Agritech Services

Indian is one of the largest producers of agriculture in the world. Due to this, many businesses have started exporting different agricultural products around the world. More investors want to provide capital in the area of agriculture. The technology disruption has caused investors to provide capital to start-ups..

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What is an Agritech?

The word ‘agritech’ is a combination of two words, agriculture and technology. The term agritech is used when a business makes informational technology products and services that benefit the agricultural sector. In India, this sector has developed recently. More ideas are brewing in this area to make a profitable venture.

Agritech business can be started by a firm that is specializing in manufacturing products and developing software services which would include the use of technology in the agriculture sector. This will include the development of software services by using advanced technologies such as Artificial Intelligence, Data Analytics, and Big Data for the purposes of developing smart services for agriculture.

Statistics for Agritech in India

India is the second-largest agricultural hub in the world. This brings about thriving opportunities for Indian Entrepreneurs as well as foreign investors to consider raising capital in this sector. The farming business has shifted from traditional modes which are utilized to modern methods. These include the shift from irrigation and depending on rainwater sources for growing crops and plants to using technologies such as data analytics and artificial intelligence to develop methods to improve the yield in crops.

Some statistics which affect the agritech sector in India:

  • In the financial year, 2018-19 more than 30 start-ups in the area of agritech business has been established.
  • The Government of India has made a foreign investment, including foreign direct investment in this sector under the automatic route. 100% foreign investment is allowed in this route. Agricultural demand has improved drastically, which has increased the amount of foreign investment in the country.
  • In 2018, more than USD 70 million was received in this sector, which increased to more than USD 230 million in the year 2019.
  • Most of the funding secured in India is at the initial seed phases.

As per the above statistics, the sector is said to improve in the coming years and reach a benchmark by the year 2025.

Key Trends in the Agritech Sector

The key trends which are developing in the sector include the following:

Key Trends in the Agritech Sector

Business Segments such as B2B and B2C are developing 

When it comes to an understanding an argitech business, more start-ups and companies developing different forms of agritech services tend to focus more on developing products which will benefit sectors such as the B2B (Business-to-Business) and B2C(Business-to-Consumer). For example, there are many companies that provide their services from the farm to the business retailer or supply chain engagement entity.

Emerging Opportunities related to agritech

Lot of emerging opportunities have developed the agritech business. This will include technologies such as Artificial Intelligence, Big Data, and Internet of Things which help argitech companies develop new products. For example, the development of artificial intelligence and data analytics uses predictive technologies to determine the crop ratio pattern. Another example is the use of drone-based technologies, to spray pesticides and study the livestock population.

Funding is prominent in this area

Funding can be the following in the agritech sector:

  • Capital funding

This can be seed-based funding for different unicorns. Apart from this, private equity investments can also be considered as a part of the funding, which is required for an agritech business.

  • Foreign direct investment

The government of India has opened doors to foreign direct investment in India. Under the automatic route, funding in the agricultural sector is allowed for agriculture. The funding which is secured is 100% which can be utile by different sectors.

  • Government Schemes

The Government of India has brought out different lucrative schemes which provide a different form of varied benefits to farmers and companies engaged in the process of farming.

Main Focus of this Business is Marketing and Supply Chain

The main focus of argitech business is primarily in the area of marketing and supply chain protocols. Without proper marketing practices, the firm would not have a minimum amount of orders to carry out day to day production activities. The firm has to market its products either through internet marketing practices and physical marketing practices. Apart from the above process, the entity must ensure that supply chain practices and protocols have been established.

The emergence of Public-Private Partnerships

In this sector, more public entities and government departments are collaborating. Through collaboration, it is possible to improve co-ordination and other activities. As farming predominately involves, liaising with government and other regulatory authorities. Hence, there are lots of government entities that, partner with private entities.

Policy Making Awareness

In this sector, it is important for the government to introduce policy and regulation for activities to be regulated. Many start-up companies and unicorns which are established are urging the government to bring out some form of policies that regulate the sector. Policy and legislative interference are required, as it would create some form of starting point for the entities carrying out this form of business to have some precedence.

Primary Regulatory Body for Agritech Sector

Up to now, the government has not brought any form of the regulation dealing with the above. However, start-ups and another form of entities which are engaged in this area have stressed the importance of bringing some form of law that regulates the working of Argitech’s in the country.

However, every form of entity which carries out the business of agriculture and technology has to have some form of business structure. The business structures which are present in India have to be in accordance with the Companies Act 2013, the Limited Liability Partnerships Act 2008 or any other law that governs the law related to a business structure.     

Types of Business Structures which can be used by an Agritech Business

The following business structures can be considered for an agritech business:

  • Private Company

All private companies are companies that do not have their shares listed in a public stock exchange. Under section 2(68) of the companies act 2013, a private company is not allowed to transfer its shares to the public. Apart from this a private company is also not allowed to place its shares in a public stock exchange. Any form of a private company that is formed under the Companies act will have the limited liability status. This means the liability of the shareholders and directors of the company is limited to the number of shares held by them.

  • Public Company

A public company is a company incorporated in India that has its shares registered in a public stock exchange. Under section 2(71) of the Companies Act 2013, a public company is an entity which is not a private company.  Apart from this, a public company must have a minimum paid-up capital of Rs. 5 Lakh. Public companies are required to have a minimum amount of directors and shareholders as per the requirements of the companies act. They enjoy the same limited liability status as a private limited company.

  • Partnership Company

Under section 4 of the Partnership Act, 1932 a partnership company is understood as any form of agreement between the persons of a partnership to agree to share profits of the business. The profits shared between the partners of the business would be for one person acting on behalf of all the partners. The liability status of the partners is not limited but is considered unlimited under the partnership act.

  • Limited Liability Partnership (LLP)

A limited liability partnership is also known as an LLP. This form of entity is formed under the Limited Liability Partnership Act, 2008. A limited liability partnership is considered as an entity that is formed under the LLP Act, 2008. There would be a respective agreement between the parties of the LLP. This agreement is understood as a Limited Liability Partnership Agreement. LLP’s can enjoy the major benefits of having a partnership structure and the limited liability status of the business.

  • Sole Proprietorship Concern

A sole proprietorship concern is an entity which is formed by an individual. Only this person is responsible for the activities which are carried out in the business. There is no limited liability for this form of concern. This makes the sole proprietor personal assets liable to be taken by creditors in case some form of debt is payable by the sole proprietor.

  • One Person Company

Under section 2(62) of the Companies Act, 2013, a one-person company is an entity that has only one person. The shareholders may or may not be the directors of the company. However, in case of death of the sole proprietor then a nominee has to be appointed to take care of the affairs of the entity.

Most suitable entity for an Agritech

Out of all the above entities, it is important to understand the advantages and disadvantages of the entities. A private limited company would have the benefits of limited liability. For a public limited company, there are lots of compliance and filing requirements which have to be followed by the entity. When it comes to a partnership concern, a normal partnership does not have benefits of limited liability.

A limited liability partnership will have the benefits of a company and a partnership. Hence this form of business structure would be idle for an agritech business. Apart from this, the agritech business can go ahead with the business structure of a private limited company.

Challenges faced by an Agritech Business

Challenges faced by an Agritech Business
  • Legal / Regulatory Challenges

These would include challenges such as a regulation being brought out by the government. In India, startups and other companies have been stressing the fact that policy and regulation must be brought out in order to support agritech businesses in the country. Having this regulation would bring about specific changes in the sector.

  • The mindset of the Farmers

Farmers in India are reluctant to garner change when it comes to using technologies such as data analytics and artificial intelligence. Traditional methods for farming are still utilized by farmers. For example, instead of using technology for their advantage, farmers still depend on irrigation and rainwater for watering their plantations.

  • Digital Implementation

Implementing Digital-based data is hard considering that technology challenges are apparent in India.

  • Funding

Funding can be a major problem to entities that are just starting off their business. This would be challenging when it comes to loan from local banks and other institutions.

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Frequently Asked Questions

Agritech is a combination of two words, 'Agriculture' and 'Technology.' The concept of agritech has disrupted the traditional market place where traditional methods were used in agriculture to produce farm foods, vegetables, grains, and other agricultural products. This initiative has welcomed Indian Entrepreneurs to utilize technologies for the benefit of agriculture.

Ever since the end of the colonial era, India has been one of the world's main agricultural exporters. According to statistical estimates, India has the second-largest agricultural land in the world. Due to this, farmers produce more grains such as rice and millets. These products are exported around the world that makes it the largest exporter of agricultural products. Technology development and disruption of modern technologies such as AI, data analytics, and big data have added to the boom of agricultural development. Entrepreneurs have seen this as an opportunity and taking advantage of different technologies to improve agricultural production facilities. However, the following factors add more scope to Agritech sector in India:

  • India has the second-largest agriculture land in the world. This creates more opportunities for a different form of business, such as exporters and technology centers, to show cause their process for the development of agriculture.
  • Increased investment in Agriculture, especially in areas related to storage and warehousing facilities.
  • 100% Foreign Direct Investment is allowed for the agriculture sector. This FDI comes through the process of the automatic route. Foreign investments can be made in floriculture, horticulture, and other allied areas related to agriculture.
  • New schemes have been introduced under the leadership of Prime Minister Narendra Modi.
  • A lot of the rural population is present in India, representing the major workforce in the agriculture department.
  • Digitization and development of artificial intelligence technologies, disruptive processes such as data protection have added to the agriculture sector's advancement.

An Agritech business is formed by the combination of the right ideas along with innovation. These two factors are the key drivers for the development of an agritech business in India. Apart from this, the following are required for an agritech business in India:

  •  Compliance with respective laws
  • Innovate Ideas
  • Business Channel Connectivity (Such as B2C – Business To Consumers or B2B- business to business)
  • Capital Requirements- Seed Funding through different rounds of investment or own capital required for starting the business.
  • Skilled and Efficient Professionals ( Example- If engaged in research and development then Botany specialists or Microbiologists may be employed)
  • Marketing Strategies.

Though India offers a diverse land area for agricultural companies, there are still many challenges faced by this sector:

  •  Agritech business in India has been adopted recently compared to peers such as the USA and Israel who developed such technologies earlier.
  • Large parts of the population that depend on Agriculture use the traditional methods for growing crops and other forms of agricultural produce.
  • Most facilities that develop agricultural products use rainwater facilities to carry out irrigation.
  • Apart from this, other problems are present in the agritech sector in India, such as:
  1. When it comes to B2B type of business, one major challenge is the supply of raw materials such as low-quality seeds
  2. Real estate problems would also be a challenge to the agritech in the country.
  3. Lack of Labour compliance related to ILO standards is also a major problem faced by the country's agricultural sector.

Some examples of Agritech which can be utilized are:

  • Drones can be used to understand crop processes. Apart from this, crops can be monitored and checked regularly. The statistics of crops can be analyzed through this process.
  • Drones can also be used to fertilize the plants regularly.
  • Drone technology can carry out processes such as thermal imaging on livestock such as cows and sheep.
  • Analytics in the farming sector can be used to understand the statistics of growth.

Agrotechnology is the same thing as Agriculture and Technology. However, horticultural processes and aquaculture are used in the process of agro-technology to increase the amount of yield produced regarding a particular product.

The following schemes are developed by the government of India to promote agriculture:

  • Paramparagat Krishi Vikas Yojana,
  • Pradhanmantri Gram Sinchai Yojana,
  • and Sansad Adarsh Gram Yojana.

Funding for Agritech Start-ups can be the following:

  • Equity Contribution
  • Capital Contribution
  • Foreign Direct Investment- Foreign Direct Investment in the agricultural sector is allowed 100% under the automatic route. Hence it would be simple for businesses to secure funding for agritech under this route.

In India, typically the following business structures would be adopted:

  • Private Limited Companies
  • Public Limited Companies
  • Partnership Firms
  • General Partnership
  • LLP- Limited Liability Partnership
  • One Person Company
  • Sole Proprietorship

Usually, the form of business structure would depend on the benefits which are offered. A private limited company would offer the benefits of limited liability of the company's shareholders and perpetual succession. However, there are a lot of formalities with forming a private limited company.

A public limited company would have to have a minimum capital requirement. Apart from this, a public limited company must have a specific amount of shareholders and directors. Hence compliance related to the respective laws would be required for a public limited company.

A general partnership is formed by two or more people with the view to share the profits and losses of the business. When it comes to filing requirements of companies, then less filing formalities are present.

Limited Liability Partnership, also known as an LLP is a partnership incorporated under the LLP Act 2008. They would have the benefits of a partnership as well as the limited liability status of a company. Hence using this form of business structure would be beneficial to the owners are the twin benefits of a partnership and company can be established. One person company is a company that has only one shareholder and director. A one-person company would also enjoy limited liability status. However, during the death of the person, another representative must be nominated to carry out the company's work. It would be beneficial to either form a company or a limited liability partnership for an agritech startup.

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