Breaking ground and filling the gaps

Start-ups in the farm sector, though few compared to those in other sectors, have begun to make their presence felt through hi-tech interventions in agriculture and offering innovative means of augmenting farmers’ income. They have taken up the challenge of uplifting the technological base of Indian farming — a task that was till recently being handled primarily by government departments and public-sector institutions engaged in agricultural research and extension. Most of these debutant but rapidly growing business ventures are providing consultancy and select services in fields like custom-hiring of agricultural machinery, including drones, sale and purchase of farm inputs and products through electronic platforms, advanced technologies to enhance efficiency and precision of farm operations, water-resource management, and information technology.

The business models of most agri-start-ups are focused chiefly on filling the gaps in the existing farming systems and their down-the-line value-chains to ensure optimal returns to farmers for their investment and labour. Many start-ups are working in agriculture’s allied fields, such as dairying, poultry, fisheries, piggery, beekeeping, and similar others. Some of them are also collaborating with the government in furthering the reach of official agricultural development schemes through public-private partnership mode.

Of the country’s start-ups, around 70,000, only about 5 per cent are in the farm sector at present. The others are in fields like information technology, health care, education, e-commerce, and other technology-intensive sectors. Though agri-start-ups began emerging on the rural scene more than a decade ago, the inflection point in their growth came during the pandemic, especially in the year 2021. Investment in agri-start-ups is reckoned to have surged threefold during this period, facilitated largely by acceleration in the penetration of smart phones in rural areas and technology adoption by farmers. The current gross merchandise value of these agri-start-ups is estimated by industry circles at Rs 75,000-80,000 crore. Interestingly, unlike most other business ventures, agri-start-ups have managed to expand their businesses without spending much on advertisement and promotion, or offering discounts to their customers. A few of them have even become unicorns by scaling up their business and capital base to beyond Rs 100 crore.

Financial institutions, most of which were earlier wary of investing in agriculture-related enterprises because of the low technological base, meagre profitability, and high risk in farming and its allied activities, have now shed these reservations and begun lending to agri-start-ups. Their outlook towards these institutions changed further when the farm sector began generating surpluses to make India a leading exporter of numerous farm commodities, including staple cereals; raw and processed fruits and vegetables; and milk, meat, and fisheries products.

This aside, a well-judged move by the Reserve Bank of India to allow commercial banks to treat loans of up to Rs 50 crore to agri-start-ups as priority sector lending also helped increase the availability of funds for these ventures. The financiers of agri-start-ups now include some of the well-established venture capital funds, debt funds, and angel investors. As a result, more technology-savvy youth and other enthusiastic entrepreneurs are getting attracted to this field. This, in turn, is helping in further proliferation of agri-start-ups, thereby bolstering their contribution to agriculture and rural development.
 

Fortunately, the government, too, has not been found wanting in recognising the importance of agri-start-ups and supporting them by providing a favourable policy environment, financial incentives, and other forms of hand-holding. Union Finance Minister Nirmala Sitharaman announced in her Budget speech this year that the government would set up a fund for agri-tech start-ups and channelise more resources through the National Bank for Agriculture and Rural Development to prop up agri-start-ups and encourage the use of drones in farming. Another special fund has been conceptualised for strengthening the farm produce value-chain. She expressed the hope that agri-start-ups would support farmer producer organisations (FPOs) by providing them the needed technological backup. Significantly, she also indicated that the government would use “Kisan Drones” for crop assessment, digitising land records, and spraying insecticides and plant nutrients on crops. The government’s intention, clearly, is to expedite the development of the farm sector by using agri-start-ups as growth-drivers.

Unfortunately, not all states are equally upbeat about agri-start-ups and the role they can play in the development of the agri-rural sector. This is evident from the variations in the policies governing agri-start-ups in different states and the uneven spread of these enterprises across the country. Agri-start-ups are generally more successful in states like Haryana, Uttar Pradesh, Rajasthan, Karnataka, and Maharashtra than elsewhere. It is time for the governments of other states also to take steps to facilitate a smooth functioning of agri-start-ups to diversify agriculture and ensure its knowledge- and technology-driven growth. Agri-start-ups, too, need to diversify from being largely service-providers to producers and marketers of value-added farm products. This would be beneficial for them as also for farmers and consumers.

surinder.sud@gmail.com