Roopam SinghLinu Mathew Philip

Sampath Raghavan

Annual Conference on Agri Business Management

BangaloreApril 8, 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

Markfed (Basmati) PepsiCo (Potato)

Contract Farming ArrangementsContract Farming Arrangements

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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