Business of Agriculture March April 2019 Edition | Page 28

CONTRACT FARMING
GETTING A BETTER DEAL FOR INDIAN FARMERS
By: Ravish Chavan *
I
ndia continues to be a largely agro-based economy
with agriculture the mainstay in providing the
sustainable livelihood for a large section of India’s
rural population. Though advanced farming techniques
have improved land productivity considerably, India’s
agriculture sector continues to be under-leveraged
owing to several challenges.
Traditionally,
land-holdings
in India have
been small and
fragmented,
limiting the
farm yield in
net acreage
Traditionally, land-holdings in India have been small
and fragmented, limiting the farm yield in net acreage.
Uncertainty in water supply and rudimentary methods
of irrigation often result in poor water harvesting and
inefficiencies in water management. Inadequacies in
the Indian agricultural supply chain system have led to
poor development of agricultural marketing facilities
and deficient allied infrastructure like storage facilities
often lead to wastage of crops in transit. Lack of
access to institutional credit and insurance hamper
the capacities of farmers to raise working capital. A
deficient agro-marketing infrastructure does not help
farmers get the best procurement prices for their
crops. The concept of contract farming can plug these
lacunae, augment the incomes of farmers and boost
the competitiveness of Indian agriculture.
How does this Concept usually Work?
The contract farming can be understood as a
contractual arrangement between a buyer and a
farmer for their agricultural produce. Typically, the
farmer agrees upon a quantity of a specified product
with its buyer at a pre-decided cost for a stipulated
period of time, thereby making the farmer, a
producer; and the buyer, a contractor; of this produce.
Identifying its advantages and opportunities for several
corporate communities especially those involved in
agro commodity trading, exports, etc. have attempted
to establish models convenient to them for procuring
raw materials at an agreed-upon cost and time. This
practice can be observed in a classic case by reputed
brands like Citrus Processing India (P) Ltd and Desai
Fruits and Vegetables among others. The former
tackles with the serious challenges of wastage in fruit
28 Business of Agriculture | March-April 2019 • Vol. V • Issue 2
production of oranges whereas the latter caters to
the supply of bananas which availed benefits through
contract farming.
As per the agreed upon contract, the farmer is
required to plant the crop in their land, harvest and
deliver the produce on the pre-agreed price to the
contractor. This practice also helps eliminate market
volatility, making it a win-win situation for the farmer
and the contractor. The contractor also provides the
farmer with key inputs and technical advice beneficial
during the start to finish process.
Contract Farming: Interesting Facts
• Contract farming was first introduced in India
for the cultivation of tomatoes and potatoes in
Rajasthan in 1927 and in Karnataka, it was started
with the cultivation of gherkin;
• The government introduced the Model Contract
Farming Act, 2018 in the budget 2017-2018;