Despite farm laws' repeal, agritech investments may rise to $700 mn in FY22

Indian agritech start-ups had attracted $528.4 mn in funding in FY21, according to VC firm Omnivore

The announcement of repealing of the three contentious farm laws by Prime Minister Narendra Modi would not have any significant impact on the funding of agritech startups, according to venture capital (VC) firms who operate in the sector.

“The farm laws did not bring any major benefit to agritech start-ups, nor would their repeal harm. More than $528 million was invested in the Indian agritech space in FY21 and we see it rising to more than $700 million in FY22,” said Mark Kahn, managing partner of Omnivore Partners, a VC firm that has Rs 675 crore and has invested in 30 companies in the space.

He said that the only impact of the farm laws on some agri start-ups was that they would no longer have to seek a licence to purchase from Agricultural Produce and Livestock Market Committee mandis. “But getting a licence should not be a huge problem for a company anyway,” he added.

However, the agriculture sector demands a lot of reforms for start-up to flourish in the space, feel several stakeholders, including VCs and entrepreneurs, in the agritech sector.

According to Anand Lunia, managing partner at VC firm India Quotient, which has several agritech companies in its portfolio apart from the likes of Sharechat, SUGAR, Koo and Lendingkart, said: “Farmers do not want to be dependent on a culture of subsidies and want to be independent. They want to be free from the clutches of the subsidy regime.”

Bharat Agri, a portfolio company that both Omnivore and India Quotient have invested in, has over 100,000 farmers on its platform which provides end-to-end decision making support for agricultural farms. “This goes to show that farmers are ready to pay for agritech products and that is why we will continue to invest more in this sector,” added Lunia. 

One segment of agritech that might have benefited a lot from the farm laws would have been market linkage platforms who have to negotiate with mandis for trading in large quantities of farm produce, according to stakeholders. In 2016, the government had started the electronic National Agriculture Market (e-NAM) platform, a pan-India electronic trading portal which networks the existing APMC mandis to create a unified national market for agricultural commodities.

Finance Minister Nirmala Sitharaman had said while presenting the Union Budget in February this year that around 1.68 crore farmers were registered on the e-NAM platform and Rs 1.14 trillion of trade value had been carried out through it.

Much like e-NAM, the farm laws would have allowed entrepreneurs to build various types of digital platforms connecting farmers and buyers across the country directly, according to Amit Srivastava, CEO and co-founder of agritech start-up InfyU Labs. 

“If these laws had been implemented, farmers would have got new channels to supply to markets, new kinds of tech platforms could have come into the picture and boosted the agritech sector,” he said.

The agritech sector can be divided into two major buckets: companies that are working on deeptech solutions for farms and those that are building farm-to-fork models. Ashish Fafadia, partner at VC firm Blume Ventures which has invested in agritech start-ups like Jai Kisan, Tartan Sense, Stellaps, says “Investments in the first bucket will get only bigger with time and it is in no way dependent on the farm laws. It might impact the farm-to-fork ones a little bit but I don’t think funding will stop.”

Krishify, a tech platform that connects farmers into an online community, had conducted a survey of how 80,000 farmers across 12 states perceived the farm laws in March. According to the findings, 54 per cent were in support of the laws whereas 46 per cent opposed them.

At one end, only 35 per cent farmers in Punjab and 37 per cent in Haryana were in favour. On the other side of the spectrum, 68 per cent in Bihar and 69 per cent in Maharashtra approved of the laws.