In this article, we’ll talk about the Indian agri-tech startup Apna Godam and the various challenges they encountered along the way. We’ll see how they successfully tackled each issue, showcasing their innovative solutions.
What is Apna Godam?
Apna Godam is an agritech startup. It was founded in 2016 by Mr. Sanjay Agarwal in Jaipur, Rajasthan. Their aim is to support farmers through innovative agritechnology solutions. The agritech startup offers essential warehousing facilities, online commodity financing, and Online spot trading of commodities to help farmers access the resources they need to improve their marketing potential.
The Journey Begins: The Story of Apna Godam
Their journey started when one day, while working, he learned that the government is offering subsidies to open warehouses for agricultural commodities under the Gramin Bhandaran Yojana.
Upon in-depth research, he found that many farmers struggle due to a lack of nearby warehousing options for their agricultural produce. This often forces them to sell their produce right after harvest, leading to lower prices since they cannot wait for better market conditions to increase their profits.
This gap in the market led Agarwal to consider a new and lucrative opportunity. He realized that to make his idea a reality, he needed to leave his well-paying job at HDFC Bank. With his qualifications as a Chartered Accountant and Company Secretary, along with 11 years of finance experience, he founded Apna Godam in 2016 to solve the warehousing problems faced by farmers.
He needed properties to set up warehouses, but purchasing land and investing in construction was a capital-intensive and time-consuming task. Instead of investing money in these options, Agarwal began identifying closed factories, old sheds, and abandoned buildings near production areas and transformed them into agricultural terminals. These locations provide farmers with secure storage for their commodities.
When he began looking for abandoned properties, Agarwal placed an ad in the newspaper. He received approximately 6,000 calls from individuals interested in renting their spaces to be converted into Apna Godam warehouses. This overwhelming response marked a successful beginning for Apna Godam.
Idea Behind Apna Godam Finance Service
Everything was going well until they began to face losses, which forced them to close some warehouses. Upon analyzing the situation, they discovered that farmers used warehouses not only for storage but also to secure loans by pledging their commodities. Banks were hesitant to lend to farmers in deeper geographies with small warehouses and limited stock. Since the loan amounts were small, banks preferred to give a single loan of 1 crore rupees to one person rather than ten loans of 10 lakh rupees each, as managing multiple smaller loans was more complicated. This is why banks were not eager to lend to farmers from less accessible regions.
To address this issue, Agarwal decided to start a fintech company focused on providing loans to farmers using Apna Godam warehouses. In 2019, he launched Singodwala Fintech Pvt. Ltd. under the brand name Apna Godam Finance. This platform is a digital commodity finance service that allows farmers to apply for loans through an app by entering some basic information. Through this app, farmers can obtain loans as small as 10,000 rupees.
With this new service, storing commodities in Apna Godam warehouses became much easier for farmers. As a result, Apna Godam recovered and began to grow significantly after addressing the financing challenges faced by farmers.
From Financial Solutions to Spot Trading Platform
Later, Agarwal recognized the problems with APMCs. He realized that the number of APMCs in India is much lower than the number of farmers depending on them for trading. In India, the physical trading of agricultural commodities is regulated by state governments through the Agricultural Produce Market Committee (APMC) Act. Buyers and sellers must meet at market yards, which are overseen by committees meant to help farmers find competitive prices. Once an area is designated as part of a market committee, then all wholesale trading takes place at that specific yard.
Agarwal acknowledged that this system has several flaws. Many market committees fail to create a competitive environment for farmers or to develop the necessary infrastructure for smooth trading. Farmers often have to travel long distances to reach market yards and may wait for days to sell their produce. There is a lack of proper grading systems, and farmers are not compensated for higher quality goods. Weighing is done manually, leading to underweight produce, and farmers frequently return to collect their payments. Additionally, there is no standardization in quality and pricing across market yards, and different state governments impose various taxes. As a result, spot prices for the same commodity can vary significantly from one market to another.
Small farmers are especially affected by the challenges posed by APMCs. They often rely on middlemen to sell their produce, resulting in lower profits and exploitation. This situation is unfair to small farmers, who often face financial losses as a consequence. For generations, Agricultural Produce Market Committees have been at the center of India’s agricultural trade. However, in recent years, spot trading platforms operated by private entities have emerged, providing new trading options for farmers and consumers.
To address these issues, Agarwal registered Apna Godam for a license to operate a spot trading platform in Rajasthan, which was the first state to issue agriculture spot trading licenses. And finally, on March 20, 2020, he marked the beginning of Apna Godam’s transformation from a warehousing and fintech company to a spot trading company. Now Apna Godam facilitates seamless online spot trading between farmers, traders, and buyers, which help with better price discovery and smoother marketing of agricultural commodities. When market prices go up, farmers can sell their stored goods to mill owners or traders on an “as is where is” basis through the Apna Godam portal, ensuring they receive fair payment for their produce. By providing these comprehensive services, Apna Godam plays an important role in supporting farmers and improving the agricultural landscape in India.
Tackling Logistics Challenges
During the pandemic in 2020, many farmers reached out to Agarwal expressing their desire to use the Apna Godam warehousing facility. However, they faced difficulties finding transportation to move their commodities to the warehouses. Agarwal recognized that farmers were struggling with transportation due to pandemic regulations. To solve this issue, he leased trucks and launched logistics services for both farmers and buyers. This service facilitated the transportation of agricultural products from farmers to warehouses and from warehouses to buyers throughout the pandemic. Government regulations allowed only vehicles carrying agricultural commodities to operate during this time to prevent hazardous situations. Agarwal’s solution proved effective, and the logistics services by Apna Godam continued even after the pandemic. Since then, farmers no longer have to worry about moving their produce after securing storage. Apna Godam ensures that their products are safely transported to buyers.
Summary
Over time, Apna Godam identified the challenges faced by farmers and worked to address them. This resulted in new services like logistics, financing, warehousing, and a private online spot trading platform. Apna Godam provides several benefits that enhance the trading experience for farmers and buyers. With warehouses nearby, sellers enjoy lower transportation costs and the convenience of online management for their stored commodities.
To ensure product safety, Apna Godam offers proper fumigation and spraying. Millers also willingly buy commodities directly from the terminals, and some of the warehouses also provide grading and sorting for better quality assurance. The company’s strategically placed terminals near farms provide cost-effective storage solutions, along with a quick paperless loan process and online CCTV access for customers to monitor their goods. Apna Godam is consistently improving its services.
Since launching in 2016, Apna Godam has continuously improved its services and grown by 500%. The company has added facilities to ensure that clients can operate smoothly in agricultural commodities without any worries.
