Create A Sustainable Pathway For Farmers

Context: Contract farming as advocated by Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 will fail if the government and/or the cooperatives are excluded from the contract.

Arguments in support of contract farming: by involving the private sector

• Empowers the farmers: to get engaged with upgraded value chain partners in a fair, transparent, mutually agreeable and remunerative manner to enhance their income by reducing marketing risks.
  • Will ensure better prices and diversification of crops and raise farmers’ incomes substantially.
• Current positive trends: Contract farming has been successfully going on for long in Punjab, and this Act will give further fillip to it.

Role of government in contract farming: While under contract farming, the stress is towards the involvement of the private sector; the government and cooperative have a bigger role to play.

• In wheat and paddy: The contract is between farmers and the Food Corporation of India (FCI) on behalf of the government, and it has worked with the highest degree of effectiveness.
  • 80 % is procured at the pre-determined Minimum Support Price (MSP) without any discrimination among farm-size categories.
• In cotton: The Cotton Corporation of India (CCI), on behalf of the government, enters the market as a buyer whenever the prices fall below the MSP.
  • The procurement by the CCI helps to restore the prices and thereby checks to a large extent farmers’ exploitation by private players.
• In milk production: Public procurement through milk cooperatives is functioning effectively.
  • Milk cooperatives under the brands Verka, Amul, Mother Dairy, etc., have created a competitive environment for contracting with private undertakings.
  • The daily milk procurement by the cooperatives has surpassed 5 crore litres, which is almost 10 per cent of the average daily milk production in India.
• In sugarcane: There is a provision of State Advised Price (SAP), which is fixed by the government.
  • There are sugar mills in cooperative as well as private sectors which create competition.

Issues with contract farming: specifically due to the involvement of the private sector.

• No significant improvement over time: For e.g., while the contract farming in Punjab had started in the 1990s with PepsiCo and other companies, these have remained limited.
• Low procurement: Private companies have never reached the scale of government contracting in any crop or commodity.
• Farmers are exploited: Farmers are initially lured by the high prices of the produce, but are forced to sell at lower prices due to calculated delays in procurement behind the excuse of quality concerns by the private players.
  • Often, the promise of higher profitability to the farmer falls flat, discouraging him from continuing the partnership with the contracting companies.
• Biased towards middle and large farmers: and thus being far from inclusive.

Way forward:  Create a sustainable pathway for farmers by-

• Create a government-supported mechanism for contract farming: For encouraging the cultivation of profitable crop options to replace paddy and wheat so as to diversify cropping pattern to conserve natural resources.
  • Diversification should not be at the cost of the livelihoods of the farmers since the paddy-wheat cropping system is more remunerative than alternative field crops.
• Involve farmers’ aggregators in contract farming: like farmer producer organisations or companies.
• Avoid adverse socio-economic implications in involving the private sector: By eliminating the apprehensions of the farming community, that big corporates may demolish the established input and output market channels in the long run and start dictating terms.
• Enhancing public expenditure: On agricultural research and education, processing, marketing infrastructure including cold chains, market intelligence and capacity-building of farmers.