Ignite

Agriculture – Empowering the Indian Farmer

Kapil Thirani

Pratheek Hegde

Saurabh Jain

Sidharth Gupta

Vikas Pavankumar

Team Ignite

Indian School of

Business

2

Executive Summary

Impact of the solution

Technology-enabled eco-system expected to substantially increase profits (80-85%) for farmers due to:

– ~30% cost saving due to access to information on optimal input resource utilization and financing

– Precision farming and knowledge sharing on best farming practices through mobile platform resulting in

~50% increased yields

– Scientific grading and e-commerce platform aiding farmers to realize ~3% increase in overall price

realization

Leverage the power of technology and community to build smart agriculture eco-system in India:

– Integrated mobile platform solution aggregating data at farm-level to maintain region-wise price-to-

consumer data and reconcile with district-level supply and demand

– Use of precision farming and remote sensing to evaluate soil condition

– Enable information flow on optimal use of agri-inputs, weather conditions, load shedding, market pricing

and demand

– Community-level financing and insurance services at subsidized costs

– Mobile trading platform to purchase inputs and sell graded output to processors on a real-time basis

Proposed solution

India stands at a much lower yield (~3000 Kg/hectare) than other nations due to significant challenges

present in the current agriculture value-chain:

– Increased costs due to sub-optimal use of agricultural inputs (e.g., nutrients, pesticides, low yield seeds)

– Lack of availability of finance leading to inability to purchase high quality seeds and other inputs

– Limited access to crop insurance; Low realization due to limited real-time price information flow

– Lack of knowledge and information flow on optimal usage of agri-inputs and load shedding

– Ad-hoc grading practices limiting farmer realizations

– Inadequate timely availability of transportation and lack of data on storage availability and cost

Problem statement

3

Sales and marketingPost-harvestingProduction

Current scenario – Problems in Indian agriculture sector

India stands at a much lower yield (~3000 Kg/hec) vis-à-vis other nationsdue to significant challenges present in the current agriculture value-chain

Cereal yield (kg per hectare)1

2008-2011; in 1000 Kg per hectare

0

2

4

6

8

2008 2009 2010 2011

1 Refer to Appendix for key data trends and sources

Pre-production

Indonesia

India

China

U.S.

Lower productivity of Agriculture sector in India– Agriculture constitutes ~15% of India’s GDP despite

employing over 50% of the population– The key challenge lies in sub-optimal productivity and

lower efficiency of the sector in India– India stands at a yield of ~2888 Kg/hectare, way below

when compared to other developing nations and developed nations

– Key challenges are highlighted below at various nodes of the value-chain (farm-to-fork)

Increased cost due to excessive use of fertilizers

Low yields due to use of low quality seeds and sub-optimal use of input resources

Inadequate real time information availability on load shedding

Lack of access to finance and crop insurance

Lack of knowledge of optimal usage of pesticides, weedicides and herbicides

Increased costs due to ad-hoc application of nutrients leading to sub-optimal yields

Low realization to farmers due to lack of availability of real time fair market prices

Ad-hoc method of grading practices limits farmer realizations

Inadequate timely availability of transportation

Lack of data on storage availability and cost

Lack of consistent supply information to food processors to better plan production run

Lack of consistent availability of quality graded output

Key problems associated with current farm-to-fork value chain

Key problems

Value-chain

4

Technology-enabled smart eco

system

Working on individual pieces of the puzzle (Discreteview)

Putting all the pieces together (Holistic view)

Our philosophy

Instead of PRODUCT; Instead of PRICE; Instead of COST; Instead of PROMOTION Focus on SOLUTION; Focus on ACCESS; Focus on VALUE; Focus on EDUCATION

Physical product flows

Financial flowsInformation flows

Gaps that technology can remove:

Step1: Disintegrating value-chain to identify key areas of gaps and opportunities and leveraging technology to improve each step

Step2: Leveraging the power of technology and community to build smart eco-system

21

Sales and marketing

Post-harvesting

ProductionPre-production

Nutrient Wastage

Seed Density and Quality

Water Budgeting

Electricity Requirement

Financing & Insurance

Pesticide Over-Usage

Sub-optimal Micronutrient Usage

Grading

Real Time Pricing

Unorganized by-product market

Transportation

Lack of Availability of Storage

Uncertainty among Food Processors

Farms

Forks

National Data Center head

Area Ombudsman

City Storage-level Officer

District-level Aggregator

Aggregates data from farmers (inputs, resources)

Maintains real-time data (harvest, storage capacity)

Maintains supply and demand data of processing plants

Maintains region-wise price-to-consumer data

Approach and Framework

Step by Step analysis of value chain from farm-to-fork to identify gaps

and opportunities and build a technology-enabled ‘smart ecosystem’

5

Soil Nutrient Wastage

Excess application of artificial fertilizers due to lack of awareness of existing soil characteristics

Value-chain Problems Role of technology

Seed Density and Quality

Inadequate quality/low yield seeds Unequal distribution of seeds

Water Budgeting

Sub-optimal use of water resources

Electricity Requirement

Intermittent supply of electricity

Accurate estimation of current levels of soil micro-nutrients using remote sensing

Delivery of certified seeds Remote sensing map of seed density

Usage of precision farming to deliver information on frequency and quantity use of water

Real time information on load shedding

Solution

Pesticide Over usage

Improper concentration and quantity of pesticides/weedicide/insecticide application

Sub-optimal use of Micronutrients

Ad-hoc application of nutrient leading to sub-optimal yields and increased costs

Precision farming techniques to accurately identify isolate and treat affected areas

Delivery of micronutrients Use of Remote sensing map for optimal use

of micronutrients at the field level

Pre-production

Role of Community

Financing and Insurance

Lack of access to finance Limited access to crop insurance

Access to community based financing and insurance service

Production

1

High Low

Identify key gaps and opportunities in the value-chain

Leveraging technology to reduce gaps related to physical product

flow, information flow and financial flow in the farm-to-fork chain (page 1/2)

6

Grading Ad-hoc method of grading practices limits

farmer realizations

Real Time Pricing Information

Due to lack of real time pricing information farmers are at a disadvantage due to reliance on middlemen

Unorganized by-product market

Unorganized by-product market limiting market access for sale of by-products for farmers

Transportation Lack of timely availability of

transportation

Access to community level scientific grading mechanism resulting in higher realization

By linking farmers to primary processors farmers will have access to fair market prices

Additional revenue stream by aggregating by-products to command a higher realization at a community level

Door to door transportation service to market areas/community centers

Uncertainty among food processors

Lack of consistent supply information to food processors to better plan their production run

Access to data on estimated and real time district level production data to help better plan production and purchasing price

Post-Harvest, Storage and Transportation

Lack of Availability of Storage

Lack of data on storage availability and cost

Real time data on location, capacity and cost of storage

Sales and Marketing

Value-chain Problems Role of technology

Solution Role of Community

High Low

Identify key gaps and opportunities in the value-chain

Leveraging technology to reduce gaps related to physical product

flow, information flow and financial flow in the farm-to-fork chain (page 2/2)

1

7

Empower community with technology - smart ecosystem

Aggregating data at farm-level to maintain region-wise price-to-

consumer data and reconciling with district-level supply and demand

2

Technology-enabled smart eco-system (Indian agriculture)1

National Data Centerhead

Maintains region-wise price-to-consumer data and reconciles with district-level supply and demand to maintain control over food prices and inflation

District-level Aggregator

Maintains data of supply and demand of processing plants. Accordingly channels flow of produce from city-level

City Storage-level Officer

Maintains real-time data of available harvest and storage capacity in warehouse

Communicates with his area ombudsmen and neighboring city officers to channel farm produce to the right place based on supply and demand

Area Ombudsman

Aggregates data from farmers (input requirements, harvest & by-product info, produce grades) at area-level; uploads to central serverFacilitates exchange/sharing of resources between farmers in his neighboring areasVisits farmers for collecting data if required (e.g., Grading)

Farmer

Send and receive information through their mobile phone –SMS/2G – weather forecasts, load shedding info, inputs delivery dates, etc.

National Data Repository

District demand-

supply aggregator

Mandi/ City

Storage

Mandi/City

Storage

Mandi/City

Storage

Area 1

Area 2

Area 3

FarmsForks

1 Refer to Appendix for details

8

Proposed improvements in agriculture value chain from farm-to-fork

Sales and marketingPost-harvestingProductionPre-production

Information Flow

Financing Flow

Physical Resources Flow

Determination of ideal seed mix based on soil-type and irrigation details at a regional level

Plan use of implements based on load shedding info

Treatment of areas affected by overuse of pesticides as identified by remote-sensing

Plan use of micronutrients based on remote-sensing

Area-level scientific grading mechanism (higher revenue)

Real time pricing info Real-time data on storage

capacity availability –shared across areas

Access of area-wise production data to processors, helping plan production and price to consumer

Higher negotiation power with financial institutions for community financing/insurance

New revenue stream for farmers by aggregating and selling by-products

Delivery of required seed mix as decided by community, to area ombudsman, who then allocates to farmers

Door-to-door delivery of inputs from area-level to farmer, reducing individual logistics costs incurred

Delivery of required micronutrients mix as decided by the community to area ombudsman, who in turn allocates to farmers

Door-to-door transport of produce from farmer to market/storage, reducing individual cost incurred

Help sell produce from farmers to processors

E-commerce portal with details of produce by grade and price –available for processors to buy

ForkFarm

Farmers’ profits expected to substantially increase (80-85%) due to cost savings (~30%), improved yield (~50%), and higher price realization (~3%)

Empower community with technology - smart ecosystem

Proposed ICT-enabled agriculture value chain (farm-to-fork) addresses

information, financing, and physical resource flow gaps

2

9

840

451

359

Revenue Cost Profits

12951045

250

Revenue Costs Profits

15%

37%

4%

37%

7%

Managing People

Managing projects

Research

Decision-making.

Trainings

34%

26%1%

23%

7%9%

HardwareSoftwareConnectivityOnline servicesTraining materialsService contracts.

Total Financial Costs = $ 30000 annualTotal Human Resources Costs = $430,000 annual

Current Remuneration (USD per hectare)1 Expected Remuneration (USD per hectare)

Human Resources Cost (%) Total One-time Infrastructure Cost (%)

Financial analysis and Impact

With the venture expected to make USD 1000 per hectare, breakeven

can be achieved by serving 1200 hectares of land

The venture will be a hybrid of self equity and funding from government bodies such as NABARD and other PSU Bank Loans– The venture is expected to cover operational costs if an area of c.1200 hectare is covered (assuming a 20% profit differential sharing

agreement with farmers is employed)

1 Source: FAO

10

Challenges and mitigation plan

Despite the tremendous potential of ICT in agriculture, the below

challenges may limit its potential, however, there are mitigation plans

Sales and marketingPost-harvestingProductionPre-production

Social,Economic and Politicalchallenges

ForkFarm

All transactions done virtually without any physical interaction

Issue of trust and authenticity of products

Input distribution cost Govt. subsidy structure

needs to be augmented to the solution

Advice given by experts without filed visits

Issue of credibility Monetizing services like

crop advice, etc. is difficult

Access to Govt. survey maps for providing services

Honoring contracts at predetermined prices

Logistical costs due to poor infrastructure

Issues like minimum support price & grading of output

Farmer are illiterate and can be misled

Transparency in purchase prices and farmer value realization

Transacting through mobile banking

Equitable distribution of profits among all stakeholders

Difficulty in adoption of technology

High yield and disease resistant crop varieties may introduce ecological imbalance

Poor internet connectivity and irregular supply of electricity

Regulatory framework may hinder crop insurance

Current regulation on storing and transporting cereals is a hindrance

Success of the project may encourage deforestation

High Contractual and enforcement costs

Delivery of real time prices to customer

Poor storage infrastructure

Consistency in grading and sizing

Seasonality of production

Tax structure in the value chain is unclear

Incentive to maximize profits in short term

Ownership of output during storage and in transit

Clout of middlemen

Mitigation plan

Samples of input materials to be distributed free of cost to gain trust and establish credibility among farmers Pilot projects to be initiated on a regional level and use the participating farmers to popularize the concept Deliver the Govt. subsidy directly to farmers without any middle men by including it in the solution platform Test suitability of new varieties of crops before introduction

Legal, Technological and Environmental challenges

11

Appendix

Data trends: Cereal yield (Page 1 of 11)

1 Source: World Bank Indicators

Cereal yield (kg per hectare)1

2008-2011; in 1000 Kg per hectare

0

1

2

3

4

5

6

7

8

2008 2009 2010 2011

United States

China

Indonesia

India

12

Appendix

Data trends: Agriculture land (Page 2 of 11)


Agriculture land (% of total land)1

2008-2011; Percentage

45 45 45 45

55 55 56 56

29 30 30 30

60 61 60 60

0

10

20

30

40

50

60

70

2008 2009 2010 2011

United States

China

Indonesia

India

13

Appendix

Data trends: Crop Production Index (Page 3 of 11)


Crop Production Index (2004-2006 = 100)1

2008-2011

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011

United States

China

Indonesia

India

14

Appendix

Data trends: Agriculture value added as % of GDP (Page 4 of 11)


Agriculture value added (% of GDP)1


1 1 1 1

11 10 10 10

14 15 15 15

18 18 18 18

0

2

4

6

8

10

12

14

16

18

20

2008 2009 2010 2011

United States

China

Indonesia

India

15

Appendix

Data trends: Employment in Agriculture (Page 5 of 11)


Employment in agriculture (% of total employment)1


0

10

20

30

40

50

60

2008 2009 2010

United States

China

Indonesia

India

16

Appendix

Data trends: Mobile Cellular Density (Page 6 of 11)

1 Source: World Bank; EIU

Mobile Cellular Density (per 100 people)1

2008-2011; Number

0

20

40

60

80

100

120

2008 2009 2010 2011

United States

China

Indonesia

India

17

Appendix

Data trends: Internet users (Page 7 of 11)

1 Source: World Bank; EIU

Internet User Density (per 100 people)1

2008-2011; Number

0

10

20

30

40

50

60

70

80

90

2008 2009 2010 2011

United States

China

Indonesia

India

18

Appendix

Data trends: Penetration of Mobile Internet in India (Page 8 of 11)

1 Source: Telecommunication report, India

Claimed and active mobile users in India 1

2012; in million

21

5

3 3 2

1

17

4 2 2 1

1

0

5

10

15

20

25

Top 8 Metros Small Metros Non-metros Small Towns Towns (1-2 Lakhs) Towns (Less than 1 Lakh)

Claimed

Active

19

Appendix

Data trends: Telephone density in India (Page 9 of 11)

1 Source: Telecommunication report, India

Telephone density in India (per 100 population) 1

2012; Number

62

82

118

135

152

5

1522

3238

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011 2012

Urban Rural

20

Appendix

Financial Analysis: Break-even Analysis to cover the Annual Operating Cost (Page 10 of 11)

1 Source: How to cost and fund ICT- Published by NCVO; FAO

Parameters Units Amount Units

Costs USD 430,000 Per year

Current Profit per hectare USD 1045 Per hectare

Previous Profit per hectare USD 451 Per hectare

Change in Profits USD 594 Per Month Per Hectare

with 3 months season USD 1,782 Per year

Profit percentage 20% of change USD 356 Per year

Number of hectares 1,207 Hectares

211 Source: Narula,2009;Empowering farmers through ICT enabled food supply chains

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Extremely imp Important Less imp Very less imp Not imp at all

Appendix

Data trends: Importance of information to Indian Farmers (Page 11 of 11)

Importance of information to Indian farmers (survey result)1

2009; Number

22

Appendix

Information flow under the proposed value chain

Farmer From the farmer: Requirement of inputs – seeds, fertilizers, pesticides, etc. (to the Area Ombudsman for consolidated

purchasing activity)

For the farmer: Water supply and/or Load-shedding schedules, weather forecast, input delivery and harvest collection

dates, etc. (for planning farming activities accordingly), information and knowledge flow from ombudsman on use of agri-

inputs to improve farm yield

Area-level From the area ombudsman: Expected harvest by crop and grade (to the city-level storage and district-level processors so

as to plan their capacities, sales and transport arrangements accordingly), etc.

For the Area Ombudsman: Demand and inventory from the city warehouses/mandis and district-level processing

units, real-time market prices, etc.

Peer-to-peer Area Ombudsman network: Share/exchange inputs within or across areas (seeds, fertilizers, land), share

transport services, fulfill output demands of their respective warehouses by planning crops accordingly

Mandi/City

Warehouse-level

From the warehouse manager: Expected requirement by crop (to the Area Ombudsmen), Expected supplies to the District-

level, Pricing data etc., real-time data on the current stocks by crop

For the warehouse manager: Expected supplies by crop (from their respective Area Ombudsmen), Pricing at the district-

level, etc.

District and national

level

From the District-level and National-level Aggregator: Expected requirement by crop (to the District

Ombudsmen), Expected supplies at the District-level, Pricing data etc., real-time data on the current stocks by crop

For the District-level and National-level Aggregator: Expected supplies by crop (at District and National level), Pricing at

the district-level and national level, etc.