Skip to main content

Legal Capsule by Veyrah Law


AGRITECH STARTUPS: REIMAGINING AGRICULTURE WITH DATA


Agriculture can be referred to as one of the oldest and primary occupations in human history and is the primary source of livelihood for about 58% of India’s population. Even though most people in India depend upon agriculture sector, its contribution to the GDP of the country is not significant. In fact, its year-by-year contribution in the GDP of India since independence has gradually decreased. This could be attributed to various challenges faced by the sector such as dependency on monsoon for irrigation, lack of knowledge in relation to time of sowing and quality of seeds, soil erosion, outdated farming practices etc.

Unlike other sectors, agriculture has been left behind when it comes to making use of the latest technologies. In this article, we will discuss the emergence of data-driven startups who are using artificial intelligence (AI) to script a change in this sector. These startups use AI to integrate technology with agriculture to provide the much-needed push to the sector. Since these startups rely mostly on data, they need to be mindful of the relevant data regulations applicable to them.

Data-driven AI startups

The current market in India is flooded with agritech startups trying to replace intuition and traditional methods of farming with technology. In the financial year 2019-20, Indian agri-food tech startups raised more than USD 1 Billion through 133 deals. Achieving any kind of automation using robots is still very expensive for a farmer in India. This is where AI comes into the picture. The resources required by a farmer to receive information collected and processed by these agritech startups, using machine learning tools, is minimal. It is very cost effective when compared to purchasing expensive hardware which would need to be updated regularly.

These startups are essentially trying to transfer the instincts and intuition of a good farmer to machines using AI. They collect and feed non-personal data sets taken from various sources such as on-farm sensors, IOT sensors, social networks, data from government organizations like ISRO, IMD etc., to the AI under development. The software can then be used for various use cases such as crop and soil monitoring, predicting agricultural analytics, building supply chain efficiencies, etc.

Regulatory regime governing data collection

As discussed above, these startups depend upon non-personal data sets to train their machine learning projects. In simple language, non-personal data is any data which is not personal data or data that is without any personally identifiable information. Non-personal data includes data sets pertaining to environment, production processes, geospatial information or any personal data set which is anonymised in a way that no individual can be re-identified from the data set.

While the personal data i.e., data by which a specific individual could be identified, is regulated by Information Technology Act, 2000 and allied rules, usage of non-personal data in India remains unregulated. The Central Government is deliberating on a personal data law which is currently in the form of the Personal Data Protection Bill, 2019 (Bill). The Bill also contains some passing references to provisions for regulating non-personal data. However, in what could be considered a positive step, the Ministry of Electronics & Information Technology constituted a Committee of Experts (Committee) on September 13, 2019 to deliberate on a data governance framework for non-personal data. The Committee has proposed deletion of the non-personal data related provisions from the Bill to harmonize the two prospective legislations. The Committee was formed with certain goals in mind: (i) to study various issues relating to non-personal data; and (ii) make specific suggestions for consideration of the Central Government on regulation of non-personal data. The Committee submitted its report on July 12, 2020 which sought feedback from public till August 13, 2020. After considering the public’s comments, the Committee released a revised committee report on December 16, 2020 (Revised Committee Report). The Revised Committee Report was once again opened for public comments till January 31, 2021. The Committee is yet to release an updated report post this.

The Revised Committee Report identifies that abundant availability of data is the primary driver of AI. It further categorizes non-personal data into two broad heads: (i) based on type – public, and private; and (ii) based on sensitivity. It also suggests setting up a separate non-personal data authority and explains key non-personal data roles such as a community acting as the data principal, data custodian, data processor, high-value data sets and data trustees etc. 

All things considered, the Revised Committee Report discourages accumulation of data in the hands of few private players or government bodies and encourages data sharing for economic purposes. It understands that it is very important for Indian businesses to have open access to non-personal data sets collected by other private players or government bodies. The regulations pertaining to usage of non-personal data sets are yet to be framed. However, the Revised Committee Report gives a fair idea on how the regulations could positively develop in favour of small Indian businesses over time.

Growth opportunity

According to MarketsAndMarkets, AI in global agriculture market is expected to reach USD 4 Billion by 2026, growing at a compound annual growth rate (CAGR) of 25.5%, from USD 1 Billion in 2020. In India, where the market is still in its nascent stage, there are various startups that have come up like CropIn, Agnext, Zentronlabs, Intello Labs, Wolkus Technology Solutions etc. They have also been successful in attracting investments from various venture capital and private equity firms like Omnivore Partners, Nexus Venture Partners, Zoho, Kalaari Capital, Chiratae Ventures etc.

As discussed earlier, these startups rely heavily on usage of available data sets to improve their machine learning software. As on date, there is no legal restriction on these startups from using the available non-personal data sets to their benefit. The Revised Committee Report also gives a positive indication in relation to sharing non-personal data sets with businesses for developing their products.

Considering the market conditions and the favourable view adopted by the Committee, one could certainly hope to see agritech startups growing at an exponential rate. The untapped potential for growth in the agricultural space in India, should be another reason for investors to be bullish about agritech startups.

Ajay Joseph | Partner, Veyrah Law; Anshul Pandey | Associate, Veyrah Law

Views expressed above are for information purposes only and should not be considered as a formal legal opinion or advice on any subject matter therein.

Popular posts from this blog

VC Interview: Shailendra Singh of Sequoia Capital India

In a recent interview to Venture Intelligence, Shailendra Singh discussed some of the firm’s newer investments in the early stage segment including in the online payments space, the progress at a few existing portfolio companies and the active role the firm is playing in helping its portfolio companies scale and succeed in India and globally. Prior to joining the firm in 2006, Singh was a strategy consultant at Bain & Company in New York and before that, an entrepreneur in the digital media industry. Venture Intelligence: How does Sequoia go about identifying potential early stage investments in India? Is there anything different you are doing today than, say, a couple of years back? Shailendra Singh: There is a lot more focus on technology investing and early stage investing. In general, as you might remember a few years ago, we were doing primarily growth investing but in the past 18-odd months, we have had a very strong focus on early stage and that’s continuing. In terms

Ambit tops League Table for Transaction Advisors to Private Equity deals in 2019

Ambit Corporate Finance topped the Venture Intelligence League Table for Transaction Advisor to Private Equity Transactions for the year 2019. Ambit advised PE deals worth $2.4 Billion (across 4 qualifying transactions) during the period. Citi ($1.1 Billion across 2 deals) and  Avendus  ($969 million across 12 deals) took the second and third spot. Edelweiss Financial Services ($758 million across 9 deals) and  PwC  ($708 million across 15 deals) completed the top five in 2019.  The  Venture Intelligence League Tables , the first such initiative exclusively tracking transactions involving India-based companies, are based on value of PE and M&A transactions advised by Financial and Legal Advisory firms. Ambit Corporate Finance advised the $1.9 Billion buyout of Pipeline Infrastructure from Reliance Industries   by Brookfield Asset Management  and the IFC and I Squared Capital-backed   Cube Highways' acquisition of Delhi-Agra Toll Road from Reliance Infrastructu

Inventus, Sixth Sense, Blume & Norwest win Apex'20 Venture Capital Awards

Inventus Capital Partners, Sixth Sense Ventures, Blume Ventures and Norwest Venture Partners were voted the top Venture Capital investors in India during 2019. The Venture Intelligence “Awards for Private Equity Excellence” (APEX) is dedicated to celebrating the best that the Indian Private Equity & Venture Capital industry has to offer. Other 2019 winners in the VC segment included  Axilor Ventures which was voted   the  Accelerator of the Year for the second year running, 3one4 Capital (VC Fund Raise of the Year) and Innoven Capital (Venture Debt firm of the Year). The APEX Awardees are selected based on both Self Nomination by the participating PE-VC firms as well as "crowd sourced" nominations and voting from the Limited Partner, PE-VC and advisory communities. (The main criteria are Exit Track Record, New Fund Raises & Follow-on Funding Rounds for Portfolio Companies).    " It is an honour to be recognised by entrepreneurs and investors as

PE Investments down by 36% in Q1'20

Press Release Private Equity-Venture Capital (PE-VC) firms invested $5.9 Billion (across 164 deals) during the quarter ended March 2020 - 36% lower than the $9.2 Billion (across 249 transactions) during the same period last year, according to data from  Venture Intelligence , a research service focused on private company financials, transactions and their valuations. The Q1'20 investments were also 37% lower compared to the immediate previous quarter (which had witnessed $9.4 Billion being invested across 227 transactions). (Note: These figures include Venture Capital investments, but exclude PE investments in Real Estate). The latest quarter witnessed 14 PE-VC investments worth $100 million or more, down from the 20 such transactions in the same period last year. The largest PE-VC investment announced during Q1’20 was the $567 million takeover of power generation company  RattanIndia Power by Goldman Sachs and Varde Partners. The second largest investment was SoftBank

Jio deals help PE investments climb 12% in H1'20 to $18.8 B

Press Release With Reliance Industries' communications unit Jio Platforms attracting 51% of the investment value, Private Equity-Venture Capital (PE-VC) investments in India rose 12% during the first 6 months of 2020 to $18.8 Billion (across 341 deals), shows data from  Venture Intelligence , a research service focused on private company financials, transactions and their valuations. Investments totaling over $9.5 Billion in Jio by a troop of global private equity firms, following social media giant Facebook's $5.7 Billion mid April investment in the company, helped overall PE-VC investments better the $16.8 Billion (across 503 transactions) invested during the same period in 2019. (Note: These figures include Venture Capital investments, but exclude PE investments in Real Estate).   Jio Platforms' $9.5 Billion Private Equity haul (excluding Facebook’s strategic investment) was led by Middle Eastern and American investors with KKR, Saudi Arabia's Public Invest