Digital platforms to service input (seeds, nutrition and pest control) needs of farmers and provide them with easy access to markets
Digital platforms to service input (seeds, nutrition and pest control) needs of farmers and provide them with easy access to markets
Business Model Description
Input-side digital platforms serving farmers (including those engaged in specialised value chains, like aquaculture or high value produce like exotic fruits and vegetables) by offering agriculture inputs (seeds, nutrition and pest control), mechanisation or productivity-increasing tools (both, on sale or on lease) and enable them to eliminate any delays in production caused by travelling to nearby markets or due to inadequate access to essential inputs (inputs are either not available easily or time involved in procuring them leads to delay in production). Such platform providers also offer advisory services to farmers to resolve the problem of information asymmetries, thereby improving production yield and increasing their income.
Expected Impact
Improvement in farm productivity, farmers' income levels and bolster food security by enabling easy and ubiquitous access to digital markets for quality farm inputs.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
Disclaimer
UNDP, the Private Finance for the SDGs, and their affiliates (collectively “UNDP”) do not seek or solicit investment for programmes, projects, or opportunities described on this site (collectively “Programmes”) or any other Programmes, and nothing on this page should constitute a solicitation for investment. The actors listed on this site are not partners of UNDP, and their inclusion should not be construed as an endorsement or recommendation by UNDP for any relationship or investment.
The descriptions on this page are provided for informational purposes only. Only companies and enterprises that appear under the case study tab have been validated and vetted through UNDP programmes such as the Growth Stage Impact Ventures (GSIV), Business Call to Action (BCtA), or through other UN agencies. Even then, under no circumstances should their appearance on this website be construed as an endorsement for any relationship or investment. UNDP assumes no liability for investment losses directly or indirectly resulting from recommendations made, implied, or inferred by its research. Likewise, UNDP assumes no claim to investment gains directly or indirectly resulting from trading profits, investment management, or advisory fees obtained by following investment recommendations made, implied, or inferred by its research.
Investment involves risk, and all investments should be made with the supervision of a professional investment manager or advisor. The materials on the website are not an offer to sell or a solicitation of an offer to buy any investment, security, or commodity, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction.
Country & Regions
- India: North India
- India: Central India
- India: Western India
Sector Classification
Food and Beverage
Development needs
As per the SDG India Index report by Niti Aayog (4.2), India’s progress on SDG 2 (Zero Hunger) is lagging with a cumulative score of 35 on 100, since the score of 20 states and 3 UTs is under 50 points. This is due to low gross value added (GVA) in agriculture per worker of ~68000, in comparison to the targeted GVA in agriculture per worker of 136,000 in accordance with UN SDG target 2.3. (4.2)
The government aims to double farmers’ incomes by 2022 (4.3). In order to achieve this target, farmers’ income, which increased at an annual growth rate of 3.31% during 1993-1994 to 2015-16, is required to grow at 10.4% in order for it to double between 2015-16 and 2022-23. (4.4)
In 2019, India ranked 72nd in 113 countries [in comparison to 76th in 2018 (4.5)], as assessed by The Global Food Security Index (GFSI) based on four parameters—affordability, availability and quality and safety (4.6). As per the Global Hunger Index, 2018, India was ranked 103rd out of 119 qualifying countries. (4.7)
Policy priority
The Public Distribution System has been revamped under the National Food Security Act (NFSA), 2013. Key features include:
- This system implements a paradigm shift in the approach towards the issue of food security at the household level, from welfare to a rights-based approach.
- This Act covers about two-thirds of the population with 75% of rural and 50% of urban population to receive subsidised food grains – rice, wheat, and coarse grains at affordable prices per kg.
- The Act has been implemented in all States/ UTs and has reached around 807 million people.
- Under the “Antyodaya Anna Yojana” (AAY), the poorest from amongst the Below Poverty Line families are entitled to 35 kg of food grains per month at more subsidised rates. (4.2)
The National Mission for Sustainable Agriculture, in tandem with other missions under the National Action Plan on Climate Change, addresses the climate change risks and aims to increase agriculture productivity especially in rainfed areas focusing on integrated farming, soil health management, and synergising resource conservation.
GOI has proposed the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 and the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 with the objective to transform Indian agriculture by offering farmers freedom to sell anywhere and to attract private investment in Indian agriculture. (4.10)
Gender inequalities and marginalization issues
While agriculture employs about half of India's workforce (58% of India’s population), it contributes less than 20% to GDP. There is, thus, a pressing need to increase agricultural productivity, and create alternative channels of employment so that many of those currently employed in agriculture can obtain better opportunities of work. (4.2)
As of 2018, 81.1 percent of the dairy and milk processing market was part of the unorganized sector and 71 percent of total participants in the sector are women. (15.1)
Investment opportunities introduction
The market size of agriculture and allied services in India stood at ~USD 283.68 billion in 2018 (4.1).
Food and Agriculture
Development need
India’s food grain requirement to adequately provide for its population is projected to range from 334-350 million tonnes by 2032. The country’s estimated food grain production in 2018-19 was 283.37 million tonnes, which was higher by about 18 million tonnes than the average of the last 5 years. This indicates that the expected rate of growth in the crop output is at par with the current growth trend in food grain production. (4.2)
The COVID-19 crisis is not permanent, but it has magnified the vulnerabilities already present in the food system in India. Taking stock of the issues (supply chain breakdowns, etc.) can help governments and businesses create stronger, more resilient supply chains and measures to support smallholder farmers, who are critical to the food supply chain. (4.11)
Policy priority
The Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) focuses on improved water efficiency with the motto of “Har Khet Ko Paani” and “Per drop more crop” and provides end-to-end solutions in the irrigation supply chain, viz. water sources, distribution network, and farm-level applications. (4.2)
The Pradhan Mantri Fasal Bima Yojana (PMFBY) provides better insurance coverage and agricultural credit at a reduced rate of 4% per annum to farmers.
The increase of the minimum support prices for all kharif and rabi crops at least by 150% of the cost of production has contributed to an increase in farmers’ income.
In addition, the Pradhan Mantri Kisan Scheme has been initiated to extend the payment of ~USD 79 per year to every farmer in the country, which provides a further boost to their income.
Gender inequalities and marginalization issues
While agriculture employs about half of India's workforce (58% of India’s population), it contributes less than 20% to GDP. There is, thus, a pressing need to increase agricultural productivity, and create alternative channels of employment so that many of those currently employed in agriculture can obtain better opportunities of work. (4.2)
Investment opportunities introduction
Since improved food availability is the basis for sustainable development, innovative initiatives are being introduced to modernise agriculture and reduce the negative impact of climate change.
The Government of India has allowed 100% FDI in marketing of food products and in food product E-commerce under the automatic route.
Currently, the share of private corporate investment to total investment in agriculture is 2.4%. Agriculture receives only 0.4% of the total private investment; yet the sector contributes ~15% of the gross domestic product.
Furthermore, amendments in the Essential Commodities Act, dismantling of Agricultural Produce Market Committees (APMCs) and a new price signalling system for farmers will be among the major agricultural reforms to be announced by GOI. (4.9)
Key bottlenecks introduction
Convincing farmers to use digital platforms is the primary challenge for such businesses. It is imperative to resolve information asymmetries through digital platforms and encourage farmers to use modern techniques of agriculture.
Agricultural Products
Pipeline Opportunity
Digital platforms to service input (seeds, nutrition and pest control) needs of farmers and provide them with easy access to markets
Input-side digital platforms serving farmers (including those engaged in specialised value chains, like aquaculture or high value produce like exotic fruits and vegetables) by offering agriculture inputs (seeds, nutrition and pest control), mechanisation or productivity-increasing tools (both, on sale or on lease) and enable them to eliminate any delays in production caused by travelling to nearby markets or due to inadequate access to essential inputs (inputs are either not available easily or time involved in procuring them leads to delay in production). Such platform providers also offer advisory services to farmers to resolve the problem of information asymmetries, thereby improving production yield and increasing their income.
Business Case
Market Size and Environment
> USD 1 billion
10% - 15%
It is a market with an upside of over 200 million potential customers. (12.10)
The agriculture industry in India reached a value of USD 592 billion in 2017. The market value is further expected to reach USD 1183 billion by 2023, exhibiting a CAGR of 12.2% during 2018-2023. (12.7)
India's agri-inputs industry comprises three key sub-sectors viz., crop protection (pesticides), crop nutrition (fertilizers), and seeds. According to FICCI, its value stood at USD 5 billion (2018), with domestic consumption at USD 2.77 billion. The industry is set to grow at an impressive 8.1% annually and touch US$ 8.1 billion by 2025. (12.8)
Agritech start-ups are operating in an attractive market with an estimated potential of USD 24 billion by 2025, wherein agritech segment supporting market linkages (farm inputs) is estimated to reach a market potential of USD 1.7 billion by 2025. (12.9)
Indicative Return
15% - 20%
In FY2020, Agrostar (agricultural inputs and advisory provider) reported 2-2.5x growth in its business in the preceding three years (with innovations in farmer engagement, product range, and delivery) (12.6), and planned to double its sales in FY2020 (from ~USD 20 million in the FY2019). (4.3)
Extensive utilisation of data analytics in this space for predicting demand, as well as for agri-input stock aggregation, will help lower the procurement cost and increase margins through economies of scale.
Platforms that service specialised value chains (end to end) (i.e. aquaculture or high value produce like exotic fruits and vegetables) focus on quality of products and are thus, able to attract a higher price realisation. Pure electronic platforms charge ~1-2% of trade as their commission.
Investment Timeframe
Medium Term (5–10 years)
Agrostar (a leading Indian Ag-tech platform) was founded in 2009. Although, it has not posted an operating profit due to the cost of prior investments, its sales are growing steadily. As per its Management, the company is close to breaking even operationally, and is aiming for a fivefold rise in the number of AgroStar users. (4.3)
As per expert consultations, such businesses are likely to generate returns in ~7-10 years.
Ticket Size
PE and VC deal values in the food and beverage sector stood at USD 881 million, through 83 deals in 2019. (12.22)
Market Risks & Scale Obstacles
Limited demand side awareness
Capital - CapEx Intensive
Impact Case
Sustainable Development Need
The average size of landholdings in India in 2001 was less than two hectares. One-fourth of the total rural households own less than 0.4 hectares each, while another one-fourth are landless. This creates difficulties in the application of modern inputs, adoption of scientific land improvement, water conservation and plant protection measures and in introducing mechanised operations. (12.1)
The existing yield levels of a majority of crops remain much lower than the world average. The causes are low irrigation, use of low-quality seeds, low adoption of improved technology, and knowledge deficit about improved agricultural practices. Close to 53% of cropped area is water stressed.
Inefficient extension delivery systems have led to the presence of large yield gaps as well. Yield gaps exist at two levels: (i) gap between the best scientific practices and best field practices. (ii) gap between the best field practices and the average farmer. There exist significant yield gaps both amongst and within states including in highly productive states such as Punjab.
As a result of the pandemic and a nationwide lockdown, farmers experienced a shortage of both labour and equipment. Consequently, farmers have not been able to harvest their bumper crops of cereal and oilseed harvest this season (April to June 2020). In some places the crops have been abandoned, while in others the crops are being harvested more than a month late, in hand along with limited and more expensive labour. (4.11)
COVID-19 has given a boost to e-NAM (the national digital platform for agricultural trade) with the number of connected mandis, or wholesale markets, increasing by ~65% since the lockdown. As of May 2020, 962 new mandis joined the e-NAM platform, giving farmers and traders another option to trade, at a time when transport disruptions and social distancing requirements have made physical mandi trade more difficult. (12.2)
Gender & Marginalisation
While agriculture employs about half of India's workforce (58% of India’s population), it contributes less than 20% to GDP. There is, thus, a pressing need to increase agricultural productivity, and create alternative channels of employment so that many of those currently employed in agriculture can obtain better opportunities of work. (4.2) As of 2018, 81.1 percent of the dairy and milk processing market was part of the unorganized sector and 71 percent of total participants in the sector are women. (15.1)
Expected Development Outcome
The business models under this IOA can provide farmers with timely and easy access to input markets, thereby facilitating improved yield. This will subsequently help in raising India's agriculture productivity. (4.3)
The business models under this IOA can resolve issues related to information asymmetry in the agriculture sector. Farmers are not fully aware of the new agricultural techniques, types and quality of seeds available, impact of excessive use of fertilisers, as well as benefits from government schemes / policies. Online platforms can digitise traditional agriculture techniques in the most proficient way to eradicate information asymmetry in agriculture. (12.3)
The business models under this IOA can increase farmers’ productivity by offering value based advisory to farmers. This would, subsequently, also contribute to GOI's goal of doubling farmers' income by helping poor farmers become more profitable and prosperous. (4.3)
Gender & Marginalisation
Primary SDGs addressed
2.3.1 Volume of production per labour unit by classes of farming/pastoral/forestry enterprise size
2.3.2 Average income of small-scale food producers, by sex and indigenous status
2.a.1 The agriculture orientation index for government expenditures
2.c.1 Indicator of food price anomalies
12.3.1 (a) Food loss index and (b) food waste index
Secondary SDGs addressed
Directly impacted stakeholders
People
Corporates
Gender inequality and/or marginalization
Outcome Risks
Gender inequality and/or marginalization risk: Majority of farmers are from the low-income bracket and may not be able to afford or utilise the tech-enabled solutions offered.
Impact Classification
What
Enable farmers to obtain the right price, advisory and inputs, in a timely manner, thereby assisting them in increasing productivity.
Who
Farmers benefit by obtaining inputs to ensure a better crop and obtaining correct advisory, which would thereby improve their productivity.
Risk
Majority of farmers are from the low-income bracket and may not be able to afford the services offered by the input-side digital platforms.
Impact Thesis
Improvement in farm productivity, farmers' income levels and bolster food security by enabling easy and ubiquitous access to digital markets for quality farm inputs.
Enabling Environment
Policy Environment
The National Mission on Sustainable Agriculture (NMSA), in tandem with other missions under the National Action Plan on Climate Change, strives to optimize agricultural productivity and mitigate climate change impacts. Soil Health Management (SHM) initiative promotes organic manures and bio-fertilizers and low-input sustainable agriculture. (4.2)
Farmers’ access to new information, knowledge and skills is being strengthened through the network of Krishi Vigyan Kendras (KVKs) or Farmers’ Science Centres, and agriculture extension support. (4.2) As per ICAR data 2020, 721 KVKs have been set up across India.
Comprehensive strategies on climate-resilient agriculture have been developed and promoted by the Indian Council of Agricultural Research (ICAR) producing adaptive crop regimes and crop management practices for different agricultural seasons. (4.2)
As per Union Budget 2020-21, USD 40.06 billion has been allocated to the Ministry of Agriculture. (12.11)
Under Budget 2020-21: (4.8) - A target of USD 212.31 billion was set for the year 2020-21. - KCC scheme was expanded to include PM-KISAN beneficiaries. -NABARD Re-finance Scheme to be further expanded.
Financial Environment
Financial incentives: The Government of India has allowed 100% FDI in marketing of food products and in food product E-commerce under the automatic route. (12.17)
Other incentives: The Government of India is going to provide USD 306.29 million for computerisation of Primary Agricultural Credit Society (PACS) to ensure cooperatives are benefitted through digital technology. (12.11) Government approved an increase in Minimum Support Price (MSPs) for all Kharif & Rabi crops for 2018-19 season at a level of at least 150% of the cost of production. (12.19) Government approved ‘Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA)’, which aims at ensuring remunerative prices to the farmers for their produce as announced in the Union Budget for 2018. (12.19) One-Product One-District introduced in order to improve better marketing and export in the Horticulture sector. (12.20) In September 2018, the Cabinet Committee on Economic Affairs (CCEA) approved a USD 820.41 million assistance package for the sugar industry in India. (12.17) In May 2019, NABARD announced an investment of USD 100 million venture capital fund for equity investment in agriculture and rural-focused start-ups. (12.17) The Government of India is going to provide USD 306.29 million for the computerization of Primary Agricultural Credit Society (PACS) to ensure cooperatives are benefitted through digital technology. (12.17)
Regulatory Environment
Regulatory bodies governing this sector include: - The Ministry of Agriculture and Farmers' Welfare (formerly Ministry of Agriculture), a branch of the Government of India, is the apex body for formulation and administration of the rules and regulations and laws related to agriculture in India. The three broad areas of scope for the Ministry are agriculture, food processing and co-operation. - Agriculture Skill Council of India (ASCI) works towards capacity building by bridging gaps and upgrading skills of farmers, wage workers, self-employed and extension workers engaged in organized / unorganized segments of Agriculture & Allied Sectors. (12.17)
Regulations applicable include: (12.18) - The companies dealing with development of transgenic seeds/vegetables, genetically modified seeds or planting material are obligated to meet all safety requirements as stated under the Environment (Protection) Act on genetically modified organisms (GMOs). - Further, the import of GMOs may be subject to the conditions laid down in the notifications issued under the Foreign Trade (Development and Regulation) Act 1992. - Lastly, the prior approval of the Genetic Engineering Approval Committee (GEAC) and the Review Committee on Genetic Manipulation (RCGM) is required for the undertaking of business activities which involve the use of genetically engineered cells and material.
Marketplace Participants
Private Sector
Investors: Bertelsmann India, Accel, Chirate Ventures, Aavishkar Bharat Fund, Sequoia Capital India, FMO, Omnivore, AgFunder, Global Innovation Fund. Corporations: AgroStar, DeHaat, Chilibeli, Decisive Farming, The Climate Corporation and FarmLead, EM3 Agri Services.
Non-Profit
The Indian Council of Agricultural Research is an autonomous body responsible for co-ordinating agricultural education and research in India. (4.2). Agricultural Technology Management Agency (ATMA) is a registered society responsible for technology dissemination at the district level. It is a focal point for integrating research extension and marketing. It decentralizes day to day management of the Agricultural Technology System (ATS). Krishi Vigyan Kendras (Agricultural Science Centres) work as innovative institutions for imparting vocational training to practicing farmers, school dropouts and field level extension functionaries.
Target Locations
India: North India
India: Central India
India: Western India
References
- (4.1 https://www.ibef.org/industry/agriculture-india/infographic 4.2 https://niti.gov.in/sites/default/files/2019-12/SDG-India-Index-2.0_27-Dec.pdf 4.3 https://asia.nikkei.com/Business/Startups/Indian-agritech-startup-targets-10m-users-in-nationwide-expansion#:~:text=Sheth%20said%20AgroStar%27s%20goal%20is,become%20more%20profitable%20and%20prosperous. 4.4 https://www.drishtiias.com/summary-of-important-reports/strategy-for-new-india-at-75 4.5 https://www.thehindubusinessline.com/economy/agri-business/agri-tech-platform-ninjacart-expands-operations-to-delhi-mumbai-pune-strengthens-headcount-by-600/article26600072.ece 4.6 https://foodsecurityindex.eiu.com/Country/Details#India 4.7 https://www.drishtiias.com/to-the-points/paper3/food-security-1 4.8 https://www.ibef.org/economy/union-budget-2020-21 4.9 https://www.hindustantimes.com/india-news/govt-to-announce-changes-in-essential-commodities-act-dismantling-of-apmc-sources/story-TOBYYq5XvLW2fNMz0mUIYL.html#:~:text=Amendments%20in%20the%20essential%20commodities,meeting%20on%20Monday%2C%20sources%20said. 4.10 https://indianexpress.com/article/explained/an-expert-explains-farm-acts-and-federalism-6622769/ 4.11 https://www.wbcsd.org/Overview/News-Insights/WBCSD-insights/Impact-of-COVID-19-on-smallholder-farmers-in-India#:~:text=Prices%20of%20sugar%20rose%20in,places%20due%20to%20over%2Dsupply.&text=However%2C%20the%20COVID%2D19%20induced,marginal%20farmers%20in%20the%20country.
- (12.1 https://www.yourarticlelibrary.com/agriculture/7-reasons-for-low-productivity-in-india-agriculture/42317 12.2 https://www.thehindu.com/business/mandis-linked-to-e-platform-see-65-rise-in-count-post-lockdown/article31560507.ece#:~:text=Photo%20Credit%3A%20PTI-,On%20Monday%2C%20177%20more%20joined%20the%20platform%2C%20taking%20the%20total,according%20to%20Agriculture%20Ministry%20data. 12.3 https://medium.com/work-work-work/information-asymmetry-in-indian-agriculture-c07f793543aa 12.4 https://tech.economictimes.indiatimes.com/news/startups/agrostar-raises-27m-funding-led-by-bertelsmann-india/68384826 12.5 https://www.livemint.com/Politics/0ZS5n0x0EsIWhhfwhwxuiM/World-hunger-rises-as-climate-change-conflict-curb-food-acc.html 12.6 https://www.agribusinessglobal.com/agrochemicals/how-agrostar-is-leading-the-way-to-simplify-indias-distribution/ 12.7 https://www.prnewswire.com/news-releases/india-agriculture-market-report-2018-2023-300709483.html#:~:text=The%20agriculture%20industry%20in%20India,12.2%25%20during%202018%2D2023. 12.8 http://news.agropages.com/News/NewsDetail---33696-e.htm#:~:text=India%27s%20agri%2Dinputs%20industry%20comprises,consumption%20at%20US%24%202.77%20billion. 12.9 https://www.ey.com/en_in/start-ups/how-agritech-start-ups-are-changing-the-face-of-indian-agriculture 12.10 https://ideascape.in/blog/a-startup-for-58-of-india/ 12.11 https://www.ibef.org/industry/agriculture-india.aspx 12.12 https://sustainabledevelopment.un.org/content/documents/26279VNR_2020_India_Report.pdf 12.13 https://www.ibef.org/industry/agriculture-presentation 12.14 https://medium.com/ninjacart/welcome-to-ninjacart-b58e64938e62 12.15 https://iasexamportal.com/the-gist/kurukshetra-corporate-investment-in-agriculture 12.16 https://corporate.agrostar.in/blog/ 12.17 https://asci-india.com/about-us.php 12.18 https://uk.practicallaw.thomsonreuters.com/1-604-1046?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1 12.19 https://pib.gov.in/PressReleasePage.aspx?PRID=1537546 12.20 https://www.business-standard.com/budget/article/budget-proposes-11-hike-in-farm-credit-to-rs-15-trillion-for-fy21-120020101225_1.html 12.21 https://www.prsindia.org/policy/discussion-papers/state-agriculture-india 12.22 https://ivca.in/wp-content/uploads/2020/02/IVCA-EY-PE-VC-Agenda-India-Trend-book-2020_compressed.pdf