Throughout the evolution of the human civilisation, the business fundamentals have remained largely unchanged, while the means to end have been many and have undergone constant evolution. Since ancient times, thriving trade has been all about delivering the quality products and services in demand to customers across geographies in the best possible value and in least possible time. This is what triggered the formation of Indian Silk Route and Spice Route, one via land and the other via sea, wherein traders engaged in high risk to get the treasured spices, silk, and other agricultural produce to other regions of the West as well as to the East.
Driven by global export, the agricultural sector in Indian history was thriving for centuries in pre-colonial times, which profited kingdoms and also trickled down to the farming community to a greater extent. However, during the long colonial era, the agriculture sector and farming community faced tremendous setback – suffering loss of choice, voice, and control over land and its produce. This has had a lasting impact on the Indian economy and on the sector, with after effects being experienced till date.
Fast forward to the present day, the share of gross value added (GVA) of agriculture and allied sectors to Indian economy is over 20%, with over 45% population engaged directly in the sector. The agriculture sector has amongst the lowest monthly income in India, which can hardly substantiate the labour while the dividends or profits of exports hardly reaching the producer.
To understand the same, let’s take India’s spice value chain as case-in-point. Being the world’s largest producer and consumer of spices, India has an annual export value of over USD 3 billion and domestic trade value of over USD 1 billion. Amidst the pandemic crisis, owing to various restrictions to contain the pandemic, the farmers are forced to sell their produce to the nearby or influential and wealthy local aggregators in their village who fix the prices at their will. Neither is the farmer visible, nor his voice is heard in most commodity supply chains.
In addition, food safety regulations across importing countries pose additional compliance challenges for Indian spices traders and producers. The presence of aflatoxins, pesticide residues, and low hygiene standards result in high volume of export rejections, which again affect the profitability and sustainability of entire spices value chain in the country.
The situation essentially necessitates a framework to safeguard farmers’ interests, which facilitates the assurance of right value for the agricultural produce. UNDP’s Accelerator Lab in India has decided to build a fortress to shield the entire value chain and eliminate various challenges that are ailing the sector. The lack of equality, transparency and accountability has adversely affected the profitability, sustainability, and the quality of Indian spice sector.
In order to design a stronghold for the farming community, UNDP Accelerator Lab is working with various stakeholders for building a digital fortress using Blockchain. The objective is to attain an infallible system of recording financial transactions and information made by each authorized stakeholder in the value chain. With each block connected through ‘peer-to-peer nodes’ in the form of a chain creating a ‘digital ledger’ of all transactions, it becomes nearly impossible to manipulate the data, unlike the traditional databases, which are vulnerable to unauthorized, unfair, and illegal modification and deletions.
This unique transparency and immutability fortifies the entire ecosystem and the stakeholders including farmers connected to a blockchain system are equally empowered and have access to all information related to the entire value chain.
Empowered with financial support from the Japan Cabinet Office (JCO) and blockchain expertise from NEC Corporation, UNDP’s Accelerator Lab India started building a prototype blockchain-powered traceability platform for Indian spices, jointly with Spices Board India of the Ministry of Commerce and Industry, Government of India. In phase-1 of the project, data of over 1000 chili and turmeric farmers from Prakasam and Guntur districts of Andhra Pradesh state of India was uploaded to the eSpice Bazaar, the trading portal of Spices Board India and connected to the blockchain system.
The data was successfully tested for immutability and retrievability. Efforts are under way to test the traceability of spices in the field using blockchain to determine how quickly we could identify troubles in the supply chain and fix them. Enabling market access and direct trading between spice farmers and prospective buyers will also be attempted through the “smart contracts” feature of blockchain. The nodes in a blockchain automatically execute a set of actions when predetermined conditions have been met and verified.
These actions could include releasing funds to the farmers by buyers and accepting a consignment of spices when the quality certificates are uploaded. The blockchain is then updated when the transaction is completed. That means the transaction record cannot be changed and only the parties who have been granted permissions can see the results. This effectively eliminates the role of intermediaries in the value chain and enhances opportunities for equitable sharing of profits, especially for small and marginal farmers who didn’t have a voice earlier.
To have a glimpse of UNDP India’s journey towards strengthening the spices value chain in the country, please watch this documentary:
UNDP India’s Blockchain video documentary on Blockchain for Indian Spices – https://www.youtube.com/watch?v=CSTI2p_6QT0
From promoting financial inclusion to improving access to energy and effectiveness of humanitarian aid, the technology at the heart of cryptocurrencies like bitcoin is finding several additional applications for advancing the Sustainable Development Goals (SDGs). UNDP has already demonstrated the feasibility and potential of leveraging blockchain technology in agri-food systems.
For instance, in Ecuador, UNDP supported the development of a blockchain-powered traceability system for premium cocoa which culminated in ‘The Other Bar’—the world’s first blockchain shared value chocolate bar which has improved the livelihoods of Ecuadorean cocoa farmers. In Mongolia, UNDP piloted the use of blockchain for tracking cashmere. This allowed incentivising herders who followed sustainable grazing practices and helped build a market for sustainably sourced cashmere.
The road ahead is more challenging and complex. How do you convince farmers and farmer producer organizations to adopt this new technology? How do you scale such a high-tech innovation across all spice growing regions in India where internet penetration and access to smart phones is still not adequate? What are the incentive structures for exporters and processors to use a blockchain-powered platform where they will have less bargaining power compared to earlier days?
For an initiative like this, technology is the easier part. To implement an end-to-end traceability system, all actors in the value chain—from farmers, aggregators and processors to certification agencies and exporters—would need to participate in the system. Aligning expectations from all actors, taking into account the existing incentive structures for each and building suitable data and decision governance mechanisms would be challenging, to say the least.
Moreover, we would need to ensure inclusivity of the solution—whether in terms of access to the technology or overcoming gender and other societal barriers. A user-centred and iterative design process will be crucial for ensuring that the platform is smoothly and widely adopted. Blockchain holds the potential for fixing many problems related to agricultural value chains. However, to leverage its full potential we need a conducive ecosystem as well as ownership at all levels.
About UNDP Accelerator Labs
UNDP Accelerator Labs is the world’s largest and fastest learning network on sustainable development challenges. The Accelerator Labs are designed to close the gap between the current practices of international development in an accelerated pace of change. They model a new capability to make breakthroughs on the future of development: inequality, decarbonization, the 4th industrial revolution and new forms of governance.
The blog has been contributed by Dr Krishnan S. Raghavan, Rozita Singh, Swetha Kolluri, Sona Pradeep and Mohit Pandey from UNDP Accelerator Lab India.
Disclaimer- The views and opinions are not to be understood as professional advice in any manner or interpreted as policies, objectives, opinions or suggestions of CII. CII does not assume any responsibility and disclaims any liability for any loss, damages, caused due to any reason whatsoever, towards any person (natural or legal) who uses this content.