Indian agriculture has to become modern, resource efficient and profitable for the benefit of the farmer, the consumer, the country and the environment. Modern science and technology have a huge role to play in this effort. Digital technology is one of them. In this context innovation and entrepreneurship in food and agriculture is to be stimulated and encouraged.
There is an increasing uptake of agri tech and food tech enterprises. Experts say that 2019 is an inflection point in this journey with more than 300M$ in one year! Rapid penetration of smart phone in rural areas is helping to drive the widespread application of agri and food tech based products or services. Increasing emphasis on Farmer Producer Organizations is also helping in aggregating farmers and increasing their capacity to absorb new technologies.
Innovations are driven around themes like improving agronomic practices, efficiency of inputs like seeds, fertilizers and pesticides, sustainable use of resources like water and soil, management of information and farm level data using digital technologies, better management of pests and diseases, digital platforms for purchase of inputs and for sale of output, post harvest management, value addition, farm extension and knowledge sharing with farmers, supply chain management, food safety and in general reducing the drudgery of the farmer. It is important to make farmer’s life easier and technology driven so that farmers children, who are fast losing interest in farming, are attracted back to this profession. Innovations should solve farmers problems and should help to improve their profitability which is the ultimate litmus. Technology should help us to offer products, services and processes which were not possible earlier in a manual system.
An ecosystem is to be developed to encourage innovation that can help farmers. Various players in the ecosystem like innovators, incubators, mentors, angel investors, funds, corporates, farmers and others should develop capacity to help the total system to mature to a level that generates high quality innovations and connect them with the farmers. Critical policy support is needed to make this happen.
During the last 10 years many food & agri incubators have come up, providing incubation facilities to enthusiastic innovators to try their new ideas and build prototypes. Many agricultural universities, business schools and research institutions have set up incubators. This is a welcome step. There is a slight fragmentation of incubation facilities around the country. Lack of visibility on what kind of innovations are being developed across the country which might lead to duplication of work and lack of channelization of work in the desired direction. This can perhaps be set right with some interventions targeted at aggregation of effort and information.
While many innovators are entrepreneurs themselves, there is also a great opportunity for pure entrepreneurs to pick up prototypes from incubators and provide the link to commercialization. Currently both the models are operating. We have not yet seen a lot of success on this front, although some of the enterprises have become symbols of successful enterprises in this space.
Start ups in food & agri in particular may struggle due to many reasons.
Most of the innovators and entrepreneurs are digital technologists. They do not have domain knowledge of food and agriculture. This creates challenges unless they get a domain expert as a mentor or an advisor. It is easy to get carried away by excel sheet calculations because of large number of farmers. But converting business ideas into actual businesses is a lot harder.
It is also a challenge to collect payments from farmers for the services provided by the entrepreneurs. The farmer does not have the access to cash to pay for such services during the course of the crop cultivation season. In dairy, poultry, fisheries and similar segments the access to cash flows may be more frequent than in crop cultivation. The innovators have to get tied up with a closed loop system to be able to get payments for their products and services.
The idea may not have been thought through properly. The assumptions behind the strategy may not be very accurate and they may not stand the rigours of the competitive markets.
Not having the right people to help in running the business is another reason. Many enterprises struggle to attract the right people due to their small size, their inability to pay well and the reluctance of some good quality people to join this ‘risky’ space. An enterprise must have a small group of core team which has members who are committed, passionate and hard working. It would be appropriate to give stake in the business to each of the core team members.
Governance of agri enterprises comes under scrutiny because they deal with unorganized sector on the input side. The innovator or the entrepreneur is not very familiar with governance processes. It is important for such enterprises to have mentors who will put them on the right path of governance from the beginning.
Protection of Intellectual Property of the innovator is important to prevent his innovation from being copied. IP robustness of innovations needs special attention. Our education system is not based on creating IP that can be protected. It is important to build the culture of creating IP and protecting the IP effectively from the class room stage itself. Our socialist upbringing looks at IP protection as a sin. This mindset has to change.
The Indian Corporates involvement in supporting or collaborating with start ups is not to the desired level. Their risk averse attitude does not give much confidence to the start ups nor does it help in building a favourable eco system. This has to change and we must see large scale participation of corporates with risk capital in supporting incubators and enterprises through collaborations and investments.
However, the greatest obstacle for the enterprises remains to be funding. The reluctance on the part of investors is mainly because they perceive food and agri as a ‘risky’ sector because they do not understand the sector. Vagaries of weather, Government interference in pricing, loan waivers, farmer suicides are some of the wrong reasons for which agriculture is in news. This makes it look risky. The angel networks are not well developed for food and agri enterprises. Similarly there are very few seed funding agencies for food and agri. But, this is slowly changing. Equity investments are on the increase, especially in 2019.
The real challenge is working capital. Their public postures apart, Banks are highly reluctant to fund start ups without collateral securities. It is very difficult for entrepreneurs to provide collateral security. The innovator ends up spending all the time running around for funds instead of focusing his or her energies on building the business. The banks may not be having a process of treating the funding of start ups, especially in food and agri, as a separate category which is supported by the Government for its risky nature. This can change only with policy support from the Government. Banks must have special instruments that can help start ups and government should back them up.
Many start ups need farmer data which they can use to tailor products and services and reach them to the needy farmers. Such data exists with the Government. Democratization of data is needed. A suitable framework for sharing of such data with private enterprises for a fee and with clearly defined IP rights is required urgently.
Policy Support Needed
This sector can develop only through partnerships among stakeholders. Suitable PPP and collaboration models need to be developed. There is a need to train farmers and FPOs on using digital applications in a safe and effective manner. In the absence of such education the adoption rates by farmers may remain low.
Farm mechanization is seen as a precursor to rapid adoption of digitization of agriculture. Suitable regulatory support, especially for technologies like the use of drones in agriculture and for uberization of farm machinery, needs to be put in place by the Government.
Government needs to review the Start Up India program and identify bottlenecks with specific reference to food and agri enterprises. There is a need to build the ecosystem that is necessary to promote innovation and entrepreneurship in this space. It would be good idea for the Government to set up a revolving Agri Innovation Fund of about Rs. 10,000 cr that can provide early stage funding to enterprises in food and agri sector. This will go a long way in encouraging the development of eco system in this important area and eventually help the farmer.
DISCLAIMER : Views expressed above are the author’s own.