Mechanising Indian agriculture - Adwytya Dal
A lack of access to modern farming machinery has long held back India’s smallholders from achieving better productivity and income. And at a time when urbanisation is pulling a once large pool of available labour away from agriculture, the problem has taken a fresh twist. EM3 Agri Services CEO Adwitya Dal explains how its pay-per-use mechanisation service is enabling farmers to overcome that hurdle, and how blended finance has helped.
Why did Indian agriculture need a company like EM3 Agri Services?
India is a country of very small farms, with average landholdings of only around 2.5 hectares, and many farmers cannot access contemporary technology. The latest machinery is unaffordable for them and many lack the skill to operate it anyway. The large rural labour pool that farmers traditionally relied to climb over this productivity barrier is also shrinking.
At the same time, 70% of the area under cultivation in India is used for field crops such as wheat, paddy, soybean, and maize. For crops like this, half of a farmer’s cultivation costs go towards efforts that could be mechanised if the technology was available. Since its launch in 2014, EM3 Agri Services has focused on addressing that pain point.
We are essentially a mechanisation services provider, offering all sorts of mechanisation technologies – including both machinery and operators - on an hourly or per acre pay-for-use basis. We cover the entire cultivation cycle, from land development and preparation to sowing, harvest and post-harvest management.
To begin with we, we ran a fleet of assets owned and operated by us. We’re now evolving into a more asset-light model, acting as aggregators for other asset owners although still providing our own assets. They are all individual asset owners rather than big companies and they attach themselves to our platform.
Since we are asset owners ourselves, we are able to provide assurance to other asset owners and aggregate fairly effectively. You could compare it to transforming from being a traditional taxi company to adopting an Uber approach.
Our model is very different from leasing. Having good machinery is only half the battle for farmers – they also need a good operator who knows how to run it. So when we aggregate, we make sure that machines that come onto the platform – and their operators - are of a certain standard.
What impact has access to mechanisation had on farmers’ livelihoods?
The work we do has a significant cost reduction impact on farmers and we see productivity improving, not only from the introduction of mechanisation but from the application of it at the right time.
Our increasingly intelligence-driven system allows us to map when an individual farm needs work doing and deliver on that. Because we cover the entire cultivation cycle and visit the same fields again and again, we pick up a lot of information, such as when a seed was sown and harvested, which variety was used and what the output was.
So we’re able to get a fairly granular view of what’s happening on the field, improve transparency for farmers in their day-to-day operations, and use that data intelligently.
How is EM3 Agri Services funded and what experience have you had of blended finance?
The company was initially funded by the family, shortly followed by an equity investment from Aspada. Our technology partner is tractor manufacturer John Deere and they financed our initial assets. A local Indian bank then financed our next round of asset purchasing. We also arrange financing for the assets that we aggregate on our platform. Assets are fairly easy to finance with debt.
Our first experience of blending came around a year ago when we financed two of our service centres. India’s Tata Trust provided grant capital to part-finance the centres, which are located in a region that we knew would benefit from our service but which because of the nature of cropping patterns was not going to be commercially attractive for us to enter otherwise. So the grant capital came in to bridge that gap. And interestingly, it was the trust that approached us rather than the other way around. The grant was topped up with a mix of debt and equity.
Blended finance is definitely an area that we’re exploring. I can see other avenues for grant makers as well, particularly around capacity building, as well as extension activities and even infrastructure.
We didn’t experience any tensions between Tata Trust’s requirements from the transaction and our own, and that speaks a lot about who the donor is. Obviously, they have their own mandate and we have ours. We are probably the only company in India that has managed to help organise a very disorganised sector, and that I think gave us some credibility. But even though part of the reason we entered this business was to produce a good social impact, when we got into dialogue with Tata Trust we were quite clear that we were still too young as an organisation to be able to afford not to make a real return on capital. They accepted that and we aligned well.
What’s next for EM3 Agri Services? Could you model be replicated elsewhere?
To this point we’ve been fairly focused on central India but we’re now expanding our footprint and this will be our focus for the next year or so.
India is very diverse, so entering any new market here is like entering a new country, but I think our model is fairly scalable. We have the recipe right and the cookie cutter is ready.
Our ability to expand in India gives me confidence that we could expand into pretty much any other market that is fundamentally similar.
by Helen Castell
© photo: F. Fiondella (IRI/CCAFS)