Post on 20-Aug-2015
Roopam SinghLinu Mathew Philip
Sampath Raghavan
Annual Conference on Agri Business Management
BangaloreApril 18, 2023
Objectives
To study the effectiveness of contract farming practices in providing better opportunities to the farmers in terms of technology transfer, increase in incomes and improved marketing facilities.
How equitableequitable are contract farming practices vis-à-vis the two major stakeholders that is, farmers and contractors?farmers and contractors?
Are contract farming arrangements equally accessibleequally accessible to all the sections of the farming community, irrespective of size of irrespective of size of holdingholding ( i.e. small and large farmers)?( i.e. small and large farmers)?
Hoshiarpur, Punjab
Sample sizeBasmati Potato
Contract 25 15
Non Contract 25 15
Total 50 30
Sources: Statistical Abstract of Punjab 2006
http://www.punjabpolice.org/map11/index.html
%
Farmers Population (no.)
2,08,841 40.68
Area under CF (ac)
35,855 16.15
Small & Marginal holdings (no.)
37,212 50.21
Contract Farming ArrangementsContract Farming Arrangements
Particulars PepsiCo MarkfedPre Contract Assessment
Direct Direct & thru middlemen
Texts of Contract Written (English) Written (Local dialect)Type of Contract Bipartite TripartiteCopy provided to farmers
No Yes
Registration fee No On the farmers (Rs.100)ID Cards No Yes
Inputs supplied
Seed, Tech know-howBrands specified w.r.to. Fertilizers & Pesticides
No credit
Seed (Optional)Tech know how
No credit Procurement of produce
Direct Direct & thru middlemen
TransportationBy the farmers upto the
collection centersAt the farm gate
Price realizationMarket rate + Rs.15-25 / q
Market rate
How equitableequitable are contract farming practices vis-à-vis the two major stakeholders that is, farmers and contractors?farmers and contractors?
Are contract farming arrangements equally equally accessibleaccessible to all the sections of the farming community, irrespective of size of holdingirrespective of size of holding ( i.e. small and large farmers)?
Contract Farming ArrangementsContract Farming Arrangements
ParticularsPotato Basmati
ContractNon-
ContractContract
Non-Contract
Total area under cultivation
Mean 75 45 19 23
Min 10 18 8 6
Max 300 80 50 52
Area under contracted crops
Mean 55 25 8 10Min 4 5 4 3Max 150 65 20 21
% of area under contracted cropMean 77% 56% 48% 47%Min 25% 13% 20% 11%Max 100% 100% 100% 100%
Playing it safe?
Contract Farming ArrangementsContract Farming Arrangements
ParticularsPotato Basmati
ContractNon-
ContractContract
Non-Contract
Area owned (ac)
Mean 25 20 7 9
Min 4 2 2 2
Max 53 45 20 30
Area Leased (ac)
Mean 50 25 13 14
Min 4 11 4 3
Max 280 45 35 40
Contract Farming ArrangementsContract Farming ArrangementsProfile of Land Holding (Contract)Profile of Land Holding (Contract)
CF in Potato – A ‘Large Farmers’ game?
Basmati N = 25; Potato N = 15
Contract Farming ArrangementsContract Farming ArrangementsLand Leased & Owned (in acres)Land Leased & Owned (in acres)
Under contract …
Proportion of area leased in more than twice the area owned
Contract Farming ArrangementsContract Farming ArrangementsLand Leased > OwnedLand Leased > Owned
Under contract …
Basmati – Small holders dominant
Potato – Large farmers
Basmati Contract N = 20, Non Contract N = 16 Potato Contract N = 8, Non Contract N = 10
Contract Farming ArrangementsContract Farming ArrangementsA ‘Win-Win’ game?A ‘Win-Win’ game?
ParticularsPepsiCo Markfed
Farmers Company Farmers Company
Assured market for produce Assured supply of raw materials or produce Higher incomes from contract Vs no contract Lower transaction costs per unit of produce Flexible terms for buyback Technical support & know how Assistance for credit
Contract Farming ArrangementsContract Farming ArrangementsThe Power EquationThe Power Equation
ParticularsPepsiCo Markfed
Farmers Company Farmers CompanyParticipation of Small Farmers
LowLow HighHigh
Level of commitment in the contract arrangement
HighHigh HighHigh EqualEqual EqualEqual
Costs of breach of contract by the other party
HighHigh ModeratModeratee
EqualEqual(Low)(Low)
EqualEqual(Low)(Low)
Alternatives in case of default by the other party
FewFew ---- EqualEqual EqualEqual
Terms of Contract Highly Highly BindingBinding
ModeratModerate e
BindingBinding
Equally Equally bindingbinding
Equally Equally bindingbinding
Risk sharing in the contract arrangement
HighHigh LowLow EqualEqual EqualEqual
Strengthening Legislative Framework
No acts at the state level to oversee contract farming arrangements - Only rules
No concrete provisions to discourage defaulters – Still evolving
Implementation of rules at the ground level – Questionable Sorting out Legal issues thru PAFC – Long & tedious Fixing the prevailing market prices – Disputable
Points to PonderPoints to Ponder
Managing Distributional Issues
Participation of small land holders (1–5 ac) – Limited Land holders under 1 ac – Totally absent Small holders often forced to lease out & work as labourers
in their own fields - Statistically hidden Prevalent among large farmers – Absenteeism Terms more favourable towards companies & large farmers -
Power (Un)equation ?
Points to PonderPoints to Ponder
Scope for future research
Applicability of the model to scale-neutral or small scale feasible crops - to be explored in detail
Promotion of High input intensive agriculture Vs soil health and pests & diseases epidemics - Environmental concerns
Corporatized version of Slash & Burn cultivation – Is Crop diversity a casualty?
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