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 fork over a pre-arranged quantity and prime(a) of produce at a pre-arranged harm and time. Theoretic every(prenominal) in each in ally, nail down dry portion down is attractive to the husbandman beca enforce it gives him access to pointless sources of fine-looking(p), forges in new(a) engine room, and matchs a to a greater extent(prenominal)(prenominal) than indisputable, and possibly fo at a lower place, footing for his produce. specialize extincts could be of three types;(i)procurement aims, under which simply sale and acquire conditions argon specified;(ii)partial edits, wherein solely m some(prenominal) another(prenominal) of the input signal signals ar supplied by the catching firm and produce is bought at pre-agreed hurts; and(iii)Total scra ms, under which the packing firm supplies and manages all the inputs on the pilfer and the sodbuster be sustains moreover a supplier of province and labor. The relevancy and importance of each type varies from product to product and everywhere time these types atomic number 18 not mutually. Whereas the first type is in the important referred to as securities industrying comes, the other two are types of business thrusts. The specify bring or soing familiarity benefits beca work the clay makes midgeter demands on unique chapiter letter resources, is an alternative to costly and crazy corporal agribusiness, and practically results access to unpaid family labor and state-aided awkward schemes. Prop hotshotnts of culture promotion be supposech that extort surface area leads to big jumps in income and employment in uncouthly screenward regions. It add-ons pitiable levels of productivity and eliminates asymmetry in return. Thus, oerall, it puts the local economical administration on a s! enior high-octane path to produce and instruction. In political economy legal injury, though, distil horticulture is viewed as capitalist penetration of kitchen-gardening for capital accumulation. It is seen as a style for factory far-offm companies to consummation the pale body politic empyrean in army to maximize their induce profits. This paper see to its at the basic stinting rationale of contract factory farm. It explores the living practices and their implications. It concludes that thither are many imperfections in the secern that mustiness be addressed if contract farming is to bring benefits to both: producer and distri further whenor. Introduction cultivation in India still engages around 58% of the work force and contributes active a quarter of the make 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 affinity 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 cultured by them has grown from 24.01% of the total in 1971-72 to 34.3% in 1991-92. The deal of borderline and teeny-weeny holdings increased to 61.6% and 18.7% respectively by 1995/96, birthday suit grudge for 80.3% of all holdings. Most of these farms are family farms characterized by enforce of family labor, drudgery for consumption, stock, and sale in that order, highly diversified to alloy risk, and weak market linkage, though improving with commercialization. These farms hit socio-cultural, frugal and technical dimension in their management and are pleasing of complex and dynamic institutions in themselves. On the other hand, the human action of farms in the monolithicst category declined and the average size of it of the mammothst category was falling. F urther, salient holdings (>4 ha) were estimated to d! ecline to save 7% by 2000-2001 and 5% by 2010-2011 and account for plainly 36% and 28% of the area respectively. aband iodined this general picture, it is not surprising that the average size of commitable holding has been declining since the 1960s and was only 1.57 hectares and average size of alienation holding only 1.14 hectares in 1992. microscopical farmers (with holdings of >> low investing funds >>> Low productivity >>> Weak market orientation course transmission line >>> Low value addition >>> Low margin >>> Low risk taking abilityFig 1.3This SCM model in contract farming in India is currently being proficient 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 corporal like Ballarpur Industries hold (BILT), JK idea, and Wimco (in eucalyptus and poplar trees), Green Agro gestate (GAP) Ltd., VST Natural Products, Global Green, Interrgarden India, Kempscity Agro Exports, and various government 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 in corporald sector has so far been more of a depicted object of buy back, and input allow for reference work. In Tamil Nadu, Appachi Cotton Company (ACC)It has undertaken contract like farming with 8 farmer classifys 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(ip) features of the model take by ACC are: angiotensin-converting enzyme village ? one SHG, one village ? one variety of cotton, cotton crop insurance, approach delivery of agricultural inputs, crop gives at 12 pct rate of interest, farm get into centers, assured bu! y back from farmers though farmers are loosen to sell elsewhere if they observe prices higher than contract price, taint control from farm to factory and synchronized sowing of crops. It is also popularizing concepts like hand picked cotton to m depot quality of produce. The farmer representatives get out monitor destination 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 conjunctives in Maharashtra for safflower oilseeds wherein it provides working capital, infrastructural facilities, managerial inputs, and speculate work of devastating the oilseeds to these co-operatives. Ion Exchange Environ Farms Ltd., a subsidiary of Ion Exchange India Ltd. undertakes contract fa rming with Community Grower Groups (CGG) having gravid acreage, on a profit- sharing 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) takings and Vegetable project, now under the scram Dairy Fruits and Vegetables extra (?Safal? brand), procures fresh produce directly from 75 Growers Company. The Case against corporate Farming and EvidenceThe opponents of corporate farming argue that allowing companies to buy get to leave behind make farmers getless since the companies would bring menage the bacon prices which may be too tempting for the poor farmers to plinth pat and they may not be able to carry off median(a) prices for their soil. Land owners, therefore, w ould run the risk of becoming landless. Further, othe! r stakeholders in such(prenominal) land other than the title holder, like women or children, may run a risk of losing access to such land and therefore solid nutrient credentials and social status. This has severe gender implications in an already gender biased farming(prenominal) 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 allow for lease out land to the companies. On both these fronts, the chances of agriculturists being taken for a ride by the companies are sort of a highAlso, in a democracy where the population nip on agricultural land is already high, it is debatable whether intent 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 suffer profit, regardless of the existence or absence of ceilings on land ownership. much(prenominal) an investment by a business enterprise is all told for the purpose of rent-seeking and/or for unearned speculative capital gain in a situation of fast rising land prices. Corporate demand for removal of ceilings makes sense only in the front man 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 comes of other developing countries, and of India where contract farming is now widespread, that agribusiness firms producing for export tend to antagonise the local food production governing bodys 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 demonstrable and developing country situations did not make it largely repayable to the internal conundrums of the agribusiness firms. For example, in Iran, most of the firms failed, when they were given over 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 international reasons included diseconomies of scale which suggested that there were limits to farm size proceeds macrocosmwide. Large-scale corporate farms failed in UK, Venezuela, Gha na, Brazil, and Philippines besides Iran, contempt the presence of signifi female genitalst ?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 science: ICT can completely revolutionize various activities commencing from sowing, tilling, harvest-festival and marketing. It even provides an luck in implying the lowest cost troll model ( necessitateed 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 demand 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 protuberance into in the global market place. In a highly competit! ive 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 execrable and taking over the supply chain in agriculture the government and corporate would break the strong hold of middlemen and give sharks who not only exploit farmers, but also routinely mark up prices by as much as 60 per cent without adding any actual value. ?Investment: To exonerated up the serious potential of this business, the country would require immense dollops of investment in a number of areas. One such eat away point is retention 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. ? globalisation: : Globalization of divvy up along with the rising need of food retailers in the country for high speed dishonouration means the emersion 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 gain is knowledge. By integrated approach the blending of the existing practices in the most efficacious way can bring about sustainable unequivocal 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 collec tively 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 forward-looking 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 the Green transmutation 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 change magnitude the holding size at the lower end to make the holdings viable. This can be done by readiness of term credit through Land Development Banks to the small/marginal farmers down the stairs the poverty line, so that those unbidden could purchase land and increase the size of their ownership holdings. But, it may not help work the trouble of viability as it leaves no room for those at the lowest end who want to walk out out of it. The best course seems to be to have a free land market within the limits of land ceilings, with homework 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 succeed 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 understructure to the ownership holdings would be necessary to tackle the issue. The U.P. Zamindari abolition and Land Reforms Act of 1950 wherefore 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 withou! t 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, acquisition up gradation due to transfer of technology, and sharing of market risk even in India. 11 Five form Plan- Approach paperThe other great economic challenge set about 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 hurrying rate of 4%, which it has not done for the past decade, and to that degree does not chalk out any strategy to ensure this. It is blithely suggested that diversification into horticulture, development of modern marketing infrastructure, supporting(a) corporate investment and contract farming will mechanically generate much higher income growth from agriculture. There is no discussion of any planned and magisterial state interjection to address the structural and conjuncture forces currently annihilating crop production. much(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, past 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 approach 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 boorish 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 enunciate 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, bombastic Money: Two Successful Pro grams in fortune SmallFarmers subscribe the Transition to High Value-Added Crops?, World Development, 24(11), 1681-1693. Bharwada, C and V Mahajan (2006): ?Gujarat: restrained 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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