The average landholding size in India is shrinking with the increase of rural population and fragmentation of families. Around 88% of households have landholding below two hectares with 0.5 hectare as the median size (Situation Assessment of Agricultural Households and Land and Livestocks Holdings of Households in Rural, 2019). This is a structural problem the nation has to contend with. Clearly, this militates against scale and makes attempts at aggregation a complex challenge.
However, there is a silver lining. In recent times, there has been a spurt in the number of entrepreneurs venturing into agri-startups that are connecting farmers. The increase in mobile connectivity and low price of data have aided their reach. More than 1,300 agri-tech start-ups are facilitating a supply chain of inputs and outputs, market linkage and access to financial services. The past five years alone have witnessed a 9x increase in institutional funding to agri-tech start-ups. During 2014–2019, the sector attracted $1.7 billion compared to $0.2 billion in the preceding five-year block. Omnivore was the first venture-capital (VC) firm to invest in agri-tech way back in 2010. Since then, investments from VC firms like AgFunder, Accel India, Aavishkaar Capital, Sequoia Capital, etc., affirmed the growing interest amongst risk investors in agriculture and allied sectors with a total investment of $2.1 billion during 2021, a 97% jump from 2020. Investment analysis shows that the addressable market will be $24.1 billion by 2025.
Proliferating agri-tech startups are providing interesting solutions. Operational across 20 cities and collaborating with more than 50,000 farmers, Ninjacart is currently India’s largest agri-tech company providing technology-driven supply chain solutions for fresh fruits and vegetables delivered from farm to retail stores in less than 12 hours. Gurugram-based farMart is India’s first Software-as-a-Service (SaaS)-based platform operational across 30 states, connecting 1.4 million farmers with more than 60,000 retailers selling their produce at competitive prices. Patna-based agri-tech startup ‘Dehaat’ has created an online platform for end-to-end solutions from sourcing seeds to market access. Through a robust network of 3,000 micro-entrepreneurs, 7 lakh farmers can potentially procure agriculture inputs online and sell their produce. Milk Mantra in Odisha is the first VC-funded agri-food venture in the dairy sector, which today is connected with 75,000 farmers to source milk.
Agri-tech innovations do provide alluring prospects of aggregation of crops, fruits and vegetables, as well as fish and meat products. But typically, the promoters and investors are looking at rural backyards of metros and Tier-2 cities. The footprints of most of the new companies can be traced to western and southern India, accounting for almost 50% of the total agri-tech startups. Therefore, we need to have a solution that has much larger relevance, especially in the regions that historically have low farm incomes, i.e. central, eastern and northeastern India.
The Centre has taken initiatives for aggregating agricultural produce from farmers by creating an online portal for the National Agriculture Market (eNAM). The Small Farmers Agribusiness Consortium (SFAC) aims to register all 2,477 regulated markets and 4,843 sub-market yards on the portal, eventually, to promote a real national common market for individual farmers and Farmer Producer Organisations (FPOs). Currently, 1,000 mandis are registered of which only 50% are trading online (enam-gov.in, 2022). However, it is to be noted that there are no service providers who are registered on eNAM to provide logistic, packaging, weighing, grading and sorting services. The platform is linear without integration of support services and has not lived up to its objectives so far. In most states, the trading is still intra-state.
Organising farmers into collectives may work. Formation of FPOs is now an official strategy of both the Centre and the states. Multiple central bodies like the National Bank for Agriculture and Rural Development (NABARD), SFAC, National Agricultural Cooperative Marketing Federation (NAFED) as well as the state agencies have been tasked to form the FPOs. The thrust is to form companies and appoint professionals to streamline their functioning. While the bigger FPOs in western India, particularly in Maharashtra and Gujarat, were organically the offshoots of genuine cooperatives, elsewhere the majority of the FPOs are top-down official initiatives.
One of the key concerns faced by small and marginal cultivators and farmer collectives is constraints of marketing. Various models of informal certainty exist in the ground. One of them relates to form of contract farming. As a model, contract farming aggregates agricultural produce and assures the cultivator that his produce will be bought. In the year 2003, the Government of India circulated a Model Contract Farming for consideration of states. In the next decade, many states made pragmatic moves to adopt contract farming and gave statutory powers to the framework.
However, contract farming continues to be adopted in various informal ways across the country. Exporters, processors, traders and even medium and small agri-sector marketers engage with farmers and support the pre-harvest and post-harvest operations. They facilitate supply of seeds and also agri-credits. We have witnessed a similar relationship in fisheries and animal husbandry sectors like sourcing broiler meat and eggs through prearranged agreements. Tamil Nadu is the only state to have passed a Contract Farming Act in 2019. Some of the state governments have passed ordinances to facilitate and regulate contract farming. Even in the Agricultural Produce Market Committee (APMC) Acts patterned after the Model Act circulated by the Government of India in the past, there is a provision of contract farming in most states.
Nevertheless, there is a lack of open support for contract farming because of several compulsions. Farmer lobbies and advocacy groups continue to look at corporates and large players with suspicion. The farmers are perceived to be victims of corporate greed. However, like in other sectors of economy, private players need to enter into agriculture. Demand and supply have to play a role in enhancing productivity and competitiveness. It is hard for small farmers to access the national market; they will continue to be at the mercy and vagaries of price at local markets unless more organised players partner with farmers. The engagement must not only protect farmer’s interests but also bring in more efficient management to the entire supply chain. The various challenges faced during the journey of food from farm to fork is daunting and large infusions of capital and technology will ensure that all sides win.
IAS (Retd), Former Chief Secretary, Government of Odisha