Areas of Service
India is an agricultural-based country. While, the agriculture sector contributes to 18% to India’s GDP, a mammoth of approximately 55% of India’s population depends on agriculture as its primary source.1 India has the 10th largest arable land resource in the world.2 It’s with 20 agri-climatic regions include all 15 major climates in the world suitable for a wide variety of agricultural products.3 In addition, India possesses 46 out of the major 60 types on soil in the world.4
With this resource base and suitable climatic conditions, India has become a significant exporter in the agricultural sector. The agricultural exports as a percentage of India’s agricultural GDP has increased from 9.4 % in 2017-18 to 9.9% in 2018-19.5 In the last financial year itself, the exports in the sector amounted to a staggering US$ 38.54 billion.6
However, the agriculture sector in India is riddled with fundamental issues like fragmented land ownerships, poor soil quality, water shortage, erratic monsoon, inadequate market access, improper storage facilities, ill-equipped warehouses, malpractices and poor credit facility.
Adoption of emerging technologies in various steps of the agriculture value chain may solve several of these challenges or reduce their negative impact.7 This creates a subsector, AgriTech, that presents new market opportunities to entrepreneurs, corporations and investors. They can, for example, link separate regional markets, giving consumers a direct access to farmers’ products, digitization of agriculture-related information, real-time access and transparency to information, improved access to inputs for greater yields, and financing for better quality implements to farmers.
According to Department for Promotion of Industry and Internal Trade (DPIIT), the agricultural sector received an equity inflow of about US$ 9.08 billion between March 2019 to April 2020.
The AgriTech ecosystem is rapidly maturing in India. With approximately more than 450 AgriTech start-ups in the AgriTech sector and growing at a rate of 25% annually, every 9th AgriTech startup in the world being an Indian one.8 This rise in the number of start-ups in the sector has seen a concomitant increase in number of global investors in the sector.9 The AgriTech start-ups have ventured in outside markets as well.
With a rise in the number of start-ups and investments coming in this sector, it is observing various private-public partnerships. AgriTech has the potential of becoming dominant industry in India. It is estimated that India’s agriculture technology can grow to US$ 24.1 billion in 5 years.10 With a turnover of only US$ 204 million, India’s AgriTech sector is under 1% of its market potential.11
Two Indian states, Karnataka and Maharashtra, account for almost 50% of the total AgriTech startups opened in the past 5 years.12 Amongst several market opportunities that AgriTech sectors unravels, some experts segment the sector primarily into supply chain tech and output market linkages (US$12.0b), Financial Services (US4.1b), precision agriculture and farm management (US$3.4b), quality management and traceability (US$3.0b), and market linkages -farm inputs (US$1.5b).13
Some of the major Indian start-ups operating in this space are Ninjacart, Agrostar, Stellops, Cropin, and Jumbotail.
Here are some relevant laws applicable to the AgriTech sector. Not all of these laws are relevant for all ArgiTech businesses and there may be other laws relevant in special cases.
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020: The ordinance overrides various state APMC (Agriculture Produce Market Committee) Acts. It seeks to provide barrier – free, efficient, and transparent inter-State and intra-State trade and commerce of farmers’ produce beyond the markets notified under various state agricultural produce market legislations. It facilitates remunerative prices through competitive alternative trading channels. Moreover, it seeks to provide a facilitative framework for electronic trading.
The Essential Commodities (Amendment) Ordinance, 2020 along with the Essential Commodities Act, 1955: The ordinance increases the competitiveness in the agriculture sector and enhance farmers income. It liberalises the regulatory system while protecting the interests of consumers. The Act empowers the central government to control the production, supply, distribution, trade, and commerce in certain commodities.
Information Technology Act, 2000 and Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011: Section 43A and Section 72A of the IT Act and the rules are primarily relevant for data protection. It is essential so as to maintain and uphold the data privacy and data security of information shared by the farmers and other stakeholders in the AgriTech sector with the AgriTech companies.
Intellectual Property Laws: With the development of new and innovative AgriTech tools and methods, it will become essential for AgriTech providers to ensure their IP products are registered. Further, while provision of services through negotiated contracts, AgriTech providers need to ensure appropriate IP protection and licensing clauses in the contract.
National Drone Policy, 2018, issued by Director General of Civil Aviation: These guidelines deal with requirements for operation of civil remotely piloted aircraft system (RPAS), other requirements for use and operation of drones in India.
Recent Reforms and GOVERNMENT INITIATIVES
One of the main reasons for the growth in the AgriTech sector is initiatives and reforms undertaken by the Government of India. Some are:
AgriTech start-ups are already leveraging technology for market linkages such as retail, B2C and B2B marketplaces and digital agronomy platforms, but some of the major sub-sectors where AgriTech startups are making their foray are Big Data Analytics, Supply Chain/Market-linked Model, FaaS, IoT Enabled, Engineering-Led Innovation etc.15
With ushering in of the new opportunities and proliferation of advanced technology, the entry of retail groceries and e-commerce players is imminent in the sector.16 With an opportunity to control an end-to-end supply chain, it presents newer avenues for stakeholders in AgriTech to leverage the technology to expand their operations while simultaneously minimising their losses with better accessibility to data.
The entry of larger food processing companies is also expected in the sector to enhance precision agriculture and provide better farm management software to farmers from whom they procure.17
On the tax front, to enhance inter-state agricultural trade the government could consider a ‘single mandi tax for the country’ and ‘removal of levies’ charged to agricultural traders and farmers when farm goods are sold to from one state to another.18
AgriTech industry in India, though in its nascent stage, offers tremendous scope of investments. The increased investment activity in the sector has accelerated the growth of the industry over a last couple of years. Increasing smart phone penetration and availability of law cost mobile data plans in India, along with the encouraging policies of government, make AgriTech a lucrative sector for investors and start-ups.
6 The Emerging Scope of Agri-tech in India, January 14, 2020, accessible at https://www.investindia.gov.in/team-india-blogs/emerging-scope-agri-tech-india
7 EY Report, ‘Agritech – towards transforming Indian agriculture, September 07, 2020, accessible at https://www.ey.com/en_in/news/2020/09/indian-agritech-start-ups-are-operating-in-a-market-with-an-estimated-potential-of-us-24-billion-dollars-by-2025
13 EY Report, ‘Agritech – towards transforming Indian agriculture, September 07, 2020.
16 EY Report, ‘Agritech – towards transforming Indian agriculture, September 07, 2020.