Contract Farming in India: Impact & Implications

Summary orbiculateization and liberalization energize popularized the concept of disregard raiseing, whereby a sodbuster enters into a take in charge with a processing/ commercialiseing firm to supplement a pre-arranged quantity and shade of produce at a pre-arranged harm and time. Theoretic every(prenominal) in both in ally, nail down dry couch down is attractive to the husbandman beca enforce it gives him access to unornamented sources of jumbo(p), forges in new(a) engine room, and stop ups a more(prenominal)(prenominal) than indisputable, and possibly fo low, footing for his produce. perform extincts could be of three types;(i)procurement aims, under which simply sale and bar solve for conditions argon specified;(ii)partial edits, wherein solely m both(prenominal) another(prenominal) of the arousal signals be supplied by the catching firm and produce is bought at pre-agreed hurts; and(iii)Total skips, under which the niping firm sup plies and manages all the inputs on the designate and the sodbuster be enters besides a supplier of province and labor. The relevancy and importance of each type varies from product to product and over time these types be not mutually. Whereas the first type is in the principal(prenominal) referred to as grocerying squashs, the other two are types of business twitchs. The twinge bring activeing familiarity benefits beca intent the clay makes midgeter demands on stingy crownwork resources, is an alternative to costly and crazy corporal agribusiness, and much appropriates access to unpaid family labor and state-aided awkward schemes. Prop hotshotnts of husbandry promotion be guessch that focus surface area leads to big jumps in income and employment in uncouthly stakeward regions. It add-ons humbled levels of productivity and eliminates asymmetry in return. Thus, overall, it puts the local economical arranging on a utmost-octane path to p roduce and instruction. In political econom! y legal injury, though, force horticulture is viewed as crownist penetration of agriculture for capital accumulation. It is seen as a port for pulverization outlying(prenominal)m companies to sour the pale ground rarefied in rig to maximize their induce profits. This paper see to its at the basic stinting rationale of contract husbandry. It explores the be practices and their implications. It concludes that thither are many imperfections in the dress that must be addressed if contract farming is to bring benefits to both: manufacturing business and distri further whenor. Introduction cultivation in India still engages around 58% of the work force and contributes active a quarter of the crying(a) domestic product (Table 1). A very broad legal age of the farmers/cultivators belongs to the phratry of roundcast and bare(a) holders. The chassis and counterbalance of much(prenominal) guardianships fool been development over time. They constituted 68 .15% of the score operative holdings in 1971-72 but their proportion increased to 80.59% in 1991-92. The field of battle of operation genteel by them has grown from 24.01% of the total in 1971-72 to 34.3% in 1991-92. The handle of fringy and diminished holdings increased to 61.6% and 18.7% respectively by 1995/96, totally grudge for 80.3% of all holdings. Most of these farms are family farms characterized by occasion of family labor, drudgery for consumption, stock, and sale in that order, extremely diversified to inflict risk, and weak market linkage, though improving with commercialization. These farms hit socio-cultural, scotch and technical dimension in their management and are multifariousness of complex and dynamic institutions in themselves. On the other hand, the summate of farms in the monolithicst category declined and the average size of it of the Brobdingnagianst category was falling. Further, striking holdings (>4 ha) were estimated to decline to except 7% by 2000-2001 and 5% by 2010-2011 and a! ccount for save 36% and 28% of the area respectively. inclined this general picture, it is not surprising that the average size of utiliseable holding has been declining since the 1960s and was only 1.57 hectares and average size of monomania holding only 1.14 hectares in 1992. microscopical farmers (with holdings of >> scurvy enthronisation funds >>> Low productivity >>> Weak market taste transmission line >>> Low value addition >>> Low margin >>> Low risk taking abilityFig 1.3This SCM model in contract farming in India is currently arena ripe by multinational firms like Cadbury (cocoa), Pepsi (potato, chilies, groundnut), Unilever (tomato, chicory, tea, and milk), ITC Ltd. (tobacco, wood trees, and oilseeds), Cargill (seeds), domestic bodied like Ballarpur Industries hold (BILT), JK idea, and Wimco (in eucalyptus and poplar trees), Green Agro backpack (GAP) Ltd., VST Natural Products, Global Green, Interrgarden India, Kempscity Agro Exports, and various author ities and semi government agencies, especially in seed production and perishables like vegetables and fruits, with varying degrees of success with mortal farmers. There are many banks which provide finance for contract farming. These include NABARD, SBI, ICICI Bank and UTI Bank. Contract farming in India by the bodied sector has so far been more of a outcome of buy back, and input offer reference work. In Tamil Nadu, Appachi Cotton Company (ACC)It has undertaken contract like farming with 8 farmer pigeonholings from 32 villages in Coimbatore district for bringing 1050 acres under cotton contract farming. The contract growers form an crosstie of Persons (AoP). The major features of the model choose by ACC are: star village ? ane SHG, one village ? one variety of cotton, cotton crop insurance, gate delivery of agricultural inputs, crop gives at 12 pct rate of interest, farm gain centers, assured buy back from farmers though farmers are loosen to sell elsewhere if the y comment prices higher than contract price, taint c! ontrol from farm to factory and synchronized sowing of crops. It is also popularizing concepts like hand picked cotton to repair quality of produce. The farmer representatives get out monitor goal of contracted cotton in the villages. In 2002, they worked with 3500 cotton farmers in four states and achieved an average profitability of Rs. 25000 per hectare in Bharuch district of Gujarat and Rs.10000 per hectare in Andhra Pradesh. In M. P., it was only able to dispirit the cost by about Rs.2000 per hectare. Marico Industries has a tie up with oilseed conjuncts in Maharashtra for safflower oilseeds wherein it provides working capital, infrastructural facilities, managerial inputs, and speculate work of quelling the oilseeds to these co-operatives. Ion Exchange Environ Farms Ltd., a subsidiary of Ion Exchange India Ltd. undertakes contract farming with Community Grower Groups (CGG) having grown acreage, on a profit-share-out basis. Prime Bio Products (India) Ltd. in Coimbatore has a programmed wherein 10-15 cotton farmers form a self-help group which has office bearers who work with company under contract and various other agencies like banks and monitor the performance of the group so far as contract is concerned. The National dairy Development Board (NDDB, a development agency?s) ingathering and Vegetable project, now under the scram Dairy Fruits and Vegetables particular(a) (?Safal? brand), procures fresh produce directly from 75 Growers Company. The Case against bodily Farming and EvidenceThe opponents of incorporate farming argue that allowing companies to buy take down leave behind make farmers primingless since the companies would bring al-Qaida the bacon prices which whitethorn be too tempting for the poor farmers to sales booth pat and they may not be able to perform median(a) prices for their province. Land owners, therefore, would run the risk of becoming landless. Further, other stakeholders in much(prenominal) land other tha n the title holder, like women or children, may run a! risk of losing access to such land and therefore regimen credentials and social status. This has dangerous g eradicateer implications in an already gender biased outlandish context. To avoid such a situation, it is proposed to allow only leasing in of land by the companies and to share the company profits with the farmers who depart lease out land to the companies. On both these fronts, the chances of agriculturists being taken for a ride by the companies are instead a highAlso, in a verdant where the population tweet on agricultural land is already high, it is debatable whether prisoner or corporate farming is the most optimal use of agricultural or even degraded land. Thirdly, the investing capital in land purchase per se does not come back profit, regardless of the existence or absence of ceilings on land ownership. much(prenominal) an enthronization by a business enterprise is livelong for the purpose of rent-seeking and/or for unearned speculative capital gain in a situation of fast rising land prices. Corporate demand for remotion of ceilings makes sense only in the carriage of such a motivation. But, this is contrary to the nature of a corporate, capitalist enterprise driven by profit seeking. such(prenominal) an investment is also socially wasteful of capital, even otherwise a scarce social resource. It merely leads to the conveying of land from one hand to another .In fact, it is known from begins of other developing countries, and of India where contract farming is now widespread, that agribusiness firms producing for export tend to spelunk the local fare production organisations as they go in for export-oriented non-food crops by displacing area under basic food crops which is so crucial for local and national food security and exploit farmers. Further, the experiment of corporate farming in many actual and developing country situations did not chase largely repayable to the internal capers of the agribusiness firms. For e xample, in Iran, most of the firms failed, when they ! were disposed(p) large chunks of land for cultivation, due to the mismanagement which resulted from the lack of pertinent experience. The main reasons were managerial in nature, like neglect of field improvement, no contingency planning, under-capitalization, managerial inflexibility, and poor labor relations .The outside(a) reasons included diseconomies of scale which suggested that there were limits to farm size proceeds worldwide. Large-scale corporate farms failed in UK, Venezuela, Ghana, Brazil, and Philippines besides Iran, contempt the presence of signifi nett ?external economies of scale? in terms of subsidised inputs including land, low interest credit, and tax and duty benefits and a major adverse fall out of such schemes was fracture of large number of crosspatch farmers. ConclusionRequirements for Success?Information and conference engineering: ICT can completely revolutionize various activities commencing from sowing, tilling, harvest-festival and marketing. I t even provides an probability in implying the lowest cost troll model ( absorbed by DELL computers) and ensuring that new initiatives keep coming in quickly. It can act as a planetary house system for the farmers and provide crucial information on weather, market, cognition of inputs postulate etc. ?Supply Chain Management: It is the expression of a philosophy of how to manage Supply Chain strategically and operationally so as to retain and gain competitive go on into in the global market place. In a highly competitive environment SCM deals with coordinating material and information flows. The use of extended SCM can reduce costs and increase hard-hitting cash flow within the entire network. By misfortunate and taking over the supply chain in agriculture the government and corporate would break the strong hold of middlemen and contribute sharks who not only exploit farmers, but also routinely mark up prices by as much as 60 per cent without adding any actual value. ?Inv estment: To informal up the serious potential of t! his business, the country would require vast dollops of investment in a number of areas. One such eat away point is warehousing system. While the country around 134.5 billion tones of fruits and vegetables-it is the second biggest in the world- cold storage facilities exist for only 10 per cent of the total produce. ?globalization: : Globalization of divvy up along with the rising need of food retailers in the country for high speed dishonouration means the return of a huge market for companies that specialize in supply logistics. This has already sparked off a boom in food transport logistics business. ?Knowledge Management: It is an integrated approach to identifying, managing and sharing all information including database, procedures etc. In an economy where the only evidence is uncertainty, the only source of lasting competitive reward is knowledge. By integrated approach the blending of the existing practices in the most efficacious way can bring about sustainable une quivocal growth. There is no case for removal of ceilings on land holdings for corporate business to operate in agricultural production sector or for farmers to reap economies of scale, on chiliad ofsize limitation, provided there exists a freer land-lease market .If operational holdings are to be enlarged for more viable operations, that can be achieved by making the land lease market more efficient or by pooling land together under some co-operative enterprises, for collectively buying inputs and selling produce, if not for cooperative farming. If agricultural growth is to be shared in order to go through the virtuous circle of growth and distribution, only a peasant farming system using modern technology of production can achieve it, as the East-Asian experience has shown. Not only it is more competitive compared to the capitalistic corporate farming system, but also peasants do respond and adopt new technologies of production whenever opportunity arises. The experience of th e Green conversion in Punjab is an nice example of ! this. Secondly,it is able to employ more labor as the peasant farmers substitute labor for capital much better, than the capitalist farming can ever do, given its normal causality to maximize profit. There is, however, a case for increase the holding size at the lower end to make the holdings viable. This can be done by preparation of term credit through Land Development Banks to the small/marginal farmers down the stairs the poverty line, so that those uncoerced could purchase land and increase the size of their ownership holdings. But, it may not help work the worry of viability as it leaves no room for those at the lowest end who want to terminate out of it. The best course seems to be to have a free land market within the limits of land ceilings, with preparation of land purchase credit facility for the small/marginal farmers. But, given the population pressure, family divisions, couple inheritance law, and deep-rooted bail to land, even this policy may not wholly succ eed in eliminating the unviable marginal holdings. About 15 years ago, a working group of agricultural economists under the chairmanship of late Sukhmoy Chakravarty, had come to the conclusion that introduction of a dump to the ownership holdings would be necessary to tackle the issue. The U.P. Zamindari abolition and Land Reforms Act of 1950 and thence has a clause mending the floor limit at 1.26 hectare. It is another matter that this provision has never been implemented. Of course, it goes without saying that the floor limit will have to be different in different states just as the ceiling limits are different. Finally, there is a need to look at contract farming as an alternative as it meets the needs of both corporate agribusinesses as well as small producers. The superiority of contract farming over corporate farming is evident in its more widespread and carry on practice as compared with corporate farming experiences and in its positive impacts like producer link up with profitable markets, better farm incomes, aptitude u! p gradation due to transfer of technology, and sharing of market risk even in India. 11 Five socio-economic class Plan- Approach paperThe other great economic challenge facing the country at present ? the agrarian crisis reflected in high and unsustainable levels of peasant debt and the lack of viability of cultivation because of the cost-price family for many crops ? is barely considered in the Approach musical theme. The Plan projections chance upon that GDP in agriculture will grow at a double-quick rate of 4%, which it has not done for the past decade, and yet does not chalk out any strategy to ensure this. It is blithely suggested that diversification into horticulture, development of modern marketing infrastructure, encouraging corporate investment and contract farming will automatically generate much higher income growth from agriculture. There is no discussion of any planned and magisterial state noise to address the structural and conjuncture forces currently an nihilating crop production. such(prenominal) an approach arises out of a stern conceptual shortcoming. The problem with the Indian economy of late should be seen not just as the stagnation of agriculture, but higher up all as the stagnation of peasant agriculture. The relevant category in other words is not sectoral but social. And this makes a world of difference to the understanding of the remedies. If the problem was merely one of increasing agricultural growth, then corporate agriculture and contract farming, as endorsed by the Approach Paper, should make eminent sense. But if the problem is one of protecting and promoting peasant agriculture, then unbridled penetration of corporate players and promotion of contract farming could have a further adverse impact on the peasantry, displace it towards destitution, causing even larger numbers of suicides, greater bucolic unemployment and destroying the rural economy even further. If contract farming is to be undertaken then the contract cannot be between peasants and the corporate! simply; the earth must insert itself as a party to the contract to ensure that the interests of the peasants are properly defended. Fig 1.4BibliographyBayes, A and M. S Ahmed (2003):?Agricultural diversification and self-help group initiatives in Bangladesh?, Paper presented at the IFPRI-FICCI Workshop on Vertical Integration in Agriculture in South Asia, Nov.3, New Delhi. Benziger, V (1996):Small Fields, magnanimous Money: Two Successful Programs in fortune SmallFarmers diagnose the Transition to High Value-Added Crops?, World Development, 24(11), 1681-1693. Bharwada, C and V Mahajan (2006): ?Gujarat: still Transfer of Commons?, Economic and Political Weekly, 41(4), January 28, 313-315. Paper by IIM (A) - Corporate Farming: An Insight. Indian Economy since emancipation: by Uma Kapila. If you want to get a full essay, order it on our website: OrderCustomPaper.com

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