Shattering Myths Around Agriculture In India — Part 3

The small and marginal farmers hold 67% of farmland in India, which makes their performance endlessly crucial for sustainable agricultural growth and and rural development.

The average size of land holding per person in India is 1.14 hectares and, to make matters worse, it is declining. The problem with having fragmented land holdings is the difficulty in implementing new-age technologies and scientific farming methods.

The small-scale farmers also lack access to cost-efficient agri-inputs such as information services, seeds, fertilisers, mechanisation services, credit and authentic markets. This leads to the perception that small-scale or landless farmers will not be able to efficiently contribute to improving productivity, food security and livelihoods in India.

But now with contract farming even small and landless growers are discovering new avenues, effectively smashing the misconception that landless farmers are incapable of participating in the market economy.

Contract farming provides pivotal backward and forward linkages, allowing a better access to inputs for landless farmers so they can pursue farming in a commercial way. It also allows other stakeholders in acquiring a reliable market base and desired market penetration.

How does contract farming work?

Contract farming is a collaboration between farmers and corporate companies (processing/ marketing firms) for the cultivation and provision of agricultural products, often at pre-established prices. The arrangement also involves buyer supporting production by supplying agri-inputs and technical advice.

The cornerstone of such arrangements is that the farmer is required to provide a predetermined amount of a particular agricultural commodity at quality standards frequently determined by the buyer or corporate, who is committed to support the desired production and buy the produce.

The terms and conditions of the contract may vary depending upon the nature of the crops to be cultivated, agencies, farmers, farming methods and the context in which they are practised.

How is it protecting landless growers in India?

Contract farming is being used for improved agricultural production across villages in India, for instance, contract farming in wheat is being used in Madhya Pradesh by Hindustan Lever Ltd, Rallis and ICICI.

The arrangement involves supply of inputs and technical advices by Rallis, farm credit by ICICI, buyback arrangement for the farm output by HLL, which requires the farm output as raw material for its food processing industry.

The system ensures benefits for involved entities at different stages, including supply, production, processing, trading, marketing of crops and so on.

Several such ventures including the The Classic Case of Pepsi Foods Ltd., Appachi’s Integrated Cotton Cultivation: Innovative Model have helped solve multiple market access and input supply problems faced along the entire agriculture value chain.

Path ahead

Contract farming as emerged as a universal remedy for problems surrounding the farming community, particularly in countries with a rapidly increasing population of small-scale grower, who cannot develop without the support of such an arrangement.

India, which is a home to overwhelmingly huge population of small-scale growers, needs a widespread implementation of contract farming, which will promote private participation to ensure penetration of increased technology transfer and capital inflow.

The integration of different stakeholders in agriculture under contract farming will protect farmers from price volatility, particularly in horticultural produce, by ensuring guaranteed and better price for their produce and reduction in post-harvest losses.

This will not let the landless farmers be marginalised even as large holding agriculture become increasingly crucial for profitable operations and food security in India.