Tag: Netafim

Adaptation of scientific agriculture practices will drive global demand towards Indian cotton farmer

Hyderabad: Cotton continues to enjoy a pre-eminent and the most favoured fibre status for the textile industry globally as well as in India. It is an immensely important crop for the sustainable livelihood of the Indian cotton farming community. Presently, ~50 to 60 million people depend on cotton cultivation, marketing, processing and exports for their livelihood across India. In the last few years, the cultivation of cotton has been steadily declining globally and the world cotton farming experienced dramatic developments in 2020/21 due to an unprecedented pressure caused by the COVID-19 pandemic.

While India is one of the largest producers of cotton in the world, Persistent adoption of unsustainable agricultural practices for the largely water-intensive crop, extensive use of fertilizers and pesticides as well as genetic modification has posed a significant challenge that needs immediate attention. There is still a gap in the yield level of cotton obtained in India vs. the global average. This means, higher land usage, but a lower income for farmers. Today less than 10 % of cotton is grown in a way that actively protects farmer’s economic growth and the environment. The latest trend suggests that the textile industry is becoming increasingly sensitive in choosing sustainable fibres to drive their textile supply chains since the outbreak of Covid-19. Hence, the buoyancy for a revival of Indian cotton farming is now driven by sustainable cultivation.

The farmers of major cotton-producing countries (India, China, United States, Brazil, and Pakistan) are facing a challenge to compete with their counterparts both in terms of per hectare yield as well as produce. Adverse weather, an infestation of pink bollworm in cotton crop, lower prices, higher labour cost and policy uncertainty all contributed to the sharp decline. Additionally, the decreased synthetic fibre prices driven by substantially lower oil prices placed huge competitive pressure on world cotton markets. Normally, India produces up to ~ 3.5 crore bales of cotton, whereas China produces ~3.25, USA produces 2.5 crore bales followed by Brazil and Pakistan which produces ~1.5 and 0.65 crore bales respectively. Although the US and Brazil are major exporters of cotton, the production in both countries has been declining for two consecutive years. Resulting in inefficiency to support the global import demand and the high price of cotton.

In terms of cotton consumption, Asian countries dominate the global market. Cotton consumption in China is around 4.75 to 5 crore bales which are higher than other countries of the globe. Whereas Pakistan’s cotton consumption is 1.35 crore bales. In recent years, strong growth of the spinning and textile industry has spurred the consumption of cotton in Bangladesh and Viet Nam. Bangladesh requires 90 lakhs to 1 crore bales of cotton and Vietnam needs 75 to 80 lakh bales. Due to their proximity to India, all these Asian countries import a substantial quantity of cotton from India.

The global acreage for cotton has been constant since the last few years. As the world economy recovers from the severe 2020 downturn, global cotton consumption is expected to grow by 4.1 percent in the 2021-22 season, substantially above the long-term average rate of 1.7 percent, according to the US department of agriculture (USDA). World cotton production is projected to grow 1.5% p.a. to reach almost 30 Mt in 2029. This growth will come from an expansion of the cotton area (0.5% p.a.) as well as growth in average global yields (1% p.a.), suggest OECD-FAO Agricultural Outlook 2020-2029.

India is one of the largest producers of cotton in the world accounting for about 26% of the world cotton production. The country has the largest area under cotton cultivation which is about 41% of the world area under cotton cultivation between 12.5 million hectares to 13.0 million hectares. The crop is mainly produced in Gujarat, Maharashtra, Andhra Pradesh, Haryana, Punjab, Madhya Pradesh, Karnataka, Rajasthan, Tamil Nadu, Odisha. Modernization of India’s cotton production—including the adoption of BT varieties—propelled India to the top among cotton-producing countries. Government policies such as giving greater thrusts to Research and Development in cotton encouraging the use of quality seeds and pesticides by providing subsidies for such inputs and price support measures have also contributed to changing the cotton scenario in India.

Even with the impressive statistics of Indian cotton farming, the productivity per hectare has not reached its full potential over the years. Persistent adoption of unsustainable agricultural practices for the largely water-intensive crop, extensive use of fertilizers and pesticides as well as genetic modification has posed a significant challenge that needs immediate attention. There is still a gap in the yield level of cotton obtained in India vs. the global average. This means, higher land usage, but a lower income for farmers.

Speaking about the sustainable practices for cotton farming in India, C K Patel, AGM – Agronomy & Marketing, Netafim India said, “To turn around the prevailing scenario, it is imperative to make farmers aware of healthier cotton practices and adaptation of scientific farming techniques. Promotion of environmentally sustainable practices for the mass-produced cash crop along with the scientific and egalitarian application of water, effective use of fertilizers and pesticides will help the Indian farmers to achieve sustainable growth in cotton cultivation. Studies have proved that the adoption of suitable technology such as micro-irrigation in cotton farming helps in reducing input cost and increases income by increasing the number of crops they grow. The benefits include an increase in the water use efficiency up to 80-90% owing to reduced water requirement, about 20% less consumption of electricity per hectare and up to 70- 80% increase in fertilizer use efficiency which translates into significant cost savings. Controlled application of water and fertilizer has resulted in increasing the productivity of the crops up to 50%. All these boost farmer income levels by more than Normal”.

Besides the economic benefits, the technology boasts of a slew of social and environmental advantages as well. Since Indian farmers are receptive to take up any technology that brings certainty to their life and leads to an increase in income level, drip irrigation in cotton farming needs extensive propagation. The backbone of the success of micro-irrigation implementation in cotton cultivation remains in the awareness generation campaigns and effective training amongst farmers.

Netafim-backed NAFA raises USD 50 mn via Equity and ECB

Hyderabad, April 26, 2021: Netafim Agricultural Financing Agency Pvt. Ltd. (NAFA), an agri-focused NBFC and a subsidiary of Netafim Singapore, has raised USD 40 million via external commercial borrowing (ECB) from the Phoenix Group and Cogito Capital, both Israel based investors. The raised funds will be utilized effectively for business expansion, enhanced offerings, and to expand horizons in the agri-rural domain. The company would successfully improve its margins as it intends to service the high-cost old debt and bring down the overall cost of funds.

The deal also marks fresh equity infusion into NAFA, which recently raised USD 9.4 million of Tier I Capital from Netafim Singapore and offered exit to the initial equity partners Atmaram Properties & Granite Hill Fund as they had reached their investment horizon. This is the maiden investment for both Phoenix Group and Cogito Capital in India and NAFA, through acquiring stake in Netafim Singapore.

Since acquiring NBFC license from RBI in 2013, NAFA has established its presence in 08 states and disbursed total loans worth Rs. 1000+ crores to 10,000+ customers. Among these, more than 60% of farmers are small farmers & marginal farmers. The company now aspires to expand this network and diversify to allied activities for customers’ long-term credit needs.

Lauri A. Hanover, CFO, Netafim
Lauri A. Hanover, CFO, Netafim

While commenting on the development Lauri A. Hanover, CFO, Netafim said, “In the aftermath of Covid, India is gearing up for self-reliance with emphasis on the agri-rural economy and its rapid modernization. While the sector is still highly fragmented, the demand for credit in agriculture is largely unmet through formal financial institutions. Being the innovator of drip irrigation and the world leader in precision irrigation serving customers for more than 57 years across the globe, the equity infusion in NAFA is aligned with our core of supporting customers in adopting precision irrigation and automation solutions in agriculture. This equity infusion will help NAFA strengthen its capital adequacy and further expand its market presence. We are delighted to partner with The Phoenix Group and Cogito Capital in their maiden investment in India and NAFA.”

 

Mr. Prabhat Chaturvedi, CEO, Netafim Agricultural Financing Agency Pvt. Ltd. (NAFA)
Mr. Prabhat Chaturvedi, CEO, Netafim Agricultural Financing Agency Pvt. Ltd. (NAFA)

Prabhat Chaturvedi, CEO, Netafim Agricultural Financing Agency Pvt. Ltd. elaborated on the company’s plans and said, “Indian agriculture, in general, is characterized by low and uncertain returns as they are more prone to natural calamities and varied risks, resulting in constant demand for agri-financing support. The advent of intensive and climate-resilient agricultural technologies has further amplified the need for good financing schemes. Despite the presence of multiple financial mediums, there aren’t enough credit products catering to the niche demands of the farmers, leading to a huge credit gap. In India, there is a need for diversified credit schemes, along with adequate handholding, to provide financial guidance to farmers on investing in agriculture and allied activities.

NAFA has been serving this sector efficiently during the past decade, understanding their needs and providing them with the right financial assistance. With this investment, NAFA will further enhance its credit lending portfolio and expand horizons within the agri-rural domain beyond micro-irrigation. We are bullish about our growth and are excited to cater to the capital needs of the agriculture and allied sector. The said capital would help us strengthen our market position and reach the communities in a much broader way.”

Guy Zukin – Managing Partner, Cogito Capital said, “Cogito is excited to be teaming up with Netafim (the global irrigation leader and pioneer), and Phoenix Insurance (one of Israel’s leading insurance companies), in providing growth capital to NAFA. We are looking forward to co-operating with our partners in supporting NAFA’s continued journey in realizing the potential in the Indian agricultural NBFC market. This investment matches Cogito’s strategy of making investments alongside strong partners, focusing on high growth and adjusted risk opportunities.”

Ofer Aviran, Head of Direct and Infrastructure Investments of Phoenix Group commented, “We are very proud to partner with Netafim and Cogito in investing in NAFA. Netafim’s prominent presence in emerging markets, and their professionalism in such an important field of agricultural infrastructure development and food production constitute fertile ground for continued cooperation for the benefit of all parties. I would like to thank Lauri Hanover, Netafim’s CFO, for without her vision, this complex investment would not have come to fruition”.