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Our latest investment in agri-tech startup Kamatan, ensuring better pricing for farmers and less wastage

By Avinash Mishra, Investment Director, and Madeleine Eastwood, Head of Communications  |   Posted 20th April 2020

GIF is excited to announce a £1.6 million investment in Kamatan, an agriculture-technology startup leveraging supply chain technology to ensure better pricing for farmers and to reduce wastage in the sector.

Based in India, Kamatan works with farmer produce organisations (FPOs) to source produce for direct supply to agricultural enterprises, processors and retailers. Kamatan helps these FPOs in procuring, storing, quality control and logistics.

Kamatan, through its partner FPOs, also assists farmers with the implementation of best practices in grading and sorting as well as value adding activities like drying, cleaning and packaging, which can help reduce wastage and match the demands of institutional buyers to enable farmers to realise a significantly higher value for their produce.

As the COVID-19 pandemic has turned into a global crisis, widespread lockdowns have hampered traditional supply chains and marketing avenues. As a result, smallholder farmers and small businesses are particularly vulnerable in the resulting uncertain economic climate. A protracted pandemic could quickly put a strain on food supply chains, which include a web of interactions involving farmers, agricultural inputs, shipping, retailers and more – all of which are stakeholders in Kamatan’s innovation. Kamatan is in a position to keep the gears of the food supply chains in India moving and support farmers by bringing markets closer to them most effectively. GIF is proud to support innovations like Kamatan that continue to remain critical in developing countries.

In India, the supply chain from the farmgate to the point of consumption for agriproducts – whether consumption, processing, retail or export – is fragmented and often has between 3-7 intermediaries. The result is a sub-optimal and often inefficient marketplace on either end of the supply chain: from the FPOs to the retailers, food processors and other small and large institutional buyers.

This challenge has several dimensions:

The farmers/producers have limited direct access to the end buyers and most often sell to local markets. As a result, they suffer from inefficiencies such as high cost of logistics, delayed payments, disguised trade ‘rents’ and significant wastages in multiple handling of the produce. Selling in small lots at local market yards or to the informal traders provides little premium for quality and there is no incentive for bringing in best practices such as sorting and grading. The unorganised nature of the trading can also lead to delayed payments and other inefficiencies associated with informal markets, including predominant cash transactions and no records of accounts.

On the buyer’s side, challenges are associated with reliable and stable supply, visibility of production output, traceability of produce, and standardisation of quality. Dealing with multiple informal traders also reduces process efficiency and increases logistics overheads. While in specific supply chains, large industry incumbents can get into contract farming, most buyers with diverse commodity needs, and especially Micro, Small and Medium Enterprises, are not able to source directly and face the challenges associated with dealing with fragmented and informal traders.

Supply chain infrastructure is a key bottleneck for the sector. In the absence of adequate storage as well as poorly informed harvesting and post-harvest practices, farmers cannot hold back their produce and are forced to sell immediately on harvest when prices are likely at their lowest. While infrastructure capital is constrained, lack of formal actors in the ecosystem increases the risk and overheads for these assets, further disincentivising investments in the sector.

The company, which is led by former Indian Administrative Services Officer, Pravesh Sharma, will use GIF’s investment to expand its reach to 500 farmer producer cooperatives across India and increase the income of approximately 500,000 farmers and their families over the next five years.

GIFs capital will help Kamatan expand their operations, further develop their technology stack and bring in value-added services for the farmers/FPOs in addition to output marketing. These services include input supplies, financial linkages, technology solutions for production, storage and quality management.

Kamatan’s technology platform is its backbone and their proprietary ERP (enterprise resource planning) solution facilitates smooth transactions between buyers and sellers across India. Kamatan is also piloting an App for the farmers and FPOs which will include updates on prices of key commodities and other value-added services. The technology integration also enables traceability of produce for the buyers as well as supply forecasting to help better manage their businesses.

To date Kamatan has reached 30,000+ small and marginal farmers through 17 farmer producer organisations, procuring over 25,000 metric tons of farm produce with direct marketing to large institutional buyers. The resulting improvement in price realisation, wastage reduction, and cost efficiencies is expected to increase farmer incomes by 10%.