Mumbai-based Agricultural-Technology (Agtech) startup firm GreenSat Innovation Labs plans to launch a “Crop Plus” programme that can potentially help to find an alternative scheme to the minimum support price (MSP) programme in India.
“China had a problem in providing better prices to apple growers. It came up with the Apple plus programme that covered the price risks of growers. A similar problem existed in corn pockets of Texas in the US. It was also solved with a similar programme,” said Deepak Yadav, Founder, GreenSat Innovation Labs Pvt Ltd.
In 2017, China introduced an “insurance plus features” hedging project for its apple growers, who were compensated for losses due to drop in prices. The project was enabled by launching world’s first apple futures contracts on the Zhengzhou Commodity Exchange in Henan province. The contracts helped growers hedge against the risks of price fluctuations.
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The hedging project was jointly floated with an insurance firm, which offered protection for 100 tonnes of apples. Since apple prices ruled lower than the target price set in the contract, the Chinese growers received nearly $15,000 ( ₹11. 18 lakh) compensation.
“We are trying to get the programme to India. We are discussing it with insurance and reinsurance companies to give us a product line. It could be a beautiful answer to the MSP programme,” Yadav said during a conference call.
According to the GreenSat founder, if farmers’ price risks can be covered, the Government will be free of a major responsibility. “Insurance companies and farmers can handle this problem without any government interference,” Yadav said.
Finding an alternative to the MSP will go a long way towards addressing some of the problems faced by the Government. One, the Centre is forced to procure foodgrains from farmers to ensure they get the MSP. This results in a considerable outgo from the exchequer.
Under WTO pressure
Often, the MSP rules higher than global market prices, thus affecting exports prospects of agricultural produce. Two, India is under pressure from its World Trade Organisation (WTO) partners to end the MSP programme as they allege that it is distorting the global market.
“GreenSat is working with National Commodities and Derivatives Exchange (NCDEX) and Farmer Producer Organisations (FPOs) to introduce this insurance scheme,” said Krishna Kumar Ghosh, GreenSat Innovation Labs Co-founder.
“We will try the Crop Plus with FPOs first and then extend it to individual farmers,” Yadav said.
In India, crop loans were becoming a burden for the banks due to unstable weather and price risks. “More than 80 per cent of crop loans turning non-performing assets (NPAs) are due to these two problems. We have designed Crop Plus and another programme, Group Credit Insurance, to address these problems," Yadav said.
Smart FPO initiative
Greensat Innovation has signed a memorandum of understanding with Gramin Vikas Trust, a rural welfare organisation, and IndiaHub e-Governance Pvt Ltd, an innovation-driven start-up, to launch a Smart Farmer Producer Organisation initiative.
GreenSat will support the initiative as the tech partner and offer end-to-end support that extends from precision farming to banking, market linkages, and innovative crop insurance products to farmers.
Yadav said GreenSat currently has 10,000 farmers on board and it has approached fertiliser companies to provide value-added services to them. “Farmers need these services since their incomes have dropped. We offer a platform where FPOs can come on board besides insurance companies and 3-4 banks,” he said.
Innovative product
Dwelling on Group Credit Insurance, Yadav said that his company had introduced a pilot project on a weather-based innovative insurance product. For example, in Maharashtra, where a sensitive crop like grapes is grown, insurance companies will automatically settle claims if a district where the crop is cultivated experiences over 10 mm of rainfall. “The claims are automatically settled or set off against the bank crop loan account of the farmer. This has been adopted well in some areas of Maharashtra as a pilot,” he said.
GreenSat is also helping food aggregators to supply fruits and vegetables in Maharashtra. “The aggregators need supply chain support and also price stability. We provide linkages with farmers and perform specialised operations,” he said.
Weather warnings
In cases where farmers face problems, GreenSat takes lands on lease and allows its dedicated team to perform the specialised operations. The firm also provides accurate weather warnings, which is key for grapes crops.
“We provide information 15 days in advance on the best sowing time. This will help avoid seed wastage and ensure 90 per cent of the seeds germinate. The precision farming also involves providing information on use of pesticides and insecticides through satellite images,” Yadav said.
Shekhar Tyagi, Director Operations, IndiaHub E-Governance Pvt Ltd, said that Grameen Vikas Trust, the group which owns IndiaHub, has been working with FPOs for over a decade now, focussing on the uplift of small and marginal farmers. “Grameen Vikas Trust and IndiaHub are involved in mentoring FPOs in adopting technologies as they come and look into the changes required. We are working closely with GreenSat to ensure proper upgradation,” he said.
Cashless credit line
On tie-up with banks, Yadav said their interaction with farmers would be “faceless”. “We have prepared a software and have applied for its patent. It will provide all data on a farmer in a digitised form when he/she wants a loan. Banks will sanction the loan based on NABARD allocation of funds,” he said.
The loans could be extended either through the Kisan Credit Card or through a cashless credit line that would be digital. “The creditline that would also be available in a QR code that can be used to buy all the inputs a farmer wants for his crop. For example, if he wants seeds for ₹25,000, the credit line will debit that amount and ensure payment to the seller,” he said.
GreenSat targets to rope in 100 FPOs for its offerings during the current fiscal and then target 500 FPOs annually from next financial year. It also expects to sign up an additional five lakh farmers by the end of the current fiscal, Yadav added.