProcessingSatellite based yield estimationSensor, data-driven harvesting timeMobile quality testing devicesProactive AI-drivenShipping information management
Agriculture marketingDigital finance in AgricultureBuyer-seller digital marketplaceDigitally enabled value chain integrationMarket access (off-taker) integrationE-marketplaces/input e-market placeBrand-certification & managementPay-as-you-go agricultural machinery
Supply chainBlockchain-based supply chain managementFarm to fork traceability of commoditiesPrecision shipping forecast management softwareShipping information managementQuality/compliance certificationsAffordable quality check tools
Climate ChangeGreenhouse systems, indoor/outdoor farming, aquaponicsReclamation of degraded, saline & alkaline landClimate-smart agricultureResidue managementWaste management /water management technologyRisk management

Challenges for Agritech start-ups

  1. Agritech market related issues
  • High cost of infrastructure and devices is a significant barrier to scaling of agritech solutions and subsequent adoption by smallholders. 
  • Lack of digital literacy & cost of device resulting in low adoption of agritech solutions
  • High cost of customer acquisition due to fragmented landholdings, lack of connections between farmers and agritech startups and lack of trust among farmers towards agritech startups
  • Inadequate farm and farmer level data set like access to digitalised land records, agricultural and horticulture output
  • Challenges in cross-border expansion
  1. Challenges specific to growth phase
  • Lack of human quality resources
  • Lack of availability of funding or grant support
  • Tremendous competition in early-stage startups
  • Scalability of start-ups

Way Forward:

  • Improving Last Mile Connectivity: Due to fragmented landholdings and lack of digital literacy most agritech startups depend on local institutions like FPOs and NGOs to roll out their solutions. The success of interventions by FPOs depend on the quality and capacity of theselocal institutions. Thus, for agritech startups to be effective significant effort needs to be put into building local institutions. 
  • Access to public data: Government has vast data on farmers, land records, financial health, weather reports, meteorological data, price etc. This data is critical for AI-based start-ups or those start-ups that require maps and data related to land records and soil types. Government should ensure that startups are able to access these data sources to scale up their solutions. Also, at the national level efforts should be made to improve data collection, storage and processing. Karnataka government has implemented e-Sahamathi to solve the 15 issue of data privacy, consent, and data sharing with an interested third party.
  • Promoting local level of infrastructure for farm-level processing: Startups depend on local infrastructure like warehouses for storage or grading and sorting centre for primary commodities processing. Therefore, government should promote the creation of local agriculture-related infrastructures by incentivising and providing financing from formal financial institutions.
  • Digitalisation of licensing regime: Many agritech startups working in agriculture inputs often face license related challenges, which are often cumbersome due to opaqueness in processes and limits their scaling. Thus, there is a need for creating transparency around licensing process by digitising the entire process.
  • State-specific Agritech policy to promote agriculture based start-ups: Only a few states like Delhi and Maharashtra have start-up policies to promote and nurture start-ups. However, agritech startups need different kind of support from other startups. Thus, there is a need for states to formulate separate agritech policies. 
  • Establishment of facilitation centre for Agritech start-ups at local and global level: A state level facilitation centre as one-stop centre should be created to ensure that agritech startups can access public resources or leverage government’s infrastructure. This centre can apprise startups about government policies and help agritech startups meet investors. 

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