Business of Agriculture March April 2019 Edition | Page 29

• The three crucial elements in contract farming
include: predefined price; quantity; and time taken
to produce;
• The contract farming in India is regulated under the
Indian Contract Act, 1872. Now the department
of agriculture and farmers welfare has a new draft
model named contract farming Act, 2018;
• Farmers can use the contract as collateral to
arrange credit with a bank.
Impact of Contract Farming to the Farmers
Now, the question here is – Is contract farming
beneficial to farmers? The answer is – Yes, it is! It
helps in reviving India’s growth story through contract
farming by paving way for mutual trust and confidence
between the two parties. The new contract farming
model act aims to create a regulatory body to enforce
the contract, creating protection for farmers.
Need for Supply Chain Management
Having looked at its benefits, for farmers to flourish,
it is also essential for them to be able to manage and
ensure high-quality produce. In order to maintain
such standards, the need and urgency for supply chain
management become very crucial. This is where a
companies like FarmLink come into play; they provide
farmers with a secured income based on long-term
off-take agreements and all-round support to improve
productivity and quality. The company procures
fruits and vegetables directly from their farmers
through a network of collection and service centres
and delivering to retail stores, Hotel-Restaurant-
Cafe (HORECA) chains, industrial processors and
e-commerce food platforms. Thereby restructuring
the supply chain, the company brings efficiency in
delivery from farm to fork which results in minimum
An integrated farming initiative of ‘hub and spoke’
approach is going to be a game changer towards
organised farming. In collaboration with the farming
community and government, large tracts of land
including cultivable waste lands shall be leased to
generate high-quality farm produce. The companies
like FarmLink would leverage their global expertise
and deploy the latest technology and best practices in
these farms enabled by farm extension services. Such
farms would be termed as Model Farms and would
set an example for farmers in the neighbourhood to
benefit in terms of capacity building, technical support
as well as forward and backward integration. These
farms shall act as hubs enabling the farmers to be
spoke suppliers. The farmers would also have an
opportunity to get into contract farming with respect
to a specific crop, either individually or collectively
organised into farmer producer organisations for
aggregation of farm produce in large volumes.
Future of Contract Farming
The future of the Indian agriculture sector may well be
greener. Contract farming is growing at an exceptional
rate and its primary drivers include: produce e.g.
tomato pulp, organic dyes, poultry, mushrooms, dairy
processing, onions, exotic vegetables, baby corn,
basmati rice, medicinal plants, potatoes for making
chips, mandarin oranges, orchid, pulpwood to name a
few. Given the diverse agro zones in our country there
lies various opportunities to cultivate and produce
numerous crops keeping into account the climatic
conditions. To help convert such farming practices
for the advantage of farmers, contract farming offers
one such possible solution. Under contract farming,
companies can provide a mechanism which may
include offering seeds, fertilizers and technical advice
customised as per their needs and requirements. This
practice helps eliminate the middleman thus benefiting
the farmers in a large way!
An integrated
farming
initiative
of ‘hub
and spoke’
approach is
going to be a
game changer
towards
organised
farming
Such practices help reduce the risk appetite
and uncertainty between both parties through
implementation of its organised and focused
teamwork practices. However, it should also be noted
that the advantage may fluctuate subject to its physical,
social and market settings. The other benefits include:
generating a steady source of income at the individual
farmer level; generating employment opportunities in
rural communities especially for landless agricultural
labour; reducing migration to urban areas; and
promoting rural self-reliance among others. The
biggest advantage is transparency in pricing as the
price is pre-decided.
wastage of the produce and ensuring better pricing
for the farmers.
* Ravish Chavan, COO of FarmLink, has played a key
role in improving the company’s operational efficiency
and bring in process discipline. Prior to his appointment
as COO, Ravish was heading investor relations and
transaction advisory at Pioneering Ventures – the
company that incubated FarmLink. He holds an MBA in
Finance and CFA and FRM charters.
Business of Agriculture
| March-April 2019 • Vol. V • Issue 2
29