Relevance: GS-3: e-technology in the aid of farmers

Key Phrases: Ecological Challenges, Efficient Supply Chains, Sustainable Resource Use, Blended Finance Programmes, public-private partnership (PPP) scheme, Digital Agriculture Technology, Centre for the Fourth Industrial Revolution

Why in News?

• The agricultural sector has reached a critical juncture wherein it is under stress to feed a growing population with limited natural resources and ecological challenges.
• Besides, it is also expected to sustain income for 100 million smallholders while facing the continued threat of climate change.
• To effectively respond to this situation, the farm sector needs to address the critical issues of inclusive access to factors of production, efficient supply chains and sustainable resource use.

Key Highlights:

• The agricultural sector is vital for the Indian economy to sustain the livelihoods of around 58 per cent of families and ensure food security for 1.3 billion people.
• Digital technologies such as blockchain, artificial intelligence (AI), drones and the Internet of Things (IoT) have immense potential to stimulate the transition process with long term impact.
• PPP(Public-Private Partnership) for digital agriculture provides a perfect platform to initiate blended finance programmes that take advantage of different types of capital.

Public-Private Partnership (PPP) Scheme for scaling digital technologies:

• In the 2022-23 Budget, the government recognised the potential of digital agriculture technology and innovation and announced that a public-private partnership (PPP) scheme will be launched to scale these technologies.
• In 2021, the World Economic Forum’s Centre for the Fourth Industrial Revolution (C4IR) in partnership with the Telangana government initiated a first-of-its-kind PPP to scale digital technologies in the State’s agriculture sector.
• The lessons from this project highlight that in such a PPP framework, the government should play the role of an enabler that creates a sustainable market for technologies by addressing systemic challenges that impede scaling up.
• This approach will also encourage the private sector to participate in regions where they do not have any business presence.

Implementation process of PPP Scheme:

• Considering the innovative nature of both the PPP structure and the technologies, governments can adopt a two-stage process of implementation which includes an initial validation process followed by a full scaling up.

Role of Commercial Capital access:

• Access to commercial capital at both the stages is critical to de-risk the private sector’s investments and ensure their sustained interest and financial viability.
• While India is one of the biggest agricultural technology (agritech) markets for equity investments with nearly $500 million invested in agritech start-ups between 2014 and 2020, there is still an unmet demand for commercial capital.

How to increase investments in the sector?

• Blended finance structures, by pooling different risk-taking capital (capital that’s invested in high-risk high impact initiatives to demonstrate the feasibility of the initiative) can play a crucial role in kick-starting investments in the sector.
• Currently, organisations that offer these instruments operate in silos.
• Grant funds offered by philanthropic organisations are largely channelled to not-for-profits for implementing digital agriculture projects in a limited geographic area within specific timelines.
• These not-for-profits may then partner with the private sector to implement digital tech solutions.

Way Forward:

• The envisioned blended finance framework can be coordinated by a government agency or multilateral institution acting on behalf of a government.
• The platform can pool a coalition of institutions that share a common vision of scaling digital agriculture.
• A collaborative structure will provide flexibility and agility while ensuring easy entry and exit for the institutions based on their strategic interests.
• The potential for such a partnership is immense and the first step is the need to further investigate the resource requirements, specific value propositions and set-up of a governance structure for such partnerships.
• The immediate next step would be a constructive dialogue, setting the vision and collaboration between the aforementioned stakeholders.
• The government is best placed to drive this dialogue at the national level and facilitate a coalition.

Source: The Hindu BL

Mains Question:

Q. The farm sector needs to address the critical issues of inclusive access to factors of production, efficient supply chains and sustainable resource use. In the light of the above statement, discuss the role of the digital initiatives in addressing the issues of Indian agriculture.