Corporate farming
Corporate farming is the business based on agriculture, specifically .
Government of India’s 12th five year plan document use word PPPIAD (Public–Private Partnership forIntegrated Agricultural Development )
PPPIAD for :-
States to facilitate ‘large scale integrated projects led by private sector players with a view to aggregating farmers and integrating agricultural supply chains.
PPP is not bad idea for agriculture but proper implementation is very basic and necessary Policy must be a win-win situation for private player and for farmer
Corporates entered in Agriculture field through :-
1. Contarct farming – A way of farming in which farmer provide land & labour and private player have to provide money and resources (seeds,technology,fertilizers etc.)
2. Marketing of Agri products - The amendment to APMC Act allowing private players in the agriculture marketing sector
The introduction of the Model Act in 2003 was directed towards allowing private market yards, direct buying and selling, and also to promote and regulate contract farming in high-value agriculture with a view to boost private sector investment in developing new regularised markets, logistics and warehouse receipt systems, and in infrastructure
3. Storage and supply chain - Government has already permitted 100% FDI under automatic route as per the extant FDI policy and now also allow FDI in muly brand retail
4. Land owning – Corporates can not own land directly and practiced farming thanks to Land celling act india.
So,today Corporates have 3/4 access of Agriculture in India.
Here now I make focus only on point 1 : contact farming
What is Contract Farming ?
In addition to the basic agreement between the company and a farmer, contractfarming usually includes some or all of the following:
►The company gives inputs, such as seeds, fertilizer, seedlings, etc. to the farmer on credit or for free.
►The company provides instructions and directs the farmer to use only certainmethods when growing the crop.
► The company often picks up the crop at its own private premises, not at the public
mandis
► The company will only purchase the crop if it meets certain “quality” standards.This might be something one would expect – such as moisture content or ripeness – but might also include things like size, colour, shape of the produce etc. Over time, companies tend to become more and more strict on these standards.
►Payment is usually not given at the time the company receives the produce but isusually given later.
►There may be penalties for farmers who do not meet the company's standards or time limit
Why need Corporate farming ?
► 2009-10, there was a shortfall in production of sugar and we imported 2.4 million tonnes, while in 2008-09, we exported 5.5 million tonnes of surplus sugar. Third, the country is the second-largest producer of fruit and vegetables (210 million tonnes); yet prices rise when
► we are the largest producer and consumer of pulses, and a crop failure in 2009 meant we had to import large quantities at high prices. We import 15-20% of our requirement (3.5 million tonnes out of 18 million tonnes in 2009-10).
►we import 55-60% of edible oil requirement that gets camouflaged on account of global supplies being stable.
►when prices of grains and oilcakes rise, this feeds into the cost of production (breeding) of dairy cattle and poultry that, in turn, pushes up final prices, which is irreversible. This is the agricultural conundrum confronting us today.
Why contract farming is not good ?
► Companies will often change the standards of the agreement over the years.“Quality” standards will be made more and more strict, and companies will often reject most or all of the crop from most of the farmers.
lets look at example . MaCain practised Contract farming in Deeesa Gujarat for Poteto chips and frozen foods ,the potetoes used in chips call : LR (lady rosetta) , Company rejected the crop on the name of quality and farmer can not sell in open mandis cause LR potetoes can not use for house hold ( Pukhraj potetoes used for house hold)
►Payment by companies is often delayed, sometimes by up to three months. Thecompanies use this time to invest the money elsewhere and to try to cover over any dip in their earnings.
► When company get product on lesser price in market than contact price than they reject the crop on the name of quality
In the case of Pepsico in Punjab : Pepsico was in contract farming with farmer on tometoes with Rs4.5/kg but due to bumper production of tometoes in Punjab Pepsico break the contract on the name of quality and purchase from Open market.
►Faremers have to face problem specially when they signed the contract for the crop which have nor MSP price by govt.
As example , In ludhiyana farmermers signed contract of Basmaati with one MNC on Rs.1000/Quintal but Company paid only Rs.850/Q due to bad quality and farmers can not sell it in market cause government do not have MSP for Basmati
►The company may require the use of only certain brands of fertilisers, which will be provided cheap the first year but will increase in cost over time. Often verylarge amounts of fertiliser and other inputs will have to be used .And excessive use of fertilizers badly affect the fertility of land .
►Over time the company will also tend to ask for the farmers to take on part of the processing of the crop. For instance, companies that buy vegetables may startasking farmers to cut the vegetables to the necessary shape on the farm itself. Thecosts of such processing will have to be borne by the farmer.
►Since the buying company will often arrange for loans, a farmer who defaults onthose loans may be penalised in other ways. Thus the FoodWorld supermarketchain supplies its contracted farmers with seeds and fertiliser on credit; if the loanis not repaid, FoodWorld will not buy the crop.
►Companies may simply break the contract and fail to buy the crop entirely if it isnot profitable for them. Pepsi, for instance, did not purchase potatoes from itscontracted farmers one year in Punjab.
1.Jain irrigation
Contract farming began in earnest in Maharashtra around 2001. Initially, about 30 farmers responded to this new idea of selling by prearranged contract to a private buyer. By 2007 the number grew to 3,000. Now there are about 7,000 farmers. Essentially three main companies are engaged in contract farming in the State—Hindustan Unilever, PepsiCo and Jain Irrigation Systems Limited. Of the 7,000 farmers, about 5,000 are with Jain Irrigation.
Kishor Bhagwat Mahajan is a small farmer from Ainpur taluk in north Maharashtra’s Jalgaon district. He plants white onions biannually and after each harvest, sows cotton. For the past eight years, he has been a contract farmer with Jain Irrigation. When asked whether he had ever suffered losses in these years, he replied in the negative. But he added, “If it ever happens, the company has said it will give me seeds on credit for the next season.” This is the maximum a company will do if there are losses due to natural calamities.
Despite this, Mahajan says being with Jain Irrigation has changed his life. The biggest advantage, he says, is not having to worry about the price being beaten down. “I used to load a lorry full of onions and sell in the open market. There have been times when I sold at Rs.2 a kilo. For the past eight years I have been selling at Rs.10 a kilo. You be the judge—is that or isn’t that an improvement?” Six other farmers in his village who are with Jain echo his words.
2. co-operative model :-
There are some successful stories where 15-20 small farmers come together and make some small company and grow crop.
Sunshine farms promoated by Col Subhash deswal and Lala Karishna yadav , these two men brought farmers together and practised co-operative model for carrot.
In larger picture Corporate farming is like as the Aadam gondavi’s shayari :-
तुम्हारी फाइलों में गाँव का मौसम गुलाबी है
मगर ये आंकड़े झूठे हैं ये दावा किताबी है
Public–Private Partnership forIntegrated Agricultural Development looks good on paper but it’s implementation is very difficult
Conclusion :-
Contract farming is not an altruistic activity. It is a deal between a farmer and a company. What is important is how they work out that deal. Yes, many deals are structured so that they work more in favour of the companies, especially if these are multinationals. But to say contract farming is a bad idea is foolishness.
Refrences :-
Frontline : business of Agriculture
IIM Ahmedabad research papaer : Corporate Farming in India:Is it Must for Agricultural Development? -Sukhpal Singh
Govement of India 12th five year plan
Economics times
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