Agriculture accounts for 25% of India’s GDP, with over 150 million farmers across the country.
These farmers currently use mandis or marketplaces to sell their produce through agents to wholesalers. With over 28,000 mandis across the country, famers can travel over 40 kilometers a day to reach their closest mandi. Here there are over 1000 other farmers also trying to sell their produce, with around 50 agents at each of these marketplaces.
As a platform, these mandis have serve the purpose of connecting end customers to farmers through a complex relationship-based trading system of agents, wholesalers and retailers. In an information and infrastructure starved country, the mandis are the crux of the agriculture supply chain. Agents with were the crucial node her. Firstly, they create information flow on either side allowing price discovery. Secondly, they extend credit terms to cash starved farmers. Thirdly, they also have facilities to hold inventory before price setting has occurred. Ultimately agents hold a significant amount of power on this platform and capture a large portion of the value in the supply chain. Farmers receive on average only 25% of the retail price of the product.
Currently it is impossible for farmers to multi-home on these platforms. Having to travel over 40 kilometers with perishable goods, a farmer can only visit one mandi each day and must sell at whatever price is offered to him. Prices can fluctuate as widely as 50% over the course of a single day and over 100% across days. However, mandis do have strong network effects, with the large the mandi, the more agents, the more allure to farmers to adopt that specific mandi.
Large players like Intuit and ITC are aiming to digitize these platforms and both create more value as well transfer more value to farmers. Both these companies are working in different parts of the countries with pilot projects at a few mandis and villages.
By offering price discovery through mobile internet and SMS service, farmers are more informed as to which mandi to travel to and what price to sell at. Intuit tested out a few different ideas in this vain. One was to offer a crop exchange, creating a SMS marketplace. Farmers would SMS at what price and what quantity they were willing to sell, and agents could accept or reject the price. Similarly, another pilot was to offer farmers daily updates on prices for various crops at each mandi. In another pilot in another region of India, ITC not only offered price transparency at mandis but also global trends, allowing farmers to plan not only on a daily basis but also more long-term. Ultimately this price transparency increased the ability of farmers to multi-home.
However, while trends have been encouraging, there is much to be done. Farmers still tend to work with agents. While price discovery has gotten easier, credit and storage infrastructure are something that ITC and Intuit still haven’t figure out. It would be important to offer an integrated solution. A hybrid digital/physical platform solving all the farmers pain points is necessary to replace traditional mandis.
Intuit Inc.: Project AgriNova by Thomas Eisenmann & Tanya Bijlani
The ITC eChoupal Initiative by David Upton and Virginia Fuller