The National Agricultural Policy (NAP) envisage that “Private sector participation will be promoted through Contract Farming and land leasing arrangements to allow accelerated technology transfer, capital inflow and assured market for crop production of oilseeds, cotton and horticultural crops”
Agricultural production is dependent on different initiatives/system viz., Individual, Cooperative, Corporate and Contract Farming. Most of our farmers are practicing the individual farming system in which the individual farmer’s efforts to procure quality inputs, secure finance/technology, market the produce are at stake. The farming community particularly small and marginal farmers require empathy from all those concerned in agricultural development – the Government, financial institutions, input suppliers, technocrats, marketing agents, extension workers etc., because they face many problems.
a)It has been reported that input dealers supply spurious seeds, adulterated fertilizers and expired plant protection chemicals in the market, which even led some farmers, to commit suicides (in Andhra Pradesh, Maharastra & Karnataka). Quality, timeliness and adequacy in input supply are not up to the mark and for procuring quality inputs, the farmers have to spend time, money, energy etc. Still, at times all these efforts go waste and turn risky on account of bad input suppliers.
b)Financial Assistance: With regard to securing loan from banks, not all farmers are able to access the Institutional credit, particularly those in rainfed areas, who are mostly dependent on money lenders even today. About 70% of these farmers are unable to get bank finance as per a survey report of ICRISAT, Hyderabad.
c)Technological Support: Though there are as about 40 agricultural universities and about 30,000 agricultural scientists working on agricultural development, it is reported that only 30% of technologies generated have been adopted by the farmers, as the rest did not meet the “ their felt needs ”.
d)Marketing Support: Marketing is as important as farming. It is known that the Government cannot fix Minimum Support Price (MSP) for all agricultural. Commodities. The GOI stipulates MSP for 26 crops only. At the same time, it should also be realized that the farmers are undertaking distress sales / forced sales of their produce at unreasonable price. Mostly, SFs/MFs are not able to withstand the pressure to meet bank commitments, consumption needs etc., by stocking. Sufficient storage facility is also not available in rural areas especially for SFs/MFs.
The foregoing aspects suggest that the farmers need support not only from Government sources, but also from private companies which are connected with Agriculture and allied agricultural activities, input supply, farm machinery manufacturing, trading of agricultural commodities, agro processing industries etc. Govt. is also encouraging Private Extension Service Providers [PESPs] to supplement their efforts in agricultural production. Contract farming companies / Agri Business Firms are the PESPs now and they may be traders or processors in agricultural commodities in future.
The Food and Agriculture Organization [FAO] defined Contract Farming as Partnership with growth. It is an approach that can contribute to both increased income for farmers and higher profitability for sponsors [Companies]. In the Context of Bank Finance: Contract Farming Finance [CFF] refers to flow of credit for crop production mainly through Kisan Credit Card directly to the Individual farmers. This enables the farmers to spend for agricultural activities and inputs like cost of fuel / electricity, repairs and maintenance of machineries, and other short term expenses etc.
India has been practicing the Contract Farming System for a long time through White Revolution – Amul Pattern in Gujarat, Sugar Cooperative in Maharashtra and Seed Production in Tamilnadu. But, the present efforts taken by Agri Business Companies are more improved and directly address the issues / needs in agriculture. They have taken the lead and the results point that Indian crop yields can be increased many folds with due support to the producers (the average Indian yields are far below the potential level).
Contract farming offers many advantages to the farmers. For example, Reduction in transaction cost, effective & efficient monitoring of production operations, extension activities and credit delivery in a cluster, encouraging high-quality, better handling and sorting, enabling producers and processors to achieve economies of scale.
At the same time, contract farming poses certain bottlenecks also. For example, no value addition by the farmers, less generation of employment due to labour-saving farm practices, farmers are under the full control of companies and present legal systems make it impossible to enforce the preference. All said and done, companies aim for profit driven business.
Contract Farming Companies (CFCs) facilitate bank linkage with the farmers. CFCs are organizing supply of quality, timely and adequate inputs by giving franchise to dealers, arranging for bank credit, dissemination of knowledge on technologies from the Agriculture University & own sources through the extension officers appointed for the purpose, arranging for buy-back of produce and for direct payment to the financing banks from the proceeds. This arrangement can be called as Single Window Delivery System (through which all the needs of the farmers are met at one place facilitating quality production and higher income). Farmers can total advantage of this new approach. The companies are establishing extension units like Tata Krishi Kendra by Tatas, Mahendra Krishi Vihar, by Mahenda Sublabh Services Limited, e-Chaupal by ITC etc.
Launching of Contract Farming Finance by Banks is a boon to farmers who can access institutional credit easily for crop production arranged by the companies. The companies and other players also get benefited from the system, which should work on MUTUAL TRUST. This is key element for the success of this system which engages many in the process of higher agricultural production, agricultural exports, income from farm, employment generation etc. The CFCs may also encourage the farmers beyond production; Ex: Value addition at farms to facilitate higher income to farmers. No farmer should get cheated by the companies and farmers should also be taken to task while diverting produce (alternate market) for undue income. CFS is the best alternative farming system which can serve the farmers better at their doorsteps. There is a need to help the illiterate, ignorant and innocent farming community particularly SF/MFs in order to keep FOOD SECURITY / NUTRITION security intact always, with the efforts of Public and Private Partnership for growth.
Photo: Rural Women working with an agricultural equipment