Note
- Agri Start Ups – TIECON – 16/02/2019- by Dinesh K Kapila
Thanks to The Indus Entrepreneurs (TiE) for
organising this day long celebration of entrepreneurship.
We would like to associate with this sector as it evolves and are associated
with this sector.
1. This
event is very relevant for our nation today. As it brings together major
stakeholders and domain experts (excluding me !) both practicing and academicians
to discuss & deliberate on this important sector. I would be primarily
focusing on Agri entrepreneurship.
A. NABARD in General
Since I am present as a NABARDIAN, a short
introduction about us before we go the subject proper. However I have drawn
upon essentially my experience and knowledge and consultations on this subject and
the views flow from that primarily.
2. NABARD is the apex Statutory Financial
Institution for Agriculture and Rural Development with responsibilities for
Finance, Development and Supervision of RFIs. It provides advisory support to
the Central and State Governments for policy development as also solutions for
development. We have a mandate as an
Apex Institution for Agriculture and Rural Development and have functions
ranging across Refinance both for Crop Loan and Investment Credit, Credit
Planning, Funding of Rural Infrastructure, Developmental Initiatives in
Financial Inclusion, Micro Credit, Off Farm Development, Watershed Development,
encouraging rural entrepreneurship, fostering Farmers Producers Companies, Institutional Development, Supporting
introduction of Banking Technology (FINTECH), Supervision of Cooperative Banks
and Regional Rural Banks etc. We also do finance State Owned Corporations for
select activities. Our Developmental Initiatives are through Trusts, NGOs,
Government Bodies etc. We view the stakeholders and the implementing agencies
as valued partners in the quest for sustainable rural prosperity. Since
inception we certainly have made a difference in the lives of rural people
through our various programmes. We are perhaps the only institution in the country to have established
and continued the tradition of building specific funds (viz. Watershed
Development Fund, Tribal Development Fund) to address various area/subject
specific developmental aspirations. I will not bring in much data, all the information is on our website
and in our reports. Kindly do refer to our website for insights and knowledge
about us and our work. We build the infrastructure so to say with our
developmental initiatives, for entrepreneurship to evolve and flourish.
B.
The Seminar
Theme – Foster
entrepreneurship and start-ups in the region.”
Now to the issue which is
our agenda for today.
5. Though India has made great strides in every
sphere of economy, agriculture still remains the main stay, but a weak point. Achievements after the great green revolution
and operation flood have been far and few.
Highly fragmented land holdings, restrictions/ inability to access
markets, lack of irrigation facilities, soil imbalance etc., remain severe
constraints in achieving higher growth. Our farmers remain in the low income
group generally. Thus it is imperative
to focus on innovations and entrepreneurship development for increasing the
productivity of land, encouraging crop diversification, finding out new
marketing channels etc.
6. India
has one of the largest public research networks in Agriculture (ICAR has 101
institutes and 70+ universities under its umbrella alongside 645+ KVKs or
district level extension service centers). In addition, some of the country’s
premier institutes such as IIT-Kharagpur have well reputed agriculture
departments.
7. Within the private sector, R&D and introduction
of new technologies in agriculture are often driven by the large MNCs and
Indian Corporate houses in the sector and the R&D cells within them.
8. The paradox is that despite India being home to a
combination of legacy institutions in agriculture, a dynamic private and NGO
sector and successive governments which traditionally have laid great emphasis
on agriculture, breakthrough innovations and technologies- similar to the kind
seen during the first wave of the green revolution, have been slow on the
uptake and limited in terms of adoption by the marginal farmer, who forms the
vast majority of farmers in India (85%), possessing landholding of 2 hectares
or less with a low average income. While technology cannot be cited as the only
reason for India’s poor productivity rates in farming and nor is it solely
responsible for the low incomes of farmers in India; it is increasingly being
recognized as a necessary but not sufficient condition or enabler if India were
to usher in the next wave of the ‘green revolution’ that it so urgently needs.
9. The
network of ICAR institutes and state agriculture universities have done
considerable research in agriculture, particularly on increasing farm
productivity. They have, however, not been very effective at diffusion and
commercialization of the innovations and technologies that they have access to
in house, due to several factors. The formation of Agrinnovate India Ltd.
incorporated as a "for profit" Company owned by Department of
Agricultural Research & Education (DARE), Ministry of Agriculture,
Government of India, to act as an effective interface between ICAR and
Agricultural stakeholders, is an enabler to bridge the gap between innovation at
the institution level and intervention, enterprise & impact on the ground.
10. Experts are of the view that the incubators
attached to public research institutes certainly have the access to quality
innovations but do not have the resources, autonomy, incentives and
commercialization push that is needed, though some are certainly doing well.
11.
A shift from agriculture to agribusiness is an essential pathway to revitalize
Indian agriculture and to make it more attractive and a profitable venture.
Agripreneurship has the potential to contribute to a range of social and
economic developments such as employment generation, income generation, poverty
reduction and improvements in nutrition, health and overall food security in
the national economy. Agripreneurship has the potential to generate growth,
diversifying income, providing widespread employment and entrepreneurial
opportunities in rural areas. Today, we need a focus on basic concepts of
agripreneurship, entrepreneurship skills, and the financing options as
available and maybe as evolving.
12.
The Agricultural production environment, being a dynamic entity, has kept
evolving continuously. The present phase of changes being encountered by the
agricultural sector, such as reducing availability of quality water, nutrient
deficiency in soils, climate change, farm energy availability, loss of biodiversity,
emergence of new pests and diseases, fragmentation of farms, rural-urban
migration and trade regulations, are some of the new challenges. These changes
impacting agriculture call for a paradigm shift in research approach. And for Innovation
to evolve and it’s faster roll out.
13. Over the years the significance of Agribusiness
is increasing and it opens the doors for creating a new employment
opportunities. Agri-business
entrepreneurs work with farmers and/ or involved directly in farming. They add
value to the supply chain, improve efficiencies, reduce wastage etc. through
innovative interventions.
14. By providing innovators /entrepreneurs with an
array of targeted resources and services, they can achieve commercial success.
This will, simultaneously, address the issue of modernization of agriculture,
leading to better productivity and higher incomes to the farmers. Agriculture –
fired by Government Policies and the strong engagement of industry and
institutions is now certainly evolving onto agribusiness in terms of approach
and structure. The entry of skilled youth, fired by ideas, passion, the power of
technology and access and counselled about new business models are striving to
fire up agriculture. These start ups are providing the missing links in the
agri value chain and delivering efficient products, technology and services to
the farmers as well as the consumers. From ICT applications to farm automation,
from smart poultry and dairy ventures to protected cultivation, food processing
etc, there has been proliferation of
innovations and technology driven start ups. These in due course will certainly
scale up the agriculture sector. Successes and numbers are few but it’s an
increasing trend and certainly encouraging. I can certainly say that we in
NABARD are building a relationship by investing in venture capital funds.
15. Despite Government interventions, the number of
Agri Business Incubators are very few in the country. Experts state that out of
120 Incubators supported by NSTEDB only 6 are Agri Business Incubators.
16. Experts are of the view that higher
agricultural productivity will help India respond to several challenges such as
persistent malnutrition, increased water scarcity and climate change. They
state that by focusing on innovation, research and improving skills of
students, agricultural universities can become the engine for increasing
agricultural productivity.
17. The
policy environment in India is extremely supportive for the growth of the Agri
start up in India. This even the major players in this sector state for start
ups in general. The Agri entrepreneurship sector has emerged as a focus area
for policy makers in India. Our success in providing affordable and hassle free
services to each and every Indian shall be the key in meeting the important
national priorities and contribute to the nation's prosperity.
18. Realising the importance of Agri Business
Incubation centres in creating employment opportunities and also supplementing
the efforts of GoI in its mission of doubling the income of farmers by 2020,
NABARD has as of now provided financial support for setting up Agri Business
Incubation centres in CCSHAU Hisar (Rs.11.74 crore) and TNAU at Madurai (Rs.12.24
Crore). The work at Hisar is underway.
19. The ABICs would be setup as a Special Purpose
Vehicle (SPV) as a “not for profit section 8 company or as a Society/Trust.
ABICs can also be established as a “for profit company” under the Companies Act
2013. Our Agriculture Universities have research centres with a large campus,
state-of-the-art facilities, laboratories, experimental fields, and a community
of national and international scientists and highly educated and experienced
professional human resources, all strengths for the ABIC.
20. The ABIC will provide a single window access
for all agri business activities within the Institution for consultancy,
consortia and Incubation, encourage associations to lead the projects in the
initial stages, mobilize entrepreneurs to promote the SPV, meet the specific
objectives of mobilizing resources, obtaining finance, transferring risk and
performing specific investment
activities.
21. There is a viewpoint and it’s also my own
personal observation that the youth is not keen to join agriculture, therefore,
there is a need to glamorise the farm sector. The ABIC would or should enable
in due course a movement of the youth, especially in rural areas, to endeavour
to be employment generators instead of employment seekers. In any case we need to foster agri-business
entrepreneurs/ agripreneurs, who can work with farmers.
22.Let me share here in passing our experience with
a sort of start up, The FPO, if I could classify them as such. We have actually
handheld them and supported them through the long journey to becoming
commercial in orientation and mindset and aware about the modalities and
regulatory compliances. The Government of India issued a National Policy and
Process Guidelines document on formation of FPOs. This set of Guidelines
encouraged State Governments to provide incentives, including credits for and
support of the formation and ongoing operation of FPOs in various states. Over
1850 FPOs have been formed and are now successfully operating throughout the
country. Successes are at varying levels understandably but the objective is to
set up FPCs to enable their members to access financial and other inputs and
services, including appropriate technologies for farming. The successful FPCs
also organize collection, processing, storage and marketing of their members’
produce in high-value markets at an optimal price. These actions by the successful
FPCs have thus reduced transaction costs and allowed the FPCs to enter into a
partnership with private and public sector companies for purposes of supplying
farm produce on more equal terms. the typical business mix of an FPC would be: ·
Aggregation and sale of agricultural produce grown under contract farming, ·
Production and sale of certified and foundation level seeds grown under seed
production contracts with public and private organizations, Supply of
agriculture inputs and implements, including financial and logistics services
(like modern storage, transport, etc.). This is brought about through
agreements with collateral service management groups, Price discovery through
spot exchange mechanisms, Agriculture extension services etc.
23. The benefits as planned and envisaged to a
member of an FPC are numerous, and in the form of: · Timely and increased availability
of good quality fertilizers, seeds and other agriculture inputs at a reasonable
rate, Better price realization for produce, with efficient extension services
leading to higher farm productivity and a reduction in costs of cultivation.
Provision of cash dividends and other services, including finance, use of
warehouses, access to agricultural implements, a crop grading facility, etc. My
one limited point, the FPOs or rather FPCs need to deeply study the terms and
conditions for sanction of loans, and to consider building up a heathy credible
relationship with banks by first availing a smaller quantum of a loan and then scaling
up once the relationship stabilises. A clear business vision is also a must.
24. In conformity with the spirit of encouraging
FPOs, the NITI Ayog will be organising a conclave on “Start-up for Smart
Agriculture” at the National Agri-Food Biotechnology Institute (NABI), Mohali
on 75h March 2019 for fruitful discussions with vast experience in the sector.
NABARD has been recognised as a facilitator for organising this conclave
through its regional offices at Punjab & Haryana. The focus of the conclave
will be on FPOs, Cooperatives, Agri-Entrepreneurs and Start-ups value addition,
utilization of agriculture equipment, success stories / best practices in this
sector.
25. NABARD has set up a Venture Capital Fund to
support agri entrepreneurship in our nation, This is to give a fillip to
sustainable and equitable growth in agriculture, agro processing, industry and
services sectors in rural areas, the idea is to explore the avenue of making
contributions to professionally managed Venture Capital Funds having exposure
to Agriculture and Rural sector. The broad objective is to to encourage
entrepreneurship in existing or new activities leading to agricultural and
rural development, to encourage investment in innovative, high-risk, sunrise
activities in agriculture and rural development sectors etc. The details are there in our Annual Report and
on our website.
NABVENTURES – This was incorporated 23/4/2018. It
is the AMC of the proposed NABVENTURES Fund with a target corpus of Rs 500
crore. To tap the vast sector in Agriculture, Food and Rural Businesses. You
would have read the press reports on this. I suppose I can safely summarise
that in due course we should evolve as the Source of ideas, Accelerator,
Incubators and Catalyctic investor for this sector.
26. Now as I must share the main actionable areas
if you plan to enter this sector. What Agri Start ups need to know and realise
is that they must from inception develop a deep expertise in agriculture and
consumer domains and specially at the top level. They need to know that an
inefficient supply chain with a dominant set of suppliers, that the current
mode of agents / buyers / middleman etc impact direct sales and the share of
prices, the lack of financing options or rather the distributor and aggregator
doubling up as a financer in addition to banks,
inadequate irrigation and the inverse relationship between farm size and
productivity are major challenges. Secondly,
they should align the products and business models with the constraints and
aspirations of the farmers and consumers. They must conduct extensive pilots
across different crop settings, climatic zones and harvesting seasons for
building relevance and encourage adoption. They need to build a partnership
with organisations which can manage and know the mode of managing farmers
groups and their produce. If needed they may build a partnership with a larger
corporate for better adoption of technology and products in case they are not
moving adequately on these fronts. Deep innovation and IP could be there,
rather is there within our academic and research institutions. They may tap
this by a sharing mode. Alongside large corporates may think of investing their
CSR Funds to test pilots and adoption of cutting edge technologies or to test
business models. Their association will certainly provide confidence and
expertise as also the depth of experience.
27. It is my thought and we can discuss this but we
need Agri Start Ups to balance the interest of farmers and consumers – for
pricing and quality and production. So far the focus is on technology
innovation IOT in planning and price discovery in commodities, far automation,
satellite or drone imagery for precision farming, Barcodes etc for quality and
traceablity etc. Process and Business Innovations are now awaited, everything
is not centred around the mobile as most believe or the drone. Plain simple
interventions in processes and business models are equally important. Lastly
but most important as per me, the farmer must be sensitised and guided through
the innovation, with patience and a close association, the consequences of any
setback are painful for credibility.
28. As a person from this region, I must add that
the current socio cultural milieu, specially of many members of the land owning
community, is not of marketing. It’s of sales or supply. We now need to move to
a business orientation in terms of thought, action and social norms. This
orientation and acumen is a challenge as we seek to move commercialising
agriculture. We have the institutions and infrastructure is improving, but a
commercial orientation is embedded within a few only. I want to add, are we
even aware about the level of education
and its quality in rural areas, a major gap resultantly is there in knowledge.
Is Commerce even taught as a subject in many rural schools, is my second
thought. Addressing this will bring about awareness and knowledge, and
facilitate a move towards entrepreneurship and maybe gradually start ups from
within rural areas.
29. There are barriers or concerns too such as
urban centric investors are reluctant to invest in a service they don’t
understand, payments from farmers do carry a certain unpredictability, farmers
may be ready to use the technology but somewhat reluctant to invest and the
scaling up of agri start ups as per experts is slower than projects in the
urban sector. Moreover, the level of technology is on a lower scale in
agribusinesses and the mode of selling is also different. Seasonality can impede scaling up too in some
cases or one has to build a business across regions. These need to be
understood and planned for before investing. A challenge as per some experts is
not many players are there in the agri business space, seed capital is not easy
to access, they may not be able to add value beyond capital, there is a lack of
mentors and breaking into markets is not easy.
30. Our
Scenario Broadly
Land Holdings are fragmented, inefficient use of
inputs, obsolete use of technology, rising costs and reduced profitability,
lack of entrepreneurship, weather challenges, supply chain problems, outdated
marketing systems, low level of ICT applications.
31. The Areas
to Invest in
Natural Resources Management.
Better and Efficiently Driven Supply Chain
Marketing Arrangements for outputs.
Informatics and Big Data Analytics
Genetic Improvement of Genetic Species
Resilience to weather / climatic variability
Suitable business models for increasing the
profitability of farmers
Suitable models for farmers aggregation
Organic farming, farmer friendly IPM IMM
Value addition and processing
Tapping the export market.
32. Some
Examples
Drone Technology – Agri Input Applications and Crop
data for insurance
Agri IOT – Farming automation and digitisation
Weather Tracking – Weather advisory services
Pervasive Automation – Plug and play farm equipment
Vertical farming – Hydroponics and Aeroponics
INM and IPM – Bio Control of Pests.
Food Processing – Logistics, markets, production
systems, storage.
33. Just An important aspect of start-ups is the need to be aware about financing
options, the mode and manner of reaching out to the financing institutions, the
existing funds venture or Private Equity or Angel Funds supporting startups in
Agriculture and related fields. More important, entrepreneurs have to be very
focused on project finance and its intricacies, the potential balance sheets,
margins and profitability. Understand the importance of knowing the terms and
conditions of banks. Secondly, the marketing aspects, channels to trade
partners are equally important. These must be absorbed by the entrepreneurs.
Structuring a Company or a start-ups knowing its various stages over a life
cycle and thereafter the exit policy of the investing agency on fund, are all
crucial inputs to be known to the entrepreneur. Read up on the GOI and State
Government facilities and follow up on them, and sites like GeM, Start up India
and Stand up India, these are result oriented sites. Do not ignore them. Maybe
think small and scale up, if that is possible in the business you seek. Banks
are certainly evolving on funding this sector and start ups as such but maybe
alongside you need to enhance awareness about the Angel Investors, Seed Funds,
Venture Capital also. Maybe just maybe Banks could be an option for funding
after moving to a certain degree of
stabilisation from the mechanisms suggested above.
34. I congratulate, TIECON-CHD on convening the
such type of event with an aim to bring all the start-ups on single platform
for sharing of success stories and exploring business and marketing linkages,
technology and financial tie-ups and partnership opportunities.
Thank You.
Notes
1. A start up is an entrepreneurial venture that is in
the first stages of operation, and is usually financed by an individual or a
small group of individuals. It is a young company by entrepreneurs designed to
search for a repeatable and scalable
business model. It is young company that searches for an unknown
business model in order to disrupt existing markets or to create new ones.
2.
Pre Start Up
Discovery and Validation
Start Up
Efficiency and Scale
Growth
Maintenance, sale or renewal.
3.
Players in The Ecosystem
Accelerator / Incubator,
Network / Ecosystem
Investors,
Start Ups.
4.
Incubator - Access to Technology and Information –
Technology.
Developing a Business Model – Innovation
Market Access – Enterprise
Skill and Confidence - Entrepreneur,
5.
Stages
Basic Research – Govt Support, Technology Transfer, incubation.
Early Stage – Testing, Innovating, PPPs, Networking, collaborations,
Both these are high risk and have an uncertain return
Then
Intermediate stage – Growth and continue with PPPs, networks
collaborations
Maturity Stage – Sales and Profits, Low Risk, high returns, private
equity.
6.
Financing
Funding by Angel Investors and Seed Funds then move to Venture Capital
and later Banks and Public Markets.
Seed Capital - no encumbrance with governance formalities, investing in
the idea, revenue generation to start and a move towards break even.
Venture Capital – This could be Early Stage (first, second) and later
stage (third and mezzanine), and at this stage Acquisitions / Mergers and
Strategic Alliances may result.
Lastly, as Revenue scales up IPO, Public Markets, Banks etc.
----------------------------------------------------------------------------
Comments
Post a Comment