Agriculture will never be the same
It is March 2020, and I’m in my village thanks to the lockdown. Curiosity about “how things work” got me to farms and farmers. Having a father working in the co-operative sector (Amul) and my keen interest in rural economy, I knew how agri-economy works briefly. While talking to few of the farmers and friends there, I got to know about a farmer in our village who planted chillies in his farms. Chillies usually have harvesting period of 65 to 70 days. Unfortunately there was lockdown by the time chillies were ready to sell. When the farmer visited the nearby market, there were very few traders there. The traders knew he didn’t have any option other than selling chillies to them. They offered a price of 5 Rs/Kg.
Now bear in mind, the vegetable business was not affected because it came under essentials, thus the usual prices of chillies in the wholesale market is around 15 to 20 Rs/Kg. The farmer didn’t have any option, so rather than selling his chilies to the wholesalers he decided to pack the chillies and sell them in retail himself. Now imagine, a farmer whose job is to produce and harvest agri-commodities is now compelled to go door-to-door selling his goods!
This (poor connectivity of farmers with buyers globally) is not the only problem, the list only goes longer. It is clear that farmers get a poor share when their product gets sold to the consumer. Let me show you how:
Selling agriculture produce is hard. You can’t sell this stuff to end consumers directly. Instead, you’re expected to sell the produce in your designated market area, called mandi. The mandis in turn are regulated by the Agricultural Produce Market Committee (APMC) composed of local farmers, government representatives, and agri-commodity traders.
Once you make your way to the mandi, you get in touch with your agent, who helps you clean, sort, and organize your produce. He then takes the end product to the auctioneer who puts it on display. Interested buyers gather on the market platform and start bidding. The highest bidder will eventually take home your output and the agent will help you settle the transaction with the prospective buyer. You walk away with what you get, but not before you pay your agent his commission.
Ideally, this ought to be a fair transaction. At least considering we have a free and fair auction. But that’s not entirely true.
You see, most auctions are rigged. Traders who are responsible for the buying collude. Instead of competing against one another, they work together and artificially deflate prices by bidding low. Now, the collusion works only until the select group of traders can work together and keep co-operating. And to this end, APMCs that issue new licenses to traders do their best to keep the club exclusive, meaning corruption is rife.
At the end of it all, traders walk away with the lion’s share and farmers are routinely short-changed. It’s a terrible travesty. In fact, by some accounts, farmers only get paid 20–25% of the end consumer price. (source: Agriculture will never be the same)
There is more, the process of selling agri-goods is exhausting and full of deceptions. First you have to be in line to weigh your goods. Then you will have to go to an agent in the APMC who will unload your goods and charge you for it. Then you will have to wait for the auction. When the auction ends and you are not satisfied with the price offered, then you will have to repeat the whole process in the next day’s auction. Bear in mind that the transportation cost to bring the goods from farm to market ranges from Rs. 1000 to 3000.
Arun Jaitley once said while addressing National Bank for Agriculture and Rural Development(NABARD),
“If there is one area in which the biggest return can come to the economy after GST is the agricultural marketing area.”
You must be thinking why the hell we are allowing this to happen in the world and times of disruption and digital revolution? There should be a free market and the problems will be solved (for the most part). Now listen carefully, it is because we are a democracy. In the body of democracy it takes years for the bureaucracy to understand something is wrong, and when finally the government decided to abrogate the APMC act, We the people decided to rebel against it! (That’s how it works). Removal of APMC act will abolish monopsony of APMCs and open the market for all.
Now after reading this, If you are an entrepreneur, your eyes must be shining right now. Slow down Tiger! There are many complications in the agriculture market which can become obstacles.
I was observing this amendment since it was a bill. And as soon as it was presented in the parliament, I started researching for the solution of these problems. And as always, my buddy Divyajeet Chauhan joined me, who is a technocrat and has a family background of farming. And then started an unending meeting streak of meeting Farmers,traders,APMCs chairmen, processors, FPOs (farmer producer organisation), agriculture officers, agriculture scientists and all functions of this market chain.
And that actually gave us some of the most interesting insights which we would have never got sitting in a room. We were able to define our problem statements. And here are they:
(1) Neither farmer nor processors(real buyers) trust each other regarding payment aka lack of transparency.
(2) Farmers do not have “selling power” as the traders buying in APMC hold exclusive rights to buy(close market).
(3) Physical and financial hassle for farmers to sell their goods.
(4) Too many intermediaries in the system thus poor pricing for farmers.
(5) Lack of a proper quality mechanism which can incentivise quality goods.
(6) Unorganised supply-demand as the farmers lack warehousing facilities.
The solution here is clear: a platform which connects farmers and processors directly by taking care of quality assurance, financial transparency and logistics.
Actually it’s not that simple.
Without aggregation of farmers it is not possible to connect them with processors(high volume,you see). There comes FPO in the picture. As the agricultural economist Ashok Gulati notes :
“They [big corporates] need scale and to create scale you create an aggregation point and that is through farmer producer organizations.”
We have created the MVP(minimum viable product), a mobile application as the platform. Those who think, “do farmers use smartphones?” need to change their perception urgently!
From a business perspective, market size of agriculture marketing is around ₹18.55 lakh crore (US$ 265.51 billion) in FY19(PE). That’s a huge market welcoming a disruption! It’s all about volume, volume and volume.
We started from focusing on grains and cash crops,as we went further we found a crop to start with, which is USP of North Gujarat. Castor! North Gujarat is responsible for around 75% export of the castor in the whole world.
We have onboarded many castor solvent plants including Asia’s biggest one (which manufactures oil from around 70% of India’s castor, by the way).
We are developing a quality assurance mechanism which rewards farmers for the quality of their goods and provides processors clarity of what they are buying.
Now why am I telling you all this? Because we need your help. We are aware of the fact that changing conventional methods requires a lot. We constantly seek feedback and advice as we are outsiders in this market. Share this to someone you think can add value to us. If you think you’re the one who can, please contact us:
Hit Desai.
Email: hitdesai01@gmail.com
twitter: @HitDesai3
I’m a socialist who keeps telling himself that he is a capitalist. ;) I love to build something which creates value and meaning. I’m inspired by the work of Sardar Patel, Dr Verghese Kurien and Nandan Nilekani.
PS: We have named ourselves after the most underrated animal behind human evolution. Bull. Bull agritech.
Cheers to the change,
Hit Desai and Divyajeet Chauhan.
