Budget 2024: Agri Stack DPI, a shot in the arm for agritech startups

Mumbai: The government’s next digital public infrastructure (DPI) project, following the success of Aadhar and UPI, among others, is set to transform the agriculture sector in the country, experts said. 

As per the Union Budget 2024-25, presented by finance minister Nirmala Sitharaman on Tuesday, the government is preparing to implement Agri Stack, the DPI for agriculture, over the next three years. It will bring over 6 crore farmers under the formal land registry system. 

Agri Stack is an open-source digital infrastructure which will help enable better income for farmers, and improve agriculture in India providing access to data to stakeholders.

“The DPI for agriculture, with initiatives like Agri Stack, ADeX, and others, are set to revolutionise the sector,” said Shardul Sheth, co-founder & CEO of AgroStar. 

“Agri Stack, comprising data, policies, and regulations, along with a data exchange and consent layer, will allow private sector stakeholders to access vital datasets and drive innovation and better decision-making.”

Sheth believes that like India Stack, which transformed identity and payment systems through Aadhar and UPI, DPI in agriculture will significantly boost the adoption and scaling of digital agriculture.

Cost reduction

For agritech startups that incur high expenses to acquire farmers while requiring a regular capital influx to survive, the formalisation and easier availability of farmer data might reduce costs and fasten the process of onboarding farmers to their platforms.

“...it's usually hard to reach out to a farmer, verify the land he has, check for other loans on the land, determine if he is a tenant farmer, and assess how many assets he owns,” said Alekh Sanghera, CEO and co-founder of FarMart, a micro-SaaS platform for food supply.

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Many agritech or similar companies have not been able to scale because acquisition and distribution takes time and resources. This can be solved by an access to Agristack, allowing companies to reach critical mass quicker without extensive fieldwork.

“Service delivery also improves; we can use satellite imagery to map the land's history, estimate yield, and understand the farmer's income and practices. This reduces the cost of acquiring, retaining, and servicing a user, allowing companies to scale quickly,” Sanghera added.

The availability of data relating to farmers will also encourage fintech startups to serve farmers by providing loans and insurance, backed by more robust data.

“This digital transformation, coupled with the streamlined Kisan Credit Card issuance, opens up new opportunities for fintech in agriculture. Startups focusing on precision agriculture, farm management software, and agri-fintech stand to benefit significantly,” said Vaibhav Nigam, senior vice president - Investments, BlackSoil. As of January 31, 2024, Indian banks issued 7.5 crores Kisan Credit Cards with a limit of ₹9.4 lakh crore, according to Economic Survey 2023-24.

This comes at a time when the agritech sector in India, valued at $24 billion, faces challenges in scaling up and a drop in investments. The sector also remains significantly untapped, with only 1.5% penetration, according to a report by Ernst & Young. In fact, none of the startups in the sector has achieved unicorn status - a valuation of $1 billion or more - or has listed publicly. Top startups in the sector like DeHaat, WayCool Foods, and Ninjacart, are valued in the range of $650 million to $800 million.

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Digitisating agriculture—a proposition most agritech startups aim to win—is challenging to implement. Apart from the high cost of modern equipment, farmers are generally hesitant to adopt out-of-the-ordinary farming techniques. In fact, only 2% of India's farmers used apps in the field as of 2022, as per estimates by Nasscom.

The push towards digitalisation of the sector, however, might attract funding to startups in the sector, in turn helping them spread awareness among the farmer community. 

“The plan to digitally survey 400 districts and include 6 crore farmers in a digital registry creates a robust data ecosystem that startups can leverage… The government's partnership with states to roll out agri-DPI will likely spur innovation and attract more venture capital to the sector,” Nigam added.

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