Time To Build Climate-Stack For Indian Agriculture

India has come out of a deficit monsoon and barely escaped a drought year. Despite 5.6% deficit in overall rainfall numbers (820 mm against average normal rainfall of 860 mm); monsoon in the year 2023 at best can be called as erratic, across months as well as across regions. 

While the month of June was deficit (-9%) July witnessed surplus rains (+13%), August saw biggest deficit ever (-36 %), thankfully September rains (+13%) had something to cheer. 

The regional and seasonal monsoon volatility is not a one-off event anymore but becoming a pattern from one year to another. The weather vagaries are not limited to India alone. 

Europe has experienced heat waves like never before. The Hawaiian and Canadian wildfires are a testimony to the looming dangers to the biodiversity of the planet earth and humanity at large.

There is no sector of the Indian economy, which is immune to the climate changes. However, one of the most adversely impacted sectors continue to be agriculture as reflected in stagnating or declining productivity of the major crops. 

It is fair to say that the sustainability of agri and food supply chain going forward depends on the acceptance and mitigation of climate risks, complemented by actions for building enough climate resilience and adaptation mechanisms amongst value chain actors.

The smallholder farmers (about 120 Mn in India and over 500 Mn globally) clearly share a disproportionate risk of climate changes than any other value chain player. 

The consumers at the other end of the supply chain are equally vulnerable, but have not realised the impact in equal measures as much as farmers; thanks to the sustained food security and supply, even during pandemic years. 

However, if perennial food inflation is an indicator to go by, the consumers cannot take food availability for granted forever. 

The ongoing COP28 deliberations are likely to sharpen focus on policy drivers and collaborations to drive sustainability in the food sector. 

India being one of the largest food producers and consumers has an added responsibility to drive the policy narrative at the global stage.

In this context, it’s time we start building a strong policy agenda as well as a vibrant innovation ecosystem addressing climate challenges in Indian agriculture. An enabling policy along with disrupting climate innovations is the need of the hour. 

This article profiles some of the innovations in the agri-climate-tech space and how building a “public digital good specific to climate” for agriculture can catalyse the entrepreneurial ecosystem, to the benefit of farmers and other food value chain participants.

Arrival Of Climate Entrepreneurs

Over last few years, there are enough deliberations at the industry and policy level to make food supply chain climate-resilient. The policy prescriptions and industry actions need to match with the emerging entrepreneurial energy to bring the desired change.  

Thankfully, the sheer number and quality of entrepreneurs, trying to build business models to fight climate change are growing in proportions and that to me is the biggest hope to solve for the climate challenges that lies ahead for agriculture in India and globally.

If one looks at the history of Indian agritech, the dawn of agritech in India happened about 15 years ago but climate-tech remained peripheral to it for over a decade. It’s only in the recent past that climate-tech is becoming more nuclear and integral to agritech, not only to entrepreneurs’ business models but also to the investors’ thesis.

This is driven by entrepreneurs’ realisation that climate-tech and agritech are not binary but essentially two sides of the same coin. Resource optimisation and unit economics go hand in hand in value creation for unlocking VC-friendly returns. It is fair to say that the winning models in agritech will have climate resilience as one of the key foundational layers.

Also, many customers and users of agritech especially the large food companies like Unilever, Nestle, Danone, Olam etc and retailers like Amazon, Walmart have made commitments publicly on making the supply chains net-zero over next 2-3 decades, so these companies have no option but to partner with their supplier base to honour their commitments. 

The downstream players of the food value chain (retailers, food brands) which so far have largely remained oblivious to the challenges of the upstream players (specifically farmers), are realising the need for supply chain integration, more accountability, higher transparency and end-to-end traceability. 

The climate crisis can possibly cure for the perpetual bipolar disorder of food value chain by bringing the “food” and “agri” ends closer.

Landscaping Climate Tech Innovations In India

The canvas of innovations in agri-climate-tech is still evolving and irrespective of how much one paints; parts of the canvas will still look blank. 

Let me still attempt to put a brush around the type of innovations the agri-climate space is witnessing. 

Broadly, they can be segmented into three buckets- “largely digital”, “largely physical” and “supply chain innovations”.

Largely Digital

These innovations typically include capturing data about weather, soil and plant health from multitude of sources such as whether stations, satellites, drones, sensors, IoT devices, scanners, smart phones etc. The evolution of hardware devices along with growing data modelling capabilities is at the core of such innovations.

The use cases of such digital solutions are essentially in climate risk mitigation including farmer advisory to reduce crop loss; estimate losses on account of flood/ drought; estimate soil nutrition and moisture for optimising fertilizer and water use; build climate-linked lending and parametric insurance products, traceability solutions that can potentially facilitate carbon trades using audited and verified data points; cattle health management for nutrition efficiency resulting in less methane emissions etc

The examples of startups in this category include SatSure, CropIn, Leads Connect, RMSI, Bharat Rohan, Frugal Labs, Borlaug Web Services, Agnext, Boomiitra, Stellapps etc. This category has seen VC interest but data monetisation at scale remains a challenge despite relatively better margin profile.

Largely Physical

These solutions include a variety of physical interventions including products, devices, machines, biologicals to drive climate resilience. 

The use of dehydrators, cold rooms, bulk coolers, CA storages, silos for reducing post-harvest losses; urea deep placement machines for optimising urea consumption; hydrogels for water use efficiency; bio stimulants, plant extracts, drones for minimising use of agrochemicals; bore chargers to improve water table; polyhouses for resource efficiency etc would fall into this category. 

Some of these physical interventions also have complementary digital tools for better efficacy of solutions like sensors / IoT devices in cold rooms, greenhouses or optical cameras mounted on drones.

Some examples in this category would include likes or S4S Technologies, Promethean, Inficold, Ecozen, Rukart, EF Polymer, GreenPod, Absolute, Bioprime, Sea6 Energy, Marut drones, Urdhvam, Distinct Horizon, Kheyti, Takachar etc. 

This category of startups needs impact / catalytic capital/ blended finance support at the beginning of their journey before venture capital kicks in. Both margin and scale potential in this category is in the moderate to high range.

Supply Chain Innovations

These include tech-enabling supply chains for dis-intermediation to align supply with the demand. The market linkage startups operating in the – whole or parts – of farmers-to-consumer value chain, such as WayCool, DeHaat, FarMart, Samunnati, Falca, Bioveda, Innoterra, KisanKonnect, Maalexi, Mango Dairies, Digigrain are some of the examples. 

Though the primary thesis for this segment of startups has been around building demand-driven tech-enabled supply chains, but in this process, these business models have contributed to shrinking food losses / waste thus improving climate resilience of food supply chains.

Likewise, factory-to-farm models focused on supplying quality inputs to farmers, riding on prescriptive farmer advisory models, end up optimising use of agri-inputs including chemical fertilizers, agrochemicals and water. Startups like Agrostar, BigHaat, Behtar Zindagi, Unnati, Upaz, Freshokartz, Hesa would fall into this category.

As many of these supply chain platforms are gaining scale, manging hundreds and thousands of tonnes of food on daily basis; they are also becoming carriers, platforms or super-apps of climate innovations in the- digital and physical categories – as described above. 

This category of startups has attracted the maximum amount of capital in the last decade invested in the Indian agritech (about 80% of the total $3 Bn plus VC investment). This segment of startups has demonstrated scale but margin improvement for many of them still remains work in progress.

In addition to the above three buckets, another category in climate innovations includes the package of practices (PoP), mostly driven by universities, research institutions and corporates. 

PoPs have been existent for many years before the arrival of climate startups. These PoPs include drip irrigation, direct seeding of rice, zero tillage practices, ethanol production from agricultural byproduct, use of biodigesters, conversion of stubbles to biochar / fuel / packaging, use of cattle feed additives etc. 

Many of these practices have been adapted in parts but need more policy push along with entrepreneurial energy for mass adoption by farmers.

It’s Time To Build Climate-Stack For Indian Agriculture 

Though there are plethora of innovations as discussed above in the climate-tech space; they are still far from wide scale adoption, required for catalysing a large-scale disruption to get closer to net-zero targets. 

Given the gravity of climate problems and the need for urgency to solve for climate challenges, it’s time to think about building a climate stack for Indian agriculture (we can name it as “Clistack” for the lack of a better acronym or word). 

Though other segments of the economy also need a climate stack as much as it is needed for agriculture but probably agriculture needs it more urgently than any other sector.

So, the question is what could be the components of the Agri-clistack, potential use-cases and its ability to catalyse climate innovations at scale to drive climate risk mitigation, resilience and adaptation.

Components Of Clistack

The three most important parameters impacting the agriculture sustainability are: weather, soil and water from climate perspective. 

Though it requires debate and rigorous technical discussions on whether these three variables are good enough to build a clistack; nonetheless these three variables can make a good start. 

The best part about these three variables is that there is tech available to measure these variables accurately, at scale, at requisite granularity and almost in real-time.  The hierarchy and weights of sub-parameters of these three variables needs further technical discussion.

Figure: Proposed Clistack Architecture

Weatherstack comprises of variables such as rainfall, temperature, solar radiation, humidity, wind direction and speed which impact crop health, production, harvest, storage and shelf life of farm produce.  

All weather parameters can be captured through weather stations and some through satellites. Indian Meteorological Department (IMD) along with many private players like Skymet, WRMS have set up thousands of weather stations across India and also use remote sensing for weather data capture and prediction.

The almost-real-time transmission of data from weather station to a central server/ cloud is possible. Many new AI tools are being developed for processing and disseminating the weather data. Skymet recently launched a conversation product using Generative AI where farmer can get voice based customised weather advisory. The government of India is also targeting to cover the entire country with Doppler radars for accurately predicting extreme weather events.

Soilstack

Soilstack comprises parameters impacting the crop production including soil nutrition – macro nutrients (Nitrogen, Phosphorus, Potassium, Calcium, Magnesium, Sulphur). Micro nutrients (Zinc, Iron, Cobalt, Manganese, molybdenum, Copper, Chlorine, Boron), organic matter, soil pH; electrical conductivity, microbial count.

The Government of India has set up a network of soil testing labs (about 11,500) to provide advisory to farmers on use of fertilisers and nutrient use. Some of the private sector companies especially those in the fertiliser business have also set up their soil testing labs. 

However, many soil testing labs are non-functional. Building a strong soil testing infrastructure along with the digitisation of soil data can go a long way in enabling the soilstack platform.  

In the last few years, we have seen surge of many soil testing startups such as Krishitantra, Bhu-Parikshak from Agronxt (rapid soil testing technology developed by IIT Kanpur), Neoperk, Soilsense, Ekosight etc.  

The portable machines / devices developed by these startups can give results on some of the vital parameters of soil health in a matter of minutes.  The new-age technologies riding on portability of devices, accessibility to farmers and affordability will complement in building the soilstack.

Waterstack

Waterstack can technically be part of weatherstack (as major contributor of water for agriculture is rainfall) or could be part of soilstack (as soil moisture / ground water is another major source). 

However, given the sensitivity and the quantum of water consumption (80% of water available in India is used for the purpose of agriculture – estimated at about 800-900 billion cubic meters) along with low water use efficiency (<50% in many crops), it may be good idea to keep water as a separate parameter for the attention it deserves. 

There are enough innovations to measure water availability in soil at surface and sub-surface (root zone) level. The use of sensors and IoT devices can accurately measure the water availability in the soil to estimate quantum of water / timing of irrigation. 

Even satellite imagery can detect surface level moisture. There are many startups in India such as Cultyvate, Sense it out, Satyukt and even irrigation companies like Netafim, Rivulis; have built their proprietary tech stacks to measure soil moisture to improve water use efficiency through better irrigation scheduling, precision irrigation and fertigation. 

To summarise, the technology (both hardware as well as data analytics capabilities) has advanced enough for measuring weather, soil and water parameters to enabling a pan-India data-driven clistack. 

However, the penetration, distribution, density of the hardware devices needs a scientific architecture. The algorithms and units to measure and report data needs standardisation / uniformity to bring clistack alive. 

The question is the granularity and frequency of data collection for the purpose of building clistack. The weather data is unlikely to change significantly within a village though there could be farm-to-farm variations for soil as well as water parameters.  

However, “a farm as a unit” may be bit too ambitious to begin with hence “a village as a unit” could be a good starting point in building this stack. The frequency of weather data collection could be daily whereas the frequency for soil and water data could be once in crop season (3-4 months). This is because of higher time sensitivity of weather data as compared to the other two. 

Given the reducing cost of hardware and improving data analytic capabilities; the investment required to build and maintain stack is not going to be significantly large. 

A lot of these investments have already been made but there could be hardware / software gaps from a stack perspective which needs to be filled. Also, there is need to build frameworks as well as an institution to conceive, build, maintain, regulate and open-source clistack for potential users.

Another positive characteristic of clistack is that there is no personal data involved, hence hopefully the concerns around data privacy are limited as compared to other stacks where personal data is integral to stack.

Use Cases Of Clistack

Though I believe there could be many use cases of clistack for the government as well as private sector, the top five most-obvious use cases are as follows:

Farmer Advisory

Farmers in India are getting digitally literate. A recent report on “State of the Digital Agriculture Sector” published by Beanstalk states that there are about 50 million farmers in low- and medium-income countries actively using digital tools out of which over 50% farmers (about 27 million) come from south Asia region, with as much as 86% farmers (out of 27 million) are from India. 

This implies that about 10-15% of Indian farmers are already using some digital tool for the purpose of accessing market linkage, advisory, price discovery etc.

The ability to collect, analyse and report data at scale, in a form that can be useful to farmers, is possible with the use of clistack. The improved penetration of digital tools and smart phones among farmers can make the transmission of the data to the farmers almost in real time. 

The data about weather, soil and water geotagged to farmer location/ village can seamlessly be integrated from the point of data collection to each and every village, resulting in pragmatic insights for the farmers. 

The layering of clistack over agristack (another important stack which is under development by the government) can enable farm / farmer specific personalised advisory.

Climate-Linked/ Green Financing

This has often been talked but rarely practiced because of lack of necessary data, digitisation and regulatory framework around it. Clistack can provide authenticated and standardised data sets to bankers to assess climate risk for the purpose of underwriting.

The Climate Risk Index (CRI) can be built in as a derivative index of clistack, which banks can use for developing climate-linked lending rates, at least at the village level. 

The personal credit score of farmers calibrated to CRI could potentially determine the farm lending rates, hopefully giving enough incentives to farmers / farmer group / FPOs within a village to collectively reduce CRI. 

CRI reporting could potentially lead to healthy competition among villages to adapt good climate practices to lower the value of CRI (like city ranking as part of “Swachh Bharat Abhiyan” has triggered competition among cities for cleanliness)

Parametric Insurance

The sachet insurance products linked to weather or climate to derisk farming are in demand. It has already been demonstrated by startups like IBISA, WRMS, Gramcover who are developing and distributing such products to farmers. 

The scale of parametric insurance products depends on getting the requisite data from multiple sources for product development, calibrating risk, ascertaining premiums and distributing the insurance products through partners in rural areas.

Clistack can help build parametric insurance products at scale. It will also assist startups in developing customised products for farmers given the granularity and frequency of data which can be made available through clistack. Agristack data can be used for selling and distributing these products.

Policy Development

India is the third largest emitter accounting for 7% of GHG emission. The government of India has committed to the net-zero target by 2070 that needs a series of actions to reduce GHG emission. 

India has the challenge as well as a unique opportunity to be the first few or the only country in the history of transitioning economies from developing to developed country; to demonstrate 6-8% YoY GDP growth with the least usage of fossil fuels.

Agriculture is one of the prime contributors of GHG emissions (about 14% of GHG emission comes from agricultural activities in India). 

The Government of India already has the National Action Plan for Climate Change (NAPCC) and many schemes for sustainable growth of agriculture. 

Clistack can provide the necessary data (by crops, geographies) which can help policy makers to prioritise action points to reduce emissions. 

The government is also promoting crop diversification schemes incentivising farmers to move from crops like paddy to maize / millets which are less resource intensive. 

Such policies can be made more effective with time series data coming from clistack, by measuring the impact of such policies.

The Priority Sector Lending (PSL) regime for agriculture (mandated at 18% of outstanding credit by banks) to enable institutional credit to farmers and agri value chain players could potentially build incentives for farmers for climate adaptation by linking lending rates / repayment to it. The regulatory framework for carbon trades in agriculture could be based on clistack data.

The loan waiver management policies for farmers could also be guided by clistack, for example if CRI (a proxy for climate risk) increases by 50% in a season due to poor weather / soil/ water; it makes a case for loan restructuring / waiver amongst farmers affected by such events.

Demand Supply Alignment

While the food demand does not change overnight; supply of food gets impacted by seasonal variations and regional arbitrage which in turn gets impacted by the climate changes. Clistack data, triangulated with other data points, could be used in estimating production and supply of a given commodity at a given point of time from a given geography. 

This can help in preventive and corrective actions to bridge demand supply gaps mitigating the unreasonable / inflationary price shocks for consumers as well as farmers.

In Conclusion

The enormity of impact of the above use cases for farmers, consumers, government and value chain players make a strong case for building clistack and as mentioned earlier given its non-personalised character with significant infrastructure already in place, it should not take significant effort or investment to build it.

The effort is required in building the policy architecture, standards, necessary physical / digital infra to cover each and every village of India to begin with. The investment required is incremental and insignificant in the context of the benefits that will accrue. 

India over the years has evolved as the world’s capital of “digital public goods” (UPI, ONDC, OCEN, Agristack etc to name a few) and clistack could be another stack where India can take the lead. 

Clistack is not only required for Indian agriculture’s sustainability but also is relevant for the resilience and longevity of global agri and food systems. The government can partner with startups even for building and maintaining clistack as we have seen in the pilot stages of agristack.

What does clistack mean for startups and investors?  – It will create an ocean of innovations around climate risk mitigation, climate resilience and adaptation in the food value chain. Startups, instead of spending VC money on creating proprietary stacks, could ride on clistack to construct interesting APIs without worrying about data collection and validation. 

Intersection of clistack and agristack will help build many farmer-centric innovations with significantly low first / last mile cost with negligible CACs. 

Investors hopefully will see a healthy deal flow, propelled by this stack, to figure out compelling investable business models for 20% plus IRR returns. 

Climate tech investment opportunities in agriculture which are hard to find in the current environment, can potentially become mainstream in a matter of a few years. 

Global and Indian investors will witness a new asset class in agri climate-tech space which can generate IRRs to the liking of VCs and PEs, potentially matching or even outperforming the returns delivered by conventional sectors/ themes.