How Technology Can Save Indian Farmers $2 billion a Year
Farmers could get a 2-3 percent better margin on their efforts thereby saving as much as $2 billion for India’s farming community per annum
A lot has been written about the state of Indian agriculture of late. From the weather to its impact on our economy to agitations among farmers, there is a lot to worry about, as far as the space is concerned. Yet, 52 percent of the Indian populace continues to remain dependent on agriculture for a livelihood and more that 50 percent of India’s land, that under agriculture, continues to remain at the mercy of the rain gods. Even as there are various factors due to which the agri sector sounds bearish, the government of India has increased its focus on building better tools to help the farmer community and new age organisations are doing their bit by introducing technology and Artificial Intelligence into the sector.
A classic sample of India’s dependence on agriculture as a sector is that if more than 50 percent of the populace is dependent on the space, then that’s still approximately 65 crore people, or to give the figure some flavor, twice the population of the United States of America, half the population of China or more than four times the population of Russia, all approximates.
The question that then arises is – are the efforts by the public and private sector complementing each other? Is there a plan? Is there an end objective?
To begin with, the farmer needs to see himself as a business man, his farm as his place of work / business and his produce as the products or services that enter the Indian economy. While variables will always have a role to play in his business, (s)he needs to understand the implications of some of the variables and how they come together and affect him such as understanding the ROI of his efforts and thence the importance of knowing his seeds, fertilizers, pesticides, farm machineries & tools and their availability at the right time and price. The farming community as a whole would also progress faster if given access to technical knowledge from manufacturers and best practices from fellow ‘progressive’ growers.
Were one to look at agriculture as a business sector, multiple players and stakeholders emerge. Yet on the input side, aka the side that works on creating farm produce, there are three primary players – the farmer community, the dealers who supply products to them and the agri-manufacturing brands.
As with any dysfunctional family, currently, the agri manufacturing brands which market products from farm equipment to fertilisers, have very limited visibility into the farmers’ mind. The dealer in turn, who procures from these brands, is unable to gain visibility into the larger demand-supply requirements and therefore overstocks, overprices, undersells and cuts short not only his margins, but those of the farmers as well.
Yet, change is in the offing, and several good things seem to be around the corner.
Ring in the new. Wring out the old.
Agriculture has been, for the lack of a better phrase, the bread-and-butter of the Indian economy. Yet one of the biggest challenges the sector has faced has been a chronic lack of visibility. This has led to a stunted supply chain, overstocking, underdelivering and overpricing among other malaise. It is these aspects that initially drove the thought process of rural markets not being rewarding enough. However, these aspects are fast changing. The FMCG, consumer durables, telecom spaces are all looking to frantically woo the rural consumer. The advent of cable television and the internet, the smartphone phenomenon and the scooterisation of the rural sector have all led to aspirational thought processes. It is therefore important that the benefit be reaped at the grassroot level before the ecosystem reaps its rewards, in order to ensure that returns are sustainable.
The input side in agriculture is a $23 billion industry. Yet it has to deal with a multitude of challenges. Brands which manufacture products ranging from farm equipment to pesticides have limited visibility of the market. Their production, sales and thereon marketing plans are therefore handicapped by this, which invariably leads to overproduction, because let’s accept it, we all like more sales than less. This overproduction leads to pricing-cutting of products, and the dealer under pressure from the agri-manufacturing brands ends up overstocking and unable to find the required demand, ends up returning excess stock.
It is here that we need to ring out the old, and ring in the new. Should the farming industry use technology adeptly, a single platform, will give farmers visibility of which product to buy at what price and from where, while giving brands and their dealers eyes in the sky on which products to sell, in what quantity and at what price.
Such clarity, brought in by technology, may help streamline India’s agri-woes.
The billion dollar answer
In my view, if a solution were to be adopted which gave stakeholders across the supply chain greater visibility and understanding of each other’s requirements, problems such as wastage, overstocking, overspending and low ROI would be a thing of the past for the agriculture sector. A technological solution which allows manufacturers to interface directly with dealers thereby understanding which dealer sells more of which product, dealers to interface directly with farmers thereby understanding farmers in which area prefer which farm inputs, and manufacturers to interface directly with farmers, therefore understanding end user preferences would allow for farmers to get a 2-3 percent better margin on their efforts thereby saving as much as $2 billion for India’s farming community per annum.
By my estimates, technology could save $16 for every farmer today. With a million farmers on the system, and sellers looking to extend better schemes, these savings could go up to $35 per farmer. And that’s just the benefit to the farmer. On the inventory front,
loss due to sales returns stands at $3 billion today. For certain products such as seeds, sales returns is as high as 30 percent, a complete loss of revenue for the year.
Technology-induced visibility would thus not only save money for farmers and improve margins for dealers, but also improve bottom lines for the agri manufacturing industry.
The answer to India’s agricultural woes lies in the many questions and the challenges that have been a part of this ecosystem for decades. At the outset, multiple stakeholders came together to run a profitable business. The platform that is built now needs to incorporate a legacy of knowledge, while making it easier for market players to make the right decisions, be able to have more meaningful discussions, facilitate simpler and transparent financial transactions and ensure a win-win for all those part of the ecosystem.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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