Dutch companies develop special solutions for the Indian agricultural sector

Agriculture in India has faced major challenges for years, but climate change is only compounding the problems for Indian farmers. Can European technologies provide a solution or are they simply too expensive for the Indian agricultural sector? Dutch agricultural technology companies Omnivent and Incotec explain how they are advancing the Indian agricultural sector and making money in India.

Damage caused by climate change

India's agricultural sector is experiencing increasingly widespread adverse weather extremes such as prolonged drought, flooding and salinization of farmland. Late last year, heavy rains destroyed over 800,000 acres of agricultural and horticultural crops in the southern states of Tamil Nadu and Andhra Pradesh, while in the northern state of Kashmir, apple farmers saw their crops fail for the third year in a row due to early snowfall. Consequently, if global climate change continues at the same rate, crop yields in India are expected to drop by 30 percent.

Machinery, refrigeration, logistics & credits

Indian farmers also face a variety of systemic problems such as a lack of sophisticated machinery, difficulties in obtaining credit and logistical problems in marketing their produce. On average, 30-40% of the total crop is lost due to lack of cold storage facilities and/or refrigerated transport, which leads to lower income for the farmers. The Indian agricultural sector is in dire need of affordable solutions to all these problems.

Dutch companies develop special solutions for the Indian agricultural sector

Indian agriculture therefore offers great opportunities for European companies. There is a demand for knowledge that is abundant in Europe. The global specialist in agricultural storage technology, the Dutch company Omnivent, has therefore been active in the country since 2007.. The company began by giving workshops to arable farmers and other key players in the supply chain. "We talked to farmers about ways we could get the agricultural product to the end of storage in a good way," says Errol van Groenewoud, Omnivent's managing director. 

"This was not only useful for them, but also for our company. We learned a lot about the resources they had at their disposal and the farming methods used in India at meetings like this," says van Groenewoud. "We came to the conclusion that our European ventilation and storage products did not match the farmers' needs and that, if you want to capitalise on the growing demand for smart solutions, you have to develop low-threshold and efficient technology at minimal extra cost. We have therefore taken the simple fans that we sold in the Netherlands in the 60s and 70s for drying flower bulbs and adapted them to provide a good and affordable solution for Indian farmers facing high temperatures."

Developing products for India

Also The innovative seed enhancer Incotec soon after entering the market in India, came to the conclusion that while their seed enhancement technologies offered a great solution to the problems of local farmers, their prices were far too high for India. "To optimize our products for Indian crops and cultivation techniques, and especially to keep the price accessible, we decided to develop a product that was cheap for us to produce and that Indian farmers could apply to their seeds themselves," explains Erik-Jan Bartels, managing director of Incotec.

Market leader in India

Incotec is now the market leader in India in seed enhancement and sees a growing need among farmers for new technologies that can make farming methods more robust against climate change. "At the same time, a large proportion of Indian farmers still do not have the means to invest in innovative solutions, no matter how simple and cheap," says Bartels. "As a Dutch company, this should not stop you from taking the step to India. Indian agriculture must adapt to the major weather changes taking place there and although it will take at least a few more years before there is a real change, now is the time for companies to become active in India. India is a country where you have to invest time and energy before you can reap the benefits."

Take your time, it is worth it

"Doing business in India requires building good relationships with your customers," adds van Groenewoude. "So you have to take the time and have a local presence to be able to make that connection. Building a dedicated team in India that can fully focus on this is essential. If you stay at a distance and thus maintain a cold, businesslike relationship with your customers, you will never be successful in business in this country." 

Are you curious about the opportunities the Indian agricultural sector offers for innovative, European companies? Our sector analysis provides a comprehensive overview of key market statistics and growth prospects.

Did you know that India is the fastest growing agricultural machinery market in the world? 

Indian agriculture is need of European knowledge and technology

India is the second largest food producer in the world, but roughly 35% of that production is lost due to a lack of knowledge and technology. In Europe, both are abundantly available, so what are we waiting for?

Huge mountain of food

While the Indian IT industry can compete with the rest of the world, Indian agriculture still lags miles behind modern production standards. Despite the lack of knowledge and technology, India produces a huge amount of food in the traditional way. Only China produces more. More than 50% of Indians, about 700 million people, work in agriculture. The majority are farmers with a small plot of land - there is hardly any large-scale agriculture. 

More than rice

The main agricultural products in India are rice, cotton, ginger, cardamom and wheat. Thanks to the enormous variety of climate zones - subtropical, tropical, temperate, dry - there are ample opportunities to grow all kinds of fruit and vegetables, both for the Indian market and for export. In western India, for example, grapes are grown on a large scale, which can be found in supermarkets in Europe. In the Himalayas many apples are grown, mainly for the internal market. India also offers cultivation areas with good soil quality. 

Temperate climate

The Deccan Plateau - the large region linking Pune, Nashik, Hyderabad, Bangalore, Coimbatore and Kholapur - offers a large agricultural area with a temperate climate. The Deccan Plateau has a fairly consistent climate with moderate temperatures. The minimum night temperature is 16°C in winter and the normal maximum temperature is 30°C, with the exception of April and May when night temperatures are a minimum of 22-23°C and a maximum of 35-38°C. The climate in the north of the country, in the foothills of the Himalayas, is somewhat seasonal. There are several microclimates here.

Potatoes

North Maharashtra, Gujarat, Madhya Pradesh, Upper Pradesh, Orissa and Bihar, all lowlands are very hot from March to September with monsoon from mid-June to late August. Rajasthan has mainly a desert climate with high temperatures from March to October; the north has relatively cold winters (above 0°C). Punjab has hot summers and cold winters. Potato cultivation (Indians are not only rice eaters but also very keen potato eaters) takes place here from November to May. Kodaikanal and Ooty (Tamil Nadu) offer a favourable climate for coffee, tea, vegetable and flower growers. Kerala in the east has the Western Ghats mountain range, which connects to the Kodaikanal mountain range, centred on Munnar. Here, tea is mainly grown.

"Western" vegetables

Himachal Pradesh in the north of the country offers a similar climate. Farmers in this region want to make the most of the climatic and soil conditions and grow all kinds of "Western" vegetables such as asparagus, broccoli, lettuce, coloured peppers, celery, Brussels sprouts, European carrot, parsley, leeks and snow peas. A considerable area in the state already grows vegetables of European origin. However, the northern states are located in hilly areas, which often makes logistics a challenge. Tamil Nadu and Andhra Pradesh consist mainly of tropical dry areas, at about 300 metres above sea level. There is plenty of cultivation here from June to September, after which the rainfall is often too erratic. The main production includes rice, bananas, coconut, ginger and cardamom. Kerala also has a large humid coastal area where sufficient water is available.

The chart below lists the different vegetables and where they are grown in India:

Product	Annual output ('000 metric tonnes)	Region	Advantages of the region
Tomatoes	21,200 (2020-2021)	Andhra Pradesh, Madhya Pradesh, Karnataka, Gujarat, Odisha, West Bengal, Chhattisgarh, Maharashtra, Bihar, Haryana, Uttar Pradesh, Telangana and Tamil Nadu.	Suitable (loam) soil, correct PH value, government support.
Cauliflower	9,174 (2018-2019)	Uttar Pradesh, Karnataka, West Bengal, Punjab, Bihar, the northern Himalayas and in the Nilgiri Hills in the south.	Cauliflower usually grows in the cold season (18 to 20°C). Good soil fertility.
Broccoli	8.6 (2017)	Maharashtra, Tapi district	Suitable loamy soils, correct PH values, temperatures between 18°C and 23°C.
Cucumber	1,100 (2019)	Haryana, Karnataka, Madhya Pradesh, Tamil Nadu, Andhra Pradesh, Telangana, Assam, Uttar Pradesh, Bihar, Jammu and Kashmir.	Good soil, suitable climate (moderate to warm).
Kool	9,207 (2019)	Uttar Pradesh, Orissa, Bihar, Assam, West Bengal, Maharashtra and Karnataka.	Suitable climate (cool and humid) In winter around Nashik (Maharashtra) and Ooty (Tamil Nadu) and Kerala.

Traditional cultivation

Cultivation in Inda is often still very traditional. There are hardly any glass greenhouses: generally, greenhouse foil is used to protect crops. Nevertheless, India has made progress with regard to cultivation aspects and the use of foil, shade and net greenhouses. The supply industry has also developed and equipment and facilities (greenhouses and other requirements for cultivation) are often manufactured in India itself. However, income from production is modest and growers do not make large investments in cultivation production. Nevertheless, there is a growing interest in technology, such as fertigation (fertilisation and irrigation), automation, substrate growth, semi-automatic climate control, modern cultivation techniques, data recording etc.

Agtech

According to researchers from the Tamil Nadu Agriculture University, India throws away billions of dollars worth of fresh fruit and vegetables every year - about 35 to 40 per cent of its total fruit and vegetable production. This is due to lack of proper harvesting methods, no or inadequate transport, poor or no cold storage facilities and/or refrigerated transport. Although India is one of the largest producers of fruits and vegetables, its export potential is not being realised. Agtech aimed at rationalising supply chains and improving agricultural efficiency in India has an estimated potential of US$ 170 billion.

Quality

Thanks to the growing focus on healthy lifestyles, the demand for high-quality products is increasing in India. According to a major market study, the Indian organic market will grow from USD 177 million in 2020 to a market worth USD 553 million in 2026. Officially, India has the largest number of farmers active in organic farming (835 thousand), but it accounts for less than 1 per cent of global organic production (worth around EUR 80 billion). In terms of total area under organic cultivation, India ranks 9th with 1.49 million hectares. However, the organic sector in India is unregulated and not transparent. 

Online food retail

The demand for high-quality and organic products is fuelled by the young population, their growing disposable income and the trend to eat out. The restaurant industry is booming and interest in foreign cuisines and products is huge. In addition, during the pandemic, online food retail has grown exponentially in India. Shopping or ordering food through online supermarkets or delivery services has become established in India at a rapid pace. As a result, the online grocery market grew by 80 per cent in 2020 alone and the Indian meal delivery market will continue to grow by around 30 per cent annually to a value of USD 8 billion by 2022, according to a study by the Boston Consultancy Group and Google.

Workshop: Market entry in India

Does your company have those innovative fertigation or automation solutions, but are you unsure about your first step into the Indian market? IndiaConnected has developed a high quality workshop, where during a two-hour session, we will answer your most pressing questions regarding a smart market entry in India.

• Get a better understanding of what is involved in your market entry in India.

• Receive valuable feedback on your current India strategy from independent experts.

• Expertise in every field: sales, manufacturing, legal, tax, finance, supply chain, recruitment, etc.

In the workshop, our local experts with knowledge of your specific sector will work with you to explore your issue and formulate possible answers and strategies. Afterwards, you will receive a report.

New budget plans for India favour foreign investors

India managed to attract a whopping $81.7 billion in foreign direct investment, or FDI, last year, the highest amount the country has ever seen. But India still needs much more investment, and so the government has an ambitious budget for the coming year, focusing on a major upgrade of India's infrastructure, the transition to a digital economy and clean energy, and making it easier and more profitable for foreign investors to do business. 

Key proposals

These are some of the key proposals in the new budget that will affect how foreign investors and companies do business in India:

Taxes

1. No change in tax rates for companies

The income tax rates (including surcharge and cess) for companies (domestic and foreign), corporations and limited liability companies remain unchanged, including the rates for the Minimum Alternate Tax (MAT) and the Alternate Minimum Tax (AMT).

2. Repeal of favourable tax rate on dividends received from foreign subsidiaries

Currently, dividends received by Indian companies from their investments in foreign companies are taxable at a reduced rate of 15%. Moreover, under certain conditions, these companies can avail of a special tax deduction if the foreign dividend received is further distributed. Under the new budget plans, this favourable tax rate of 15% will be abolished and the foreign dividend received will be taxed at the ordinary corporate tax rates. The deduction for further distributions remains.

3. Tax benefits for producers and start-ups

Newly established manufacturing companies and factories can benefit from the preferential tax rate of 15 per cent (plus surcharge and cess) for one more year. The scheme will be extended until 31 March 2024. Start-ups that qualify for the so-called tax holiday benefits can also avail of them for one more year, until March 31, 2023.

4. Submission of updated tax returns 

Previously, no changes could be made to a submitted income tax return, but with the new budget, this changes. To encourage voluntary tax compliance and filing of returns, taxpayers can file an updated tax return within three years of the end of the tax year, provided they pay additional taxes on undisclosed income. However, an updated tax return cannot be filed if it leads to a reduction in tax liability, a tax refund or an increase in the refund. 

5. Changes in withholding tax

Under the Indian tax code, the value of any benefit or fringe benefit received by a taxpayer in the course of his business is taxable as business income. The Budget 2022, therefore, proposes the imposition of a 10% withholding tax on such benefits or favours, requiring the person paying or providing such benefits or favours to a resident of India to withhold such taxes.

6. International Financial Services Centre (IFSC)

In recent years, India has introduced various tax breaks for entities based in the IFSC to make it a global hub of the financial services industry. A tax exemption is now announced for non-resident income from offshore derivatives or over-the-counter derivatives issued by an offshore bank, income from royalties, and income from portfolio management services provided by the IFSC, subject to certain conditions.

7. Deadline for submitting the monthly GST declaration

The deadline for filing monthly GST returns by foreign companies is brought forward to the 13th of the month (previously it was the 20th).

8. Input tax credit (ITC)

Budget 2022 imposes additional restrictions on the application of the ITC under the GST laws, making taxpayers even more compliant. 

The Indian tax system can become a real headache without the right local help. IndiaConnected has therefore put together this guide, which provides insight into the complex tax and financial system every CFO in India has to deal with, and which we can support you with at all times. From obtaining all necessary documents for your first export from the Netherlands to taking care of the entire back-office of your Indian entity, so you can always fully focus on your activities in India.

Export

1. Less benefit on import duties and more focus on Make-in-India

The new budget announces a phased review and partial elimination of nearly 350 duty exemptions to encourage companies to set up a manufacturing plant in India.

2. Special Economic Zones (SEZ)

To promote exports from India, the Special Economic Zones Act is being replaced by a new legislation that will bring the states together as partners in 'Development of Enterprise and Service Hubs'. The aim of these hubs is to improve cooperation between all major existing and new SEZs, make the best use of available infrastructure and increase export competitiveness.

The number of SEZs in India will also increase substantially in the coming year, with almost 40% of the approved SEZs yet to become operational.

Interesting opportunities for international companies in India

Defence
In the new budget, 25% of the 66 billion dollar defence budget will be made available for R&D in this sector by companies, start-ups and academia, providing opportunities to international players with innovative solutions. In addition, this investment is expected to create exciting opportunities for manufacturers in this sector based in India. In 2020, India changed its regulations for FDI in the defence sector and now allows investments of up to 74 per cent. 

Healthcare
The Indian government is expanding the favourable tax regime for manufacturers in this sector, with the aim of stimulating, among other things, the production of pharmaceuticals and medical devices. It has also identified the pharmaceutical sector as one of the key growth sectors and is supporting the sector with favourable policy measures. However, in the budget it leaves out the R&D segment of this sector, which is a missed opportunity. 100 per cent FDI is allowed in almost all segments of the healthcare sector. 

Digitalisation and technology
India's new budget shows the ambition to move towards a digital society and economy. As a result, almost every sector (digital currency, infrastructure focuses on EVs, e-passport, etc) will get a digital boost, creating significant direct and indirect opportunities for start-ups and companies, such as software, hardware and service companies. In the technology sector, 100 per cent FDI is allowed.

The Indian government also aims to boost the country's data centres and energy storage systems, charging infrastructure and battery systems. It wants to build a world-class data centre ecosystem by attracting investments from domestic and international players, thereby boosting this sector.

Agriculture
One of the sectors where the government is trying to make a big push for development is agriculture. A new fund has been announced that will support start-ups that lease agricultural machinery to farmers and provide companies with innovative, digital solutions to make their operations more efficient. Innovative solutions are also being looked at: such as using drones to help farmers with land registration. In the agricultural sector, 100 per cent FDI is allowed.

Are you curious about the specific opportunities that exist in the Indian market for your company or sector? Our local experts are ready to answer your questions.