Contract Farming in India -Pros and Cons
Agriculture sector in India is all set to experience a see change, all thanks to contract farming. While previously it was limited to small philanthropic initiatives from the corporate honchos, now, with entry of big business houses like TATA, Reliance, ITC and PepsiCo it has become a mainstem initiative. Besides, over the last few years, successive governments at the center have been very keen incorporatized agriculture where big businesses will have contracts with farmers to produce what they need.
In India, contract farming is there since 1960s; however, after the amendment of the APMC Act at State levels it was made legal. The concept was largely adopted across assortment of crops, regions and firms. The commercial crops like cotton, sugarcane, coffee, tea, etc.have always involved contracts; however, post the economic liberalization, corporates that sign contracts with farmers provide capital and technological help in addition to marketing assistance.
As per this bipartite agreement made between the farmers and the corporates, the latter directly contributes to the management of the firm via supply of inputs, technical assistance and marketing of goods so that the produce is tailor made as per the company’s requirements.
As there are no middlemen involved, farmers get a predetermined sale price from the corporates. The process is easy and simple in which the farmers need not have to worry about seeds and credit and also stay away from making multiple trips to the mandis. By signing a contract, farmers get immunity from fluctuating market demand and fluctuation in the prices.
Punjab has seen tremendous success in contact farming for over 15 years and success stories from PepsiCo India in cultivation of potatoes, tomatoes, chilies and groundnut in Madhya Pradesh and palm oil in Andhra Pradesh.
However, despite these success stories contract farming is yet to make a mark across all cultivators in India.
To make contract farming inclusive, farming associations or cooperatives should be supported. Sometimes, farmers are not literate enough to understand the details of the contract, and if the produce does not meet the quality standards of the company, it is rejected in bulk quantity. In such a scenario, there should be a proper channel in which he can dispose of the produce.
Also, often it’s seen that the predetermined prices do not consider the food inflation. And in case there is a hike in food price, the farmers are deprived of the profit because they are under contract to sell at the price agreed upon beforehand. Also, lack of education and awareness bars them from bargaining power viz-a-viz big business houses; thus, making it difficult for getting fair price for the produce.
Contract farming is best suited for some types of crops. In China, only few specific agricultural producescome under the purview of contract farming. Best practices from successful models of contract farming should be considered when creating a model for the contract farming idea. Many serious challenges in agricultural marketing can be overcome and eradicated because the farmers are not hassled with issues of storage or distress sales and passing through middlemen.
Agriculture, at the end of the day, should remain in the hands of the farmers and not be controlled by the corporates. In order to help farmers increase their produce without compromising on the quality, HPM India has an array of products to ensure the crops are not damaged during the harvest season and the produce is of good quality. The list of PGR (Plant Growth Regulators)—Bio-Organic, Organic Bionutrient, Zinc Sulphate 33%, Ethephon 39% L—areone of many important inputs for the success of green revolution. PGR (Plant Growth Regulators) help plants with adequate quantity of nutrients, combined with valuable enzymes (Gibbrellins, Oxyzines, Cytokinins,etc.). Use of PGR ensures healthy crops irrespective of the weather or temperature.