How This Aquaculture Startup Helps Farmers Reduce Costs and Increase Production

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For a very long time, aquaculture, or the business of farming prawns, lobsters, mussels and other edible aquatic organisms, remained highly disorganized in India. Farmers reaped good crops but failed to earn the money they deserved because of middlemen.

It was to address this problem that Rajamanohar ‘Raj’ Somasundaram in 2017 launched Chennai-based Aqua Connect, a full-stack aquaculture technology business and marketplace that offers technology-based farm monitoring solutions in real time, consultations, aquaculture expertise and access to export markets for coastal farmers.

The startup uses artificial intelligence and satellite remote sensing technologies, and works with 60,000 fish and shrimp farmers to help them increase their productivity. It also organizes the entire value chain and connects farmers to upstream and downstream actors, including sellers and suppliers, agro-input manufacturers (which provide probiotics, water chemicals , manufacture animal feed, chemicals, etc.) and exporters.

As Raj says, “We activate the enablers”.

Over the past five years, the tech-focused startup claims to have helped farmers in its network reduce input costs by 30% and increase production by 20%. Over the past year, the number of farmer members has increased 4x and the founder says their revenue growth has increased 14x over the same period.

The startup’s growth has been aided by the fact that India is the world’s second-largest fish-producing country, accounting for 7.58% of global production, according to the 2020-21 economic survey, and providing livelihoods to 28 million people. .

According to the Union Fisheries Ministry, fish production for 2019-2020 stood at 14.16 million metric tons compared to 13.57 MMT in 2018-2019. However, the irony is that production from marine fisheries is declining even as harvest from land-based fisheries is increasing.

Aquaculture ponds

According to Raj, it is a $25 billion industry where the upstream segment which includes inputs like fish feed and farm operations is around $9 billion and the downstream segment which is the value generated mainly from sales of approximately $16 billion.

Aquaconnect has raised $17 million in funding so far in a combination of equity and debt. The investors of this startup are among others Omnivore, Rebright Partners, Flourish Ventures, Trifecta Capital.

Focus on fish farmers

A key component of the aquaculture industry are the farmers and their farms. A pond, which is usually one acre in size to produce and harvest fish and other aquatic species, requires around Rs 7-8 lakh for shrimp farmers per harvest and Rs 3 lakh for a fish farmer.

Raj says the three main challenges an aquaculturist faces are water quality, feed efficiency and fish quality. If the water quality of these ponds is not at the desired level, the yield can be seriously affected.

He gives an example of how the feed ratio for these fish should be on the order of 1:1.2 to get the optimum yield. However, most farmers follow the 1:2 ratio, which leads to feed wastage.

“We have created all kinds of measures that are provided to farmers to ensure that they benefit from these inputs,” says Raj.

Aquaconnect combines the elements of human and technological intervention to ensure that farmers are made aware of the best practices prevalent in aquaculture to ensure higher production. She created her own geographic information system (GIS) to collect data on the health of these aquaculture farms.

Raj says, “We have boots on the ground and eyes in the sky.”

Aquaconnect has a network of experts who provide the necessary expertise to farmers as well as franchise partners (retail outlets who provide all necessary inputs like fish feed, medicine and other necessary tools). Information is also available on the app.

Ray says farmers have historically been unable to get science-based or quality inputs, and says the profit margin for network farmers has increased by 15%.

Access to cheaper credit

However, the greatest benefit Aquaconnect is able to bring to these farmers is access to cheaper capital. Since this sector has been purchased under the Priority Sector Loans, banks and financial institutions are still hesitant to provide loans to these farmers unlike those associated with agriculture.

Raj says, “In agriculture everything is above ground, but here (aquaculture) everything is underwater, which is a big challenge for effective underwriting or collection. This is where Aquaconnect is able to bring visibility.

As Aquaconnect has detailed data on the status of each shrimp/fish pond, it helps banks secure loans much more efficiently as there is much more transparency.

Unlike in the past, when fish farmers depended on private lenders who charged exorbitant rates, they can now obtain loans at much lower interest rates.

Raj says the cost of lending to farmers has dropped by 60%. “We are not only an aquaculture startup but also a fintech.”

Connect chain

Aquaconnect has also forged links with other players in the ecosystem, particularly those who source from farmers. Given the amount of data available, the startup is able to provide efficient output sourcing, predictability, and traceability.

The concept of traceability is very important in the aquaculture industry, especially when focusing on the export market.

Aquaconnect has now made its foray into the overseas market with an export order from Japan.

“If a buyer wants to buy fish or prawns, we are able to identify exactly when the harvest is in the field,” says Raj.

The tech-driven aquaculture startup has about 160 partners on its platform, which includes its retail network, manufacturing companies, pharmaceutical companies, banks and others. It aims to increase that number to 500 by the end of next year.

Aquaconnect earns its revenue from the retail network’s trade margins, price arbitrage of products sold through its platform, and the commission it receives for facilitating bank lending. It is completely free for farmers.

Given the progress it has made over the past five years, it is now looking to expand from the four states in which it is currently operational – Tamil Nadu, Andhra Pradesh, Orissa and Gujarat. It targets landlocked states like Madhya Pradesh, Chhattisgarh and Bihar, which practice inland pond fishing.

Raj believes Aquaconnect makes the system more efficient and gives access to technology to every stakeholder across the entire value chain.

“Aquaculture is about growing your water, and we need to build sustainability across the whole ecosystem,” he says.

The demand for aquaculture products is expected to increase in the coming year with a growing and ambitious middle class, and focus on protein in the diet.

“This industry is growing at a CAGR of 10% and there is a huge opportunity to double the number of farmers on our platform year on year,” says Raj.

Edited by Teja Lele Desai
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