Reducing Agri Food Waste – Opportunity for Startups

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Agriculture food wasteApril 2013 saw farmers in West Bengal, India, venting their anger and frustration by throwing their year’s yield of tomatoes on the roads. Having spent nearly 8 rupees ($0.15) for producing one kg of tomato and failing to get even 1 rupee ($0.02) in the market, most farmers resort to selling their produce at a loss. Ironically, while farmers are incurring huge losses, end consumers are shelling out 12-15 rupees for a kg of tomatoes. (Story in Business Line)

In developing countries with ever-growing population with stomachs to fill, food wastage should be non-existent. Yet a 2011 report by a UN body, FAO, puts wastage in fruits and vegetables as high as 45% of produce (post-harvest to distribution) for developing Asian countries like India. Despite considerable effort being made to improve production, not much focus has been given to curb food supply chain losses. With over 1.2 billion people to feed, addressing the issue of food wastage is essential to India’s efforts towards combating hunger and improving food security.

Some glaring facts:

  • India, the world’s second largest fruit and vegetable producer encounter a waste of close to 18% worth INR 44,000 crore ($7 billion) of produce.
  • The latest DIPP paper on Foreign Direct Investment (FDI) in retail estimated that against a production of 180 million metric tons a year of fruits, vegetables and perishables, India has a capacity of storing only 23.6 million metric tons in 5,386 cold storages across the country.
  • The Saumitra Chaudhuri Committee in 2012 indicated 61.3 million tonnes of cold storage requirement in the country against the present capacity of around 29 million tonnes.
  • The country lost INR 45 crore ($7.2 million) worth of food grain in the past 5 years (Data by Hindustan Times)
  • A report by the Institution of Mechanical Engineers reveal that each year, 21 million tonnes of wheat which is equivalent to Australia’s annual grain production is wasted in India
  • Food Corporation of India (FCI) reports shows that food grain worth INR 120.29 crore ($19.2 million) was lost in storage, while INR 106.18 crore ($17 million) worth of grain was lost in transit. The remaining INR 9.85 crore ($1.5 million) worth of food grains were not fit for human consumption (Data from Business Line)

Issues faced:

  • Inadequate and improper storage facilities for grains, which are often stored outside under tarps that provide little protection from humidity and pests.
  • Insufficient cold storage and cold chain transportation system is a major cause for fruits, vegetables and other perishable products to rot.
  • Poor roads and inefficient transport systems can cause massive delays. This in turn causes decay of temperature sensitive produce.
  • Limited reach of Mandis, which are currently the point of aggregation for agricultural produce. This poses problems for small farmers who don’t have proper transport facilities at their disposal and have to travel and average of 12 km to the closest Mandi.
  • Multiple layers of middlemen between the farmer and the end consumer, driving up prices and reducing bargaining power and price transparency for the farmers. These intermediaries have led to a cost inflation of ~250% (over the cost of production).
  • Lack of a well-developed agricultural banking sector, which forces formers to take loans with high interest from commission agents.
  • Lack of education and training on new techniques, technologies and agricultural products.

Emerging solutions:

  • Integrated post-harvest management solutions: Companies like Star Agri and Sohan Lal Commodity Management,  have solutions that eliminate the middlemen and connect farmers with reliable crop markets, easing the flow of produce from farms to commercial buyers and processors. They also provide value added services like warehousing, collateral management, quality testing, agricultural insurance, and bulk procurement.
  • Integrated cold chain solution: Companies like ColdStar Logistics and LEAF provide customized end-to-end solutions for cold storage and refrigerated transportation for temperature-sensitive cargo.
  • Alternate marketplaces: Startups like eFarm are providing ways to connect all stakeholders in the supply chain: from farmers, to buyers, to suppliers of services like labor and transportation via a web and mobile based information exchange platform.
  • Food processing is a great way to increase the shelf life of produce. SV Agro is one such company.
  • Contract farming where businesses sign contracts with farmers to grow a specific crop and guarantee buy-back of the produce at an agreed price range could be next wave of improvement efforts from the private sector.
  • Utilize IT and mobile service to provide real time market information, price transparency and personalized advisory services. Ekgaon is a startups that provides mobile tools allowing 11,000 farmers in rural India to access market price information, weather alerts and advice on crop management and agricultural best practices.

Although it’s still early days, these solutions should lead to better supply chain management in Indian agriculture, reducing inefficiencies and increasing farmer realizations, as well as curbing food waste.
Unitus Ventures is investing in early-stage startups that are building scalable and profitable businesses which improve the agriculture ecosystem in India resulting in improved livelihoods for small farmers and more affordable food options for low-income consumers. If you are building a startup to target this market, learn about how to Get Fund >

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