Agriculture was never a very attractive destination for investors and private entrepreneurs. Weather related uncertainty, government interference, farmer suicides and similar negative news impacted investment sentiment for long. It has been traditionally seen as a risky and money losing sector.
But many now believe that this will change and the sector will generate good profit opportunities for the farmers and other private sector players who have an opportunity to invest in this sector. What has caused this change?
According to experts this decade will be a turning point in the lives of our farmers. Here are some reasons for this expectation.
a) The Government of India has announced some pathbreaking reforms last month in the legal framework, creating the 1991 moment for agriculture. This will certainly cause long term effects on the efficiency of output management. These reforms will lead to a huge transformation of the supply chains of agricultural output. They should increase the role of private sector in the agri commodities markets, give more choice to the farmers in selling their produce and there by discovering a better price for their produce.
b) Consumers and farmers are expected to be connected directly, bringing down the role of middlemen. This should be good for both the farmers and the consumers.
c) Digital technology is expected to transform the agri and food sector in a big way. Young Agri Tech start ups are moving to the center stage of this new configuration. Well established corporates are joining hands with Agri Tech start ups to offer digital services to farmers and consumers. Experts believe that active internet users will go up from current 500 million to 1 billion by 2027, mostly through rural penetration.
d) Demand for better quality food, healthy food with traceability should be multiplying manifold during this decade.
e) Farming will get more mechanized and digitized which will reduce the daily drudgery of the farmer in the field. New business models will come up to make this happen.
These all are transformational changes that can convert our villages from the current state of neglect to new centers of prosperity. Farmers, Corporates, Investors and entrepreneurs have an opportunity to create profitable ventures out of this opportunity.
Let us look at some of the specific opportunities for private enterprises.
1. Farmgate infrastructure. Government has announced a facility of One Lakh Crore rupees to help private enterprises, FPOs and others to create farm gate infrastructure. This would be in the form of warehouses, drying & packing facilities, private mandis, transportation and logistics, Cold storage and cold chain facilities. However the trick lies in not just investing in physical infrastructure but combining it with suitable digital systems and soft ware to create electronic warehouses with warehouse receipt system that can attract bank funding for farmers and establishing world class, smart and modern transport systems. This is a huge opportunity to save the 30% losses we incur on agricultural output due to improper storage and transportation.
2. Connecting farmers with markets including exports. While middlemen can not be completely eliminated without substituting their functions with greater efficiency of the supply chain there is a definite need to bring down the length of the chain. Investors can set up aggregation platforms, especially for perishables like fruits and vegetables, establish cleaning, grading and packing facilities in clusters and set up a supply linkage with large retails chains and e commerce platforms. Some of the other crops like cereals, millets and pulses can also be added to this portfolio. This will need to be combined with setting up a digital catchment area of farmers, providing them with app based outreach, arranging on line technical advice for them and a closed loop payment and bank funding system. This will liberate the farmers and the consumers both. Export of agricultural produce, currently at Rs. 2.5 lakh cr is a growth area. Huge opportunity for these players who can easily diversify into export markets by creating export oriented production zones of farmers.
3. Set up custom service centers for machines and irrigation facilities to serve clusters of villages. Farm mechanization will dominate this decade. Mechanization of agriculture will need large scale availability of machines but the farmers can not afford to buy them. Custom service centers will provide agronomic services to farmers through machines owned by the service center. These centers will require large investments in infrastructure, purchase of machines, training, manpower, complete digitization of the service including pest identification, advisory service, spraying of crop protection chemicals and similar services. Large scale farmer data base can be built through this and data points can be collected from fields over a period of time and analysed using big data and AI tools. This can make farming a more precision and data driven profession leading to much better efficiencies. Setting up a chain of such service centers is the best way to achieve efficiencies in machine capacity utilization.
4. Capacity building in rural areas. Farmers need help in terms of organizing themselves into Farmer Producer Organizations, training, digital literacy, leadership development and similar capacity building measures. Investors may set up such capacity building centers in the rural areas and help farmers and others to develop capability to build digital skills, set up cottage industries with market linkages being provided by the investor, provide financial and insurance services and improve other social development indicators in villages. Government has just announced many programmes for supporting micro food enterprises, dairy, fisheries and other businesses in rural sector which can be utilized by the rural people with the help of these capacity building centers. Setting up a network of such centers may not need huge investment but it will have a developmental dimension to the investment making it a social venture. This will create a huge social impact on our rural population.
It is important that any new investment should aim at combining physical infrastructure with digital backbone. A large number of Agri Tech innovators and entrepreneurs are now in advanced stages of offering their products and services which will make the above four opportunities possible. Investors can rope in such Agri Tech enterprises into their business models and establish partnerships with them for mutual benefit. It is a whole new game that is opening up.
It is time for our investors to turn agri business entrepreneurs and pick up one of the above four opportunities that are available right now. These opportunities will give rise to more opportunities that will emerge with passage of time and experience. Early movers will have long term advantages. Time to act is now!
(The writer is also a Partner with a philanthropic organization Social Venture Partners and is a Co-Founder of a food and agri tech platform ThinkAg)
DISCLAIMER : Views expressed above are the author’s own.