Reaping the tech dividend: India’s next agricultural revolution

India’s agri sector is on the brink of massive transformation thanks to the converging tailwinds of deregulation and mobile Internet penetration. Against this backdrop, we’re excited to announce our partnership with DeHaat, which building the next-gen agri supply chain.

Abhishek Mohan

Published April 8, 2020

India’s $350+ billion agriculture sector is powered by over 100 million small and independent farmers. However, the sector is fraught with inefficiencies that pose hurdles for every player involved in India’s food supply chain, from farm to table.

Almost every farmer has a story of a fast-talking agent who convinced them to buy unnecessary inputs, sold them counterfeit products – or gouged them on pricing. Producers of agricultural inputs, meanwhile, have long made efforts to get closer to their customers for tighter feedback loops, product testing and research-based innovation, but the long chain of intermediaries and the vast geographical spread came in between.

At the other end of the supply chain are India’s increasingly health-conscious consumers, who are now more careful than ever about what they are eating and have a strong focus on quality. These changing urban lifestyles have left food producers & FMCG companies that buy livestock and produce yearning for a more transparent and accountable process. But again, multiple layers of intermediaries makes the whole distribution system highly opaque.

The sector, however, is on the brink of a massive transformation thanks to converging tailwinds.

Farmers until recently could only sell their produce to distributors and agents who were licensed to trade at state-run mandis, or agricultural markets. However, over the last four years, deregulation has paved the way for farmers to sell directly to any buyer or corporation in several key agricultural states. The sector is also becoming organised, with registrations of FPOs (Farmer Producer Organisations) surging to 5000+ now, from just 20 in 2014. These regulatory and structural shifts come at a time when smartphone penetration among India’s rural population is growing more than 30% year on year, thanks to the Jio effect, and millions of farmers are coming online.

With smartphones in the hands of more farmers and more customers at their door, the agri-sector is ripe for tech-led innovation. We believe the sector will see the emergence of multiple tech-enabled players, solving different problems for the agricultural industry. One such company is DeHaat and today, we’re excited to announce our partnership with them.

DeHaat is a tech-based platform that’s leveraging these trends with a full-stack offering of agricultural services for farmers, ranging from access to high quality agricultural inputs, customized farm advisory, financial services and connections with a new range of large corporate buyers.

DeHaat has a hub and spoke model, which recognises that most farmers are still very new to technology and need more than just an app – while also solving the last mile piece of the logistics puzzle. DeHaat, which operates regional operational offices cum warehouses, or ‘nodes’, has appointed over 450 ‘micro-entrepreneur’ franchisees to run local DeHaat retail centres to service farmers within a 3-5 KM radius. The farmers can buy agricultural inputs three ways: in person, at the nearest DeHaat retail centre; over the phone, via their helpline; or by placing an order on their app. All local orders, no matter how they come in, are fulfilled by the closest micro-entrepreneur within 24 hours. Orders for farm produce from mid to large corporate customers, meanwhile, are pushed out over the app, providing both micro-entrepreneurs and farmers with transparent pricing. Farmers deliver their crops to the nearby DeHaat retail centres, and the company then transports it on to one of their regional nodes.

On a recent visit to a DeHaat retail outlet in Samastipur in Bihar, we met a group of farmers who described the company as a “a friend in the system that they never had”. One farmer told us he’d seen a 30% improvement on his wheat crop yield thanks to the advice he got via the platform’s advisory on what nutrients to add and advice on new farming techniques. The seeds and fertilizers he had ordered for his maize crop through the app were also of a better quality and at a better price compared to the inputs he had previously bought from local retailers; what’s more, he received a much better price for his produce, both because of the improved quality of his crop and the fact there were lesser intermediaries in the chain.

Shashank Kumar and other co-founders of DeHaat have worked hard over the last eight years to build trust among rural farmers – and that effort is starting to pay off. The company today provides farmers with access to over 3,000 agricultural inputs; aggregates corn, wheat, rice, fruits, and vegetables from farmers on their network; and directly supplies over 200 commodity bulk buyers, including retail chains, e-commerce players, FMCG giants, and SME food processors. Today, DeHaat has 450 retail centres serving 210,000 farmers across Bihar, Uttar Pradesh, Jharkhand and Odisha, and team has ambitions to rapidly grow the network of micro-entrepreneurs in the next year by penetrating deeper into the existing large states and expanding to new states, like Rajasthan and MP.

What’s more, farmers themselves are asking DeHaat to add more services to their platform, including credit and insurance, and to process orders for different type of crops. Now that’s a sign of product-market fit – and strong customer love.

India’s agricultural sector plays a critical role in the country’s economy. Sequoia India is excited to partner with DeHaat on their journey to empower millions of farmers and unlock value for buyers and sellers across the supply chain.

This column was originally published on LinkedIn.