MUMBAI, 14 December 2016 : At the time when the government has infused more interest & funds on mechanized farming, Jagdish Kumar of Agriculture Times spoke to newest entrant in farm equipment rental business, farMart co-founder & CEO, Alekh Sanghera on the factors that are driving growth and why he believes that the farm equipment rental business will touch $12 billion by 2025.
Full excerpts...
India is spending million on farm mechanization, your comments?
Government claims to have released over USD 50 million in previous two years and intends to release another USD 17 million over the next year (FY16-17). Farm mechanization spending amounts to only 0.003% of total agriculture budget (FY15-16). This figure is very low if you look at the bigger picture.
Farm mechanization in India is at its nascent stage with less than 40% of land mechanized.
Government and public sector spending needs to increased in order to increase farm mechanization in India.
Is government focusing on farm mechanization at the right time, or India has lost the race with other countries in mechanizing the farmers years back?
“ It is never too late to start” they say. Yes, India has lost a lot of time but that doesn’t mean that we cannot expedite our growth trajectory and achieve our goals. With increased literacy levels, financial inclusion, better agriculture practices, and use of technology, India can increase its level of mechanization from current 40% to 90% in the next 10 years. Let us look at Brazil’s case, which is a developing country with similar socio-economic conditions as India. Brazil mechanization rate is over 75% and only 14.8% of its population is engaged in agriculture viz-a-viz India where level of mechanization is 40% and 55% of population is engaged in agriculture. We need to strive towards hitting similar numbers in order to increase farmer productivity through mechanization.
Do you believe that Indian farmers can double their income by 2022?
I certainly believe with right policy changes, technology interventions, and generation of alternative sources of income. Government can double farmer incomes by 2022. I also believe farmers need to move away from wheat-rice crop cycle and grow alternative crops in order to boost their incomes.
How is your company helping the farmers to increase the production?
Through farMart platform, farmers now have access to wide range of productivity enhancing agriculture machinery delivered at their doorstep at a push of a button.
Farmers can increase their productivity by over 20-30% by using right kind of machinery during harvest and land preparation.
We also provide information to our farmers regarding new age techniques of farmers to help them adopt new practices, grow right crops and increase their agriculture knowledge.
Could you share more details about the company?
farMart is a technology platform where farmers can rent out their underutilized agricultural machinery to fellow farmers who are in need on pay-per-use basis through a mobile APP and call centre. We help farmers increase their productivity at the same time generate an alternative source of income for machinery owners. We are truly changing the way farming is done in this country using the shared economy principal.
How is your company different from government's farm equipment rental programme?
Government farm equipment rental programme is based on establishing customer hiring centers (CHC). CHC have an inventory led model. In contrast to that, farMart is an aggregator led model. Given there is no capital costs involved in purchasing of machinery. We are able to offer services at lower prices due to marginal costs advantage.
Is farm mechanization only way to double farmers income by 2022?
No. Farm mechanization is one of the many but an integral way to double farmers income by 2022. Greater focus on each aspect from farm mechanization, market linkages, diversification of crop production, generating alternative income opportunities, etc needs to be laid in order to double farmer incomes by 2022.
In India, farmers tend to do traditional farming rather than equipment. How can your company make a difference?
Traditional farming methods using animal power is a thing of the past. Since earlier farmers had no option and were unaware about the benefits of farm mechanization. Once a farmer prepares his land using mechanized power, s/he will never go back to animal power. Traditional methods are also bad for the cattle. Farmers have become much more aware and educated about these facts in today’s time.
Currently, in which states, you have your presence and what is your future plans?
Currently we are operating in western parts of UP. In the next three years we have identified UP, Haryana, Punjab and MP are our target markets.
Can you give us an idea on rental farm equipment market in the country?
The current agri-renting market is highly unorganized and fragmented. This is due to information asymmetry, demand-supply mismatch and no formalized booking process. This results in price exploitation and compromises quality of service. All these reasons often lead to lower yields or crop loss for the farmers.
What is the market capitalization of the farm equipment market today and where do you see the market to be in 2025?
In India, the total annual farm equipment hiring market is estimated to be over USD 5 billion. The market would witness a growth of around 5-10% annually, as labor becomes more scarce and expensive.
By 2025, I expect the market between USD 7.5 -12 billion annually.
What made you enter farm equipment rental market?
We saw huge opportunities in farm equipment renting market. Other than the fact, that the market was so unorganized and fragmented. There were not many startups were working in this space. In India, agriculture market size is over USD 300 billion (annually). With so many problems to be solved in this space, I fail to understand why not many entrepreneurs are not disrupting using technology.
Was it a passion or a strong business knowledge that brought you to this sector?
It surely was a mix of both. All three co-founders Mehtab, lokesh and I come from an agriculture background and posses deep amount of passion about this field. Our consulting work experience has largely been around policy advocacy for offering better financial services to rural communities. Lokesh has also been an entrepreneur in the past and founded a rural microfinance institution. Therefore I believe in our idea and our team. farMart is something that has come naturally to us.
Caption: farMart co-founder & CEO, Alekh Sanghera in centre along with other co-founders, Mehtab and Lokesh of the company.