CONTRACT FARMING-CONCEPT AND COMPATIBILITY IN INDIAN AGRICULTURE
M. PRAKASH KUMAR
In an age of market liberalization, globalization and expanding agribusiness, there is a danger that small-scale farmers will find difficulty in fully participating in the market economy. Agribusiness firms, besides providing resources for productive investment, can benefit the locals in employment, technology transfer, and incremental technical knowledge, especially at the farmers' level (Goldsmith 1985). But, agribusiness firms in general, and multinational companies in particular, may not promote larger national objectives like employment generation, equity, and balanced regional growth as they are driven by business goals alone. . They tamper with the local production structures in order to tailor the agricultural production to their needs, thus generating a process of dependence of producers on these corporations.
Contract farming can be defined as an agreement between farmers and processing and/or marketing firms for the production and supply of agricultural products under forward agreements, frequently at predetermined prices. The arrangement also invariably involves the purchaser in providing a degree of production support through, for example, the supply of inputs and the provision of technical advice. The basis of such arrangements is a commitment on the part of the farmer to provide a specific commodity in quantities and at quality standards determined by the purchaser and a commitment on the part of the company to support the farmer's production and to purchase the commodity.
The purpose is certainly not served by the contract farming model of agricultural change as these firms are not only the beneficiaries of value addition surplus and do not share the extra profits with farmers. In fact, the issue of diversification has been tackled in an undesirable fashion. Diversification can mean doing same thing or different things differently. But, here, the different things are being done in the same way, i.e., new crops are being grown with the same or higher input intensity. The non- governmental and community organisations, which can play a role in information provision, and in the monitoring and regulating the working of contracts, are unfortunately, missing from the state together. In fact, that was one of the reasons that the suicide of the farmers due to crop failure and indebtedness in the state could not be prevented. So what is essential for making success out of contract system is the institutional and organisational innovations in the rural sector. Secondly, various bargaining co-operatives or other agricultural producer organisations are needed to negotiate equitable contracts which have been able to secure the standardisation of contracts and their scrutiny by a government agency in the past in the U.S. A legal protection to contract growers as a group is a must to protect them from ill effects of contracting (Wilson, 1986).
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