Why Agritechs are complementary to Fpos in the agricultural value chain

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Agriculture in India – like its businesses – is largely small-scale. While we lament the dearth of mid-sized firms in manufacturing, we observe that the agricultural sector is trying to achieve scale and capability through collectivization. Farmers, when they come together to work as a single entity in any phase of their production, are called collectives. This move towards collectivism was seen on the marketing side for some time, in the formation of farmers’ marketing cooperative societies, and on the production side more recently, in the form of agricultural producer organizations (FPOs) . These types of collectives have managed to overcome some constraints unique to Indian agriculture, such as fragmented land ownership and information asymmetry.

While farmers’ cooperatives were and still are popular, government and the well-meaning private sector, enthusiastic about the successes of some OPAs, are giving impetus to the formation of other such collectives.

FBOs, with their professional management structures, provide much-needed leadership for smallholders – from getting the right seeds and the right proportion of fertilizer to finding a market for their produce. They therefore have the potential to fill some of the major gaps in India’s agricultural supply chain. However, experience from around the world, as well as the case of the Indian manufacturing sector, shows that these structural changes must be accompanied by innovation and capacity building.

As the world prepares for the fourth agricultural revolution (Lejon and Frankelius, 2015), India must carefully assess its capacity, needs and social context while choosing its own path towards not only greater agricultural productivity and a improved well-being of farmers, but also ecological sustainability. Emerging technologies such as the Internet of Things, artificial intelligence and robotics have the ability to radically change the way we farm (Wolfert et al., 2017). With an internet penetration rate of 32%, India is still in its early years of adopting these advanced technologies. FPOs, however, have the potential to accelerate the adoption of these technologies by creating economies of scale and building the necessary architecture.

FPOs and agri-techs therefore have a complementary role to play in the Indian agricultural ecosystem. OPAs provide scale and organizational structure to small and medium farmers, who by themselves might not be able to effectively participate in the agricultural market individually. Agricultural technologies provide the technical solutions to agricultural problems such as pests, inefficient use of water, shortage of labor and lack of market information. For example, aerial pest/plant health surveillance systems can provide early warning signals to FPOs about affected regions. Micro-weather monitoring solutions can give personalized alerts to FPOs that they can use to optimize planting and harvesting.

Science-based drip irrigation installation and management solutions can help FPOs conserve water and maximize yield. Demand and price forecasting technologies can provide valuable market signals to FPOs for their cultivation decisions. This role of agricultural technologies has been recognized by the government in its Indian Digital Agriculture Ecosystem (IDEA) consultative document. However, for agritechs and OPS to work together in symbiosis, funding for agritechs must keep pace with that for OPS.

There are key differences in the type, duration and mode of financing FPOs and agricultural technologies. FPOs, being commercial entities, need early funding for their formation and secondary funding for their maintenance in the early years until they break even and become profitable. Funding for technology generally does not follow the same pattern. Financing innovative technology often involves ambiguous overhead, longer lead times, and uncertain product outcomes. However, many agricultural technologies relevant to Indian agriculture have already been piloted, tested and commercialized in the advanced world.

What India needs now is a concerted effort to locally replicate these technologies in the Indian context. This requires building a problem-solving and innovation ecosystem that successfully identifies opportunities and gaps in the agricultural value chain. Of course, it also needs substantial, sustainable and flexible capital.

It is reasonable to focus on organizational changes (collectivization) to address some of the structural problems in Indian agriculture. However, India must also give due consideration to some of the systemic innovations in food production that are happening around the world and their potential impact on the way we farm in India. Doubling farmers’ incomes is now a political priority. To make this a reality, we also need to think about technological innovations and how to bring them to our farmers, alongside other support mechanisms.

Policy decisions must therefore balance the need for an immediate resolution of current problems and a futuristic vision of an agile and sustainable agricultural ecosystem. For Indian agriculture, with its specific needs in each region and geography, there is no single solution. Here, agricultural technologies, which help and support OPAs, can allow farmers to get their fair share of the value chain while providing a much-needed boost to the sector, perhaps spearheading its revival and its durability.

—With contributions from Professor Dr Rakesh Arrawatia, Anand Institute of Rural Management

— The author, Priyadarshini Ganesan, is a senior research fellow at Dvara Research’s Household Finance Research Initiative. Opinions expressed are personal

(Edited by : Ajay Vaishnav)

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