From Smog to Soil: How Carbon Capital Is Reshaping the Fate of India’s Smallholder Farmers 

In a landmark deal that signals a shift in climate finance, the Kering-backed investment firm Mirova is injecting $30.5 million into Indian startup Varaha, not for equity, but for a share of future carbon credits, funding a regenerative agriculture program that tackles the root causes of North India’s farming crisis.

By providing farmers with machinery and incentives to adopt practices like direct seeding of rice and in-situ crop residue management, the project aims to eliminate stubble burning—a major source of air pollution—while simultaneously sequestering carbon, drastically reducing water use, and improving soil health. This model creates a new income stream for hundreds of thousands of smallholders by monetizing their stewardship of the land, positioning regenerative agriculture not just as an environmental solution, but as a viable economic pathway for rural communities.

From Smog to Soil: How Carbon Capital Is Reshaping the Fate of India’s Smallholder Farmers 

Introduction: A New Kind of Harvest 

In the vast, fertile plains of Punjab and Haryana—India’s breadbasket—a quiet revolution is taking root. For decades, the story here has been one of intensifying agricultural crisis: depleted soils, plummeting water tables, and toxic winter air choked by the smoke of burning crop stubble. The very practices that fueled the Green Revolution are now threatening its legacy. 

But a new narrative is emerging, one where farmers are paid not just for the food they grow, but for the carbon they trap and the environmental catastrophe they help avert. This shift is being catalyzed by a landmark $30.5 million investment from French firm Mirova into Indian climate-tech startup Varaha. This isn’t a typical venture capital deal; it’s a sophisticated bet on soil as the world’s next great carbon sink, and it could chart a new course for sustainable agriculture in the Global South. 

The Soil Crisis: The Unseen Foundation of Our Food System 

To understand the significance of Varaha’s work, one must first grasp the scale of the soil crisis. Conventional farming, with its intensive tilling, monocropping, and heavy chemical use, has severely degraded the world’s topsoil. The United Nations warns that the world may have as little as 60 years of topsoil left if current practices continue. 

In India, the problem is acute. The rice-wheat cropping system, predominant in the north, is particularly destructive. 

• Water Guzzling: Transplanting rice seedlings into flooded paddies consumes an astronomical amount of water, depleting aquifers at an alarming rate. 

• Stubble Burning: After the rice harvest, the leftover straw is often burned to quickly clear the field for wheat planting. This practice releases massive clouds of particulate matter, contributing to some of the world’s worst urban air pollution in cities like Delhi. 

• Soil Carbon Loss: Repeated tilling and the absence of organic matter expose soil to air, oxidizing its carbon and releasing it into the atmosphere as CO2. The soil becomes inert, less fertile, and less resilient to droughts and floods. 

This creates a vicious cycle: farmers must use more chemical fertilizers and pump more water to maintain yields on increasingly lifeless land, raising their costs and deepening their debt. 

The Varaha Model: More Than Just Carbon Credits 

Varaha, founded in 2022, enters this complex landscape not as a charity, but as a climate-tech architect. Its model is a sophisticated interplay of agronomy, technology, and finance. 

1. The Agronomic Intervention: Back to the Future Farming

Varaha’s “Kheti” project focuses on two key levers of change: 

• Direct Seeding of Rice (DSR): Instead of flooding fields and transplanting seedlings, farmers use a seed drill to plant rice directly into the soil. This simple switch can reduce water usage by 30-35% and significantly cut methane emissions—a potent greenhouse gas produced by flooded paddies. 

• In-Situ Crop Residue Management: Instead of burning rice straw, farmers use machines like “Happy Seeders” or “Super Seeders” that cut the residue, mix it into the soil, and plant the next crop (wheat) in a single pass. This not only eliminates air pollution but also returns precious organic carbon and nutrients to the earth, rebuilding soil health. 

These aren’t experimental, futuristic technologies. They are practical, proven practices. The barrier has always been economic and logistical. This is where Varaha’s model becomes ingenious. 

2. The Financial Engine: Carbon as a Cash Crop

Mirova’s $30.5 million investment is not for equity; it’s an advance payment for future carbon credits. This structure is crucial. It provides Varaha with the upfront capital needed to overcome the biggest hurdles: 

• Machinery Procurement: As Varaha’s CEO Madhur Jain pointed out, there simply aren’t enough direct seeders or happy seeders in the market to meet the demand. Mirova’s capital allows Varaha to work with manufacturers to procure and distribute thousands of these machines to its network of 48 local partners. 

• Farmer Incentives: Adopting new practices is risky for a smallholder farmer living on the edge. The promise of a verified carbon credit provides a tangible, additional revenue stream, de-risking the transition. 

The revenue from the sale of credits is shared directly with the farmers, making them active participants in the carbon economy. For the first time, their stewardship of the land has a direct, monetizable value beyond the food commodity market. 

3. The Tech Backbone: Verification at Scale

Trust is the currency of the carbon market. Varaha’s proprietary software platform is what allows it to scale credibility. It monitors projects in real-time, using a combination of remote sensing, soil sampling, and farmer-reported data to accurately measure and verify: 

• Carbon Sequestration: How much CO2 is being removed from the atmosphere and stored in the soil? 

• Emission Reductions: How much methane and CO2 from burning are being avoided? 

• Co-benefits: What are the impacts on water usage, biodiversity, and crop yields? 

This data is then used to generate credits verified under Verra’s VM0042 methodology, the leading standard for soil organic carbon. While Verra has faced scrutiny in other areas (like forestry), its soil carbon methodology is considered robust and scientifically advanced. 

The Ripple Effects: Beyond Carbon 

The true brilliance of this model lies in its multi-solving capacity. The carbon credit is the catalyst, but the outcomes are a cascade of positive externalities: 

• Improved Soil Health: Healthier soil retains more water and nutrients, leading to reduced fertilizer costs and increased resilience to climate shocks. 

• Water Security: DSR alone could save billions of liters of water, helping to recharge the critically over-exploited aquifers of North India. 

• Cleaner Air: Eliminating stubble burning would transform the air quality for millions of people, providing a massive public health benefit. 

• Economic Empowerment: Additional income from carbon credits provides farmers with a crucial financial buffer, improving livelihoods and reducing agrarian distress. 

• Gender Inclusion: Varaha’s planned programs for women farmers acknowledge their critical, yet often uncredited, role in agriculture, potentially unlocking significant social and economic benefits. 

A Template for the Future? 

The Varaha-Mirova deal is a powerful case study in “blended finance.” Corporate capital from luxury giants like Kering and tech leaders like Google (which has a separate 100,000-ton biochar deal with Varaha) is being channeled to the grassroots, addressing supply chain emissions at their origin. 

This model is replicable. The principles of regenerative agriculture can be adapted across the world’s major agricultural zones. What Varaha is proving is that with the right combination of agronomic science, verifiable technology, and innovative finance, we can realign economic incentives with ecological necessity. 

The challenge of feeding a growing population on a warming planet will not be solved by a single silver bullet. It will be solved by a million small interventions that make the life of a single farmer more sustainable, profitable, and resilient. By turning the soil beneath their feet into a valuable asset, Varaha and its backers are not just investing in carbon—they are investing in the very future of farming itself. The harvest they seek is a stable climate, thriving rural communities, and a blueprint for a restorative relationship with the land.