logotype

Daily Answer Writing And Mentorship Program

10-07-2023

Q: “In spite of many advantages associated with contract farming, the practice is not very popular in India” Give reasons.               (15 Marks, 250 Words)

                                                           For Answer Submission Please Join the Telegram Group: Click here to join the Group

Contract Farming refers to a system of farming, in which bulk purchasers including agro-processing/exporting or trading units enter a contract with farmer(s), to purchase a specified quantity of any agricultural produce (including livestock and poultry) at pre-agreed prices.

 

Studies by Food and Agriculture Organization (FAOs) show that contract farming can indeed benefit both parties by increasing efficiency, productivity, and farmer’s income, while at the same time giving private player a larger say in farming methods, type and quality of produce.

 

 

Advantages of Contract Farming:

  • For Buyers it ensures quality product availability and price stability.
  • For producers it reduces the risk of fluctuation in market price and demand. Research have shown that contract farmers earn considerably more than non-contract farmers.
  • Increases private participation in agricultural reforms.
  • Contract farming also improves the quality of input as the producer get support from the buyer in the form of technology, pre-harvest, and post-harvest support etc.
  • It reduces the subsidy burden on the government on procurement.

 

Situation in India

  • Despite the above advantages, the Contract farming is not very common in India.
  • The 2003 model law provided for contract farming, but it suffered from various limitations including APMCs being designated as authority of registration and dispute; provisions for stockholding limits on produce limited the participation by bigger players and finally poor awareness/publicity about contract farming and its benefits among farmers.
  • 2018 Model Law tried to bring some changes but wasn’t very effective.
  • 2020 Ordinance and law – withdrawn in 2021.
  • This law tried to bring some simplification and protection for farmers but had to be withdrawn because of farmer protests.


While contract farming, if implemented wisely, does have the potentials to alleviate the sufferings of India’s farmers, improved yields, and greater technology transfer, it is imperative that the state government takes a cautious, research backed approach and implements the model law with modifications suitable for the state.