Indian agriculture reforms and tech’s role!
Recently, the central government of India rolled out 3 major and long-awaited agri-reforms. Like many others, I view these reforms as empowerment and not just entitlement of more than 60% of India’s population that makes a living on agriculture and related activities. While a lot depends on the execution of these reforms at the grass-root level, I have summarised what each of these reforms means to the agriculture sector and how technology can play a key role in realizing the expected benefit!
First things first, the Reforms
- Modification of the Essential Commodities Act (ECA) to enable better price realization for farmers.
- Providing wider marketing choices to farmers.
- Establishing a legal framework enabling farmers to engage in contract farming and transact with bulk buyers.
What do these reforms mean to the Agri sector?
1. Modification of the Essential Commodities Act (ECA) to enable better price realization for farmers.
No stock limit will apply to cereals, edible oil, oilseeds, pulses, onions, potato.
Whenever prices of agriculture commodities rise, immediately exports are halted, stringent stock limits are enforced to keep the prices under control. While it makes sense to keep the prices affordable for common consumers, the farmer loses out on his earnings by a large amount. The farmer is losing anyways when the prices are lower, and when major cut of his sales is taken away by middlemen. The government is amending the ECA so that farmers can cater to the export demand and for that matter any demand without restrictions.
This is said to be a long-awaited reform since the ECA was enacted in 1955. The market and economic conditions have changed quite a lot since then. This is a bold move in the right direction but how can we make sure that the benefits are not snatched away from farmers by the black marketers and hoarders? Of course, the government is expected to do its bit, but there is a lot that the private sector and in particular tech entrepreneurs can do!
2. Providing wider marketing choices to farmers.
Farmers are no longer restricted to sell only to APMCs, removing barriers for inter-state trade, enabling e-trade of agriculture produce.
While APMC markets, also known as mandis, have been a farmer’s conventional go-to selling avenues, and for some states, the only selling channels by law. APMC’s selling prices are driven by demand vs supply balance on a daily basis. The price-setting mechanism is not transparent and has often led to cartelization by APMC agents. This coupled with the lack of market insights puts the farmer in a tough spot. The excess arrivals end up weakening the negotiating power of farmers and prices crash. The farmer can, of course, can’t take his produce back home as he can’t withstand additional transport and storage costs.
With these reforms coupled with farm-gate infrastructure and post-harvest management infrastructure, farmers will have wider channels to sell their produce and get better prices and will not be bound to sell to exploitative prices at the local mandi. This reform will also remove barriers to free interstate trade and will help the farmer in realizing better prices.
This measure will have limited success unless it is backed by the availability of digital platforms that allow farmers to sell their products all over the country. Digital platforms that provide market access to farmers to buy inputs and to sell output will go a long way in eliminating middlemen and in better price discovery for the farmers. eNAM is a government’s initiative to create a unified national market for agricultural commodities and enable online agricultural commodity marketing. It is yet to prove its mettle mainly due to the lack of awareness and the absence of an assaying/grading framework and infrastructure. Today’s AI tools including computer vision and deep learning can be deployed to grade the quality of agricultural commodities. It has huge potential to enable not only farmers but also industrial processors, retailers, exporters to transact digitally and generate cost-time savings.
3. Establishing a legal framework enabling farmers to engage in contract farming and transact with bulk buyers.
Risk mitigation and assured returns for farmers.
The FM quotes: Currently, farmers do not have a mechanism to get the predictable price of his produce. At the time of sowing, he goes in with uncertainties. Provided that there are adequate monsoons that year and no natural disasters, he is able to produce adequately. However, he doesn’t know where and how much to sell to get maximum returns.
This outlines the need for looking at the overall ROI for the crop cycle (Return on Investment or simply expected profits = revenue — costs) rather than just working on improving the productivity of crops. Through this reform, the government will facilitate a legal framework to enable farmers to enter into contracts with processors, aggregators, and large retailers with the pre-agreed quantity, quality, and price of farm produce. This will help in liberating farmers and also giving them valuable demand and price inputs prior to sowing the crops.
Role of today’s technology
It’s a known fact that there are uncertainties at every stage of the crop cycle mainly due to the lack of synchronization between demand and supply signals. Without data-driven assistance, the farmer sows his crop with almost no certainty of returns. From crop selection, sowing, and harvesting schedule, to where to sell the harvest are some of the most critical decisions in the agriculture sector that are heretofore based on farmer’s experience, instinct, and lack of proactive planning. Even if he produces adequately, he may not know where and how much to sell to get maximum returns. With inputs like what is expected to sell better, where, and of what quality the farmer will be in a much better position to make intelligent decisions.
Today with the combined potentials of AI, Cloud Computing, and IoT it has become not only possible but also quicker to provide recommendations aligning with a farmer’s geography and preferences that can assist him with crop selection, finding wider sales channels, storage, and transportation recommendations to maximize the returns. Additionally, such a data-driven framework can capture farmer’s expected ROI based on expected sales and projected costs involved during the entire crop cycle even before sowing!
List of questions that today’s technology can help find answers -
- Which crop variety to choose for the next crop cycle?
- What is the optimal sowing to harvesting schedule- when to sow? What fertilizers, pesticides needed to produce the desired output?
- What is the expected selling price at the time of harvesting? What is the total cost involved? What are the expected profits?
- Does it make sense to sell right away or store it now and sell it at some later time?
- How to store and transport optimally?
- Where to sell — AMPC markets, industrial bulk buyers, retailers, export?
- Can on-farm post-processing fetch better prices? If yes, will that result in more returns?
Additionally, such agro-tech platforms can also help in aggregating farmers to create a larger seller effect and product mix to leverage the economics of scale and offer a wider range of commodities. On-boarding bulk buyers or aggregating multiple small buyers, on the other hand, will enable an organized supply chain and grow crops in sync with demand.
Conclusion
It seems these reforms are placed well for the agriculture sector to catch up on flexibility and infrastructure enjoyed by other businesses like manufacturing however just that is not enough to travel the full distance. Technology must play its role to leverage these offerings to make Indian farmer truly Atmanirbhar!
Many thanks to my colleagues Advait Godbole & Sidharth Rupani for proofreading, content suggestions.
