SCOPE OF CONTRACT FARMING WITH REFERENCE TO FARMERS OF INDIA

Abstract

Starting with the abolition of zamindari system and introduction of cooperative farming and joint farming, different institutional arrangements have been tried to reorganise the land and production relations for changing the farming systems and enhancing the productivity of the small and marginal farmers who constitute nearly eighty per cent of the farming community in India and are the main stakeholders in any policy reforms.  Yet, they continue to be the major chunk of poor in the country even after sixty years of independence. While different policy options were attempted in the form of direct and indirect interventions, in the shape of target group and target area oriented approaches, commodity specific and region. Specific missions, yet the twin facts of farmers’ poverty and low productivity remained unabated. Two primary reasons behind the continuing poverty and low productivity are cited to be non-viability of the small and marginal farmers and inadequacies in the service/ input delivery system. With the advent of globalization, the task of reorganising the small and marginal farmers assumed greater importance to face the challenges of the market economy. The experience of the post-globalisation era has thrown various alternative options for reorganising the small and marginal farmers to make interventions in the existing farming systems. Changes in the institutional arrangements of land tenure system like land leasing, contract and corporate farming are some of the emerging alternatives which have the potential of not only making small and marginal farms economically viable, but also have implications for land markets in a market economy. While each of these institutional arrangements have their own socio-economic implications, a systematic study needs to be undertaken on the  strengths and weaknesses and their potential in changing the existing farming systems from low yielding uncompetitive agriculture to economically viable and sustainable agriculture.

 

Contract Farming (CF) is one option that has opened up for farmers in the recent past with the liberalisation of agriculture and amendment of (APMC) Acts, where the farmers can reduce the risk of production and prices by tying up with the companies.  Agriculture being one of the important components of the economy, many corporate giants like Bharati Tele Ventures, PepsiCo India, HLL, Tata, DCM Shriram, Reliance Industries, etc., have entered into agribusiness and retail business. Many studies on this subject provide contradictory views regarding the pros and cons of CF, particularly its effect on small and marginal farmers.  Hence, this paper attempts to understand the conceptual framework of contract farming and its effect on small and marginal farmers through some cases and analyses what needs to be done in future.

Starting with the abolition of zamindari system and introduction of cooperative farming and joint farming, different institutional arrangements have been tried to reorganise the land and production relations for changing the farming systems and enhancing the productivity of the small and marginal farmers who constitute nearly eighty per cent of the farming community in India and are the main stakeholders in any policy reforms.  Yet, they continue to be the major chunk of poor in the country even after sixty years of independence. While different policy options were attempted in the form of direct and indirect interventions, in the shape of target group and target area oriented approaches, commodity specific and region. Specific missions, yet the twin facts of farmers’ poverty and low productivity remained unabated. Two primary reasons behind the continuing poverty and low productivity are cited to be non-viability of the small and marginal farmers and inadequacies in the service/ input delivery system. With the advent of globalization, the task of reorganising the small and marginal farmers assumed greater importance to face the challenges of the market economy. The experience of the post-globalisation era has thrown various alternative options for reorganising the small and marginal farmers to make interventions in the existing farming systems. Changes in the institutional arrangements of land tenure system like land leasing, contract and corporate farming are some of the emerging alternatives which have the potential of not only making small and marginal farms economically viable, but also have implications for land markets in a market economy. While each of these institutional arrangements have their own socio-economic implications, a systematic study needs to be undertaken on the  strengths and weaknesses and their potential in changing the existing farming systems from low yielding uncompetitive agriculture to economically viable and sustainable agriculture.

Contract Farming (CF) is one option that has opened up for farmers in the recent past with the liberalisation of agriculture and amendment of (APMC) Acts, where the farmers can reduce the risk of production and prices by tying up with the companies.  Agriculture being one of the important components of the economy, many corporate giants like Bharati Tele Ventures, PepsiCo India, HLL, Tata, DCM Shriram, Reliance Industries, etc., have entered into agribusiness and retail business. Many studies on this subject provide contradictory views regarding the pros and cons of CF, particularly its effect on small and marginal farmers.  Hence, this paper attempts to understand the conceptual framework of contract farming and its effect on small and marginal farmers through some cases and analyses what needs to be done in future.