IGIDR Proceedings/Projects Series PP-069-10b

Contract Farming for Agricultural Development in India:

A Small Holders Perspective

Sukhpal Singh

Workshop on

POLICY OPTIONS AND INVESTMENT PRIORITIES FOR ACCELERATING AGRICULTURAL PRODUCTIVITY

AND DEVELOPMENT IN INDIA

NOVEMBER 10-11, 2011

India International Centre, New Delhi

Organised by

Indira Gandhi Institute of

Development Research, Mumbai

Institute for Human Development,

New Delhi

Supported by

Planning Commission

Food and Agriculture

Organization

The World Bank

1

Revised

Contract farming for sustainable agricultural development in India: A

smallholder perspective

Sukhpal Singh*

1. Introduction

With the liberalisation and globalisation of food and fibre markets in the developing

world including India, there is renewed corporate business interest in agriculture in

the form of corporate involvement in food processing, agro-exports and retailing as it

is seen as an unattended sector by those with capital and technological and managerial

resources. With the gradual withdrawal of the state from agricultural markets (due to

the Amendment of the Agricultural Produce Marketing Committee (APMC) Act in

2003 in India under which now private markets can be set up, and contract farming

(henceforth CF) with and direct purchase from farmers are legal) and emphasis on the

role of private sector for bringing efficiency and growth to the sector, space is being

provided to corporate and multinational agencies in the form of opening up of

procurement, wholesale trade, and retailing. The mechanisms being allowed and

promoted are CF, public private partnerships, retailing and wholesaling. It is argued

that the sources of trouble in farm sector are in the supply chains of the sector which

can be improved by corporate involvement and investments. In this policy

environment and in the context of low growth of the farm sector and prevalence of

farmer distress in large parts of India, domestic corporates have made forays into the

retail sector and in perishable produce CF in the last decade and many foreign

supermarket retailers (Metro, Wal-Mart, Tesco, Carrefour) have entered wholesale

cash & carry sector (permitted since 1997) as Foreign Direct Investment (FDI) in

retail is still restricted to 51% of the total equity and, that too, in single brand retail

only (permitted only since 2010). This restriction has kept the foreign supermarkets at

bay though most of them are present in wholesale and are setting up systems of

procurement in the hope that retail will be opened sooner than later. In this context,

this paper examines the role of CF and domestic supermarket retail chain linkage in

sustainable agricultural improvement in terms of risk (production and market)

reduction from a smallholder perspective so that policy issues and implications could

be deciphered. It reviews the state of the art in CF in India and examines the degree of

smallholder involvement in CF. The next section (2) profiles the concept and context

of Indian agriculture and major problems of smallholders in India followed by

practice and performance of CF and retail linkages from smallholder perspective

including evidence of their exclusion (section 3). The paper then examines

mechanism of inclusion of smallholders and leveraging of new arrangements of CF

and food supermarkets (section 4) and concludes in section 5.

2. Context and Issues

Small farmers with holdings of less than 2 hectares (hereafter ha) accounted for

85.9% of all operational holdings in 2002/03, and 42% of the total cultivated area in

India (table 1). Large holdings (>4 ha) declined to only 6.4% by 2000/01 and

accounted for 37% of the area. The average holding size came down to 1.32 ha in

2000/01, with the average size of marginal holdings being only 0.4 ha and that of

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*IEG Delhi

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small holdings 1.41 ha (Sharma, 2007). By 2003, the average size of the holding

further came down to 1.06 hectares (EPW, 2008). Of the total, 64% are marginal (i.e.

below one ha each) and 18% small holders (i.e.1-2 ha each). The small and the

marginal farmers are also a bulk (more than half) of the rural poor and the under

nourished (Agrawal, 2000; Singh, et al, 2002; Muller and Patel, 2004). In so far as a

typical farmer‟s access to land ownership, especially of small/ marginal, is concerned,

the land base of the marginal landholders and the near-landless households has not

improved much over time; at best, the percolation of gains from land re-distribution

have stopped at the middle level of peasantry (Singh, et al, 2002). In this situation, if

any mechanism has to help agricultural development, it has to involve and work with

this overwhelming majority of farmers and workers.

In 2000-01, small farmers contributed 57% of total vegetable production, and 47% of

total fruit production, which is higher than their share in the gross cropped area. As

compared to others, small farmers allocate a larger proportion of their area to

horticultural crops. Even diversification option in terms of change of crop sequence

was exercised more by small holders than that by large holders both in irrigated and

non-irrigated areas (Singh, et al, 2002). In 2000-01 they allocated 5.7 % of their gross

cropped area to horticultural crops, compared to 3.9 % by the large farmers (Birthal et

al, 2008). Vegetables crops are the most favored crops on small farms, while fruits,

condiments and spices are favoured on large farms. Reasons of this are availability of

surplus labour and liquidity constraint, and a good market price of vegetables (Shroff

and Kajale, 2008).

Table 1: Distributions of operational holdings and area by category in India

Year

Category

1953-54 1961-62 1971-72 1981-82 1991-92 2002-03

Number of operational holdings by farmer category (%)

Marginal 39.1 45.8 55.5 62.8 69.7 70.0

Small 22.6 22.4 19.5 17.8 16.3 15.9

Med/Large 33.3 31.9 25.0 19.5 14.0 14.1

Operational holdings area by farmer category (%)

Marginal 6.9 9.2 11.5 15.6 22.6 21.7

Small 12.3 14.8 16.6 18.7 20.9 20.3

Med/Large 80.8 76.0 71.9 65.7 56.5 57.9 Note: Marginal (< 1 ha), Small (1.01-2ha) Medium and Large (>2 ha)

Source: Datta and Sharma (2008).

1.2. Issues in small producer context in India

Major problems of small and marginal farmers in India include spurious input supply,

inadequate and costly institutional credit, lack of irrigation water and costly access to

it, lack of extension services for commercial crops, exploitation in marketing of their

produce, high health expenditures, and lack of alternative (non-farm) sources of

income (Dev, 2005). Employment which is the only way to raise farmers‟ and

workers‟ incomes, is low on these farms because of the low employment elasticity of

output due to increasing mechanisation and the kind of crops grown (Muller and

Patel, 2004). The problem is not that small farms are inherently unviable in today‟s

marketplace as recent studies show that per hectare net returns are the highest on

marginal and small holdings than that on any other holding category (Chand, et al,

2011; Gaurav and Mishra 2011), but that they face an increasingly tilted playing field

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For example, prices smallholders receive for their output are lower than those

obtained by larger farmers due to their weak bargaining power and holding capacity

(Agrawal, 2000). In wheat, marginal holders had the highest yield per hectare

compared with all other categories in India but, they realized the lowest prices per

quintal (Gandhi and Koshy, 2006).

The arguments in favour of small farms in a situation of large disguised unemployment

are many. Small farms in such situations will maximise labour use and value added, not

profit and will have higher yields per unit of land, both of which are socially optimal

given land scarcity and labour surplus. They also distribute income more evenly, thus

increasing purchasing power of the population which is must for industrialisation. Small

farms, when free of incentive incompatible systems like share cropping, or insecurity of

tenure, can greatly expand output even when they are not profitable in a capitalist

business sense. It was due to small farms that rapid agricultural growth occurred in

Korea, China, Japan and Taiwan, and even in West Bengal in India (Morris, 2007).

The social and economic benefits from smallholder focused interventions can be

enormous (Hazel, 2005). Further, small producers have certain competitive

advantages like lower cost due to labour abundance, higher flexibility in their working

capability, work as family and thus, are lower cost, and have plenty of traditional

knowledge which can be harnessed for many sectors. The only threats they face are:

standardisation of products in global and national markets, and large volume

requirements of modern markets. But, there are opportunities in organic, fair and

ethical trade markets which are particularly suited for small producers and offer high

prices (Harper, 2009).

But, small producers face production and marketing risk which make them vulnerable

to poverty. Commercial farming means risks, additional to the natural phenomena

which are intrinsic risks of farming everywhere: the risk of output prices that

fluctuate, of input prices that may not be commensurate with increased output, of

increased vulnerability to pests and so forth (Payer, 1980). In the absence of any

support, the coping costs of commercial modern farming are too high for marginal

and small farmers. For example, motor burnout costs for marginal farmers were 10%

of their gross farm income in Haryana and 7.7% in A.P. This figure for large farmers

was only 1.6% and 2.3% in the two states respectively (WB, 2004). Further, since

marginal farm households are net buyers of food, the increasing and fluctuating prices

can hit them hard (Singh, et al, 2002).

There are many policy and market instruments of risk reduction in India including

crop/weather insurance against yield/production risk; state-sponsored tools e.g.

Minimum Support Price (MSP) for 24 crops, Market Intervention Scheme (MIS) for

other crops, and Farmer Income Insurance Scheme (FIIS); market based institutions

i.e. Futures markets and Warehouse receipt system, besides other mechanisms like

diversification of crops and use of risk reducing inputs (Acharya, 2006). But,

implementation of MSP which includes procurement has been weak except for a few

crops in a few regions and has often failed when farmers were most in need of it. The

lack of access to insurance and credit markets makes small producers vulnerable and

they reduce their risk by choosing low risk activities or technologies which have low

average return. For example, in semi-arid regions of India, such self-insurance

produces 35% lower returns for the poor than if they did not need to self-insure (WB,

2007).

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But, high value perishable crops (read fruits and vegetables) which are being targeted

by corporate interventions are riskier as they have uncertain yields, higher costs due to

higher use of high cost inputs, quality standards, and their profitability is dependent

on market access as there is no price or market protection unlike cereals or cotton.

For example, in high value cut flower production for Delhi market by growers in an

Uttar Pradesh village, the net returns from flower cultivation were many times higher

than those from traditional crops of sugarcane or wheat. Further, flower-cultivating

households had much higher gross and net returns than the others. However, small

farmers received lower prices and incurred higher costs due to smaller volumes. The

variability in prices received by small farmers was also above average and higher than

those for other categories of farmers for all categories of flowers. As for the risk, the

proportion of households making losses was very high in flower cultivation (12-38%)

and almost negligible (1-2%) in wheat and sugarcane, mainly because of yield

fluctuations and, to some extent, price fluctuations. This risk dimension makes it

difficult for small and resource-constrained farmers to take up diversification to high-

value crops like flowers (Sen and Raju, 2006).

The above discussion is suggestive of the complex socio-economic reality and

relationships in which smallholders operate. Therefore, any intervention in the farm

sector has to take this into account. In this light, the following section examines the

role of corporate agribusiness in helping smallholders reduce their production and

market risks while at the same time promoting sustainability, through the mechanism

of CF.

2. Contract („contact‟) farming-the concept and the logic Corporate agribusinesses, both domestic and multinational, interface with

smallholders through seed production and supply, other input supply, procurement of

produce, and more directly, facilitation of production through CF. CF has also been

used in many situations as a policy step by the state to bring about crop diversification

for improving farm incomes and employment (Benziger 1996; Singh, 2002). CF is

also seen as a way to reduce costs of cultivation as it can provide access to better

inputs and more efficient production methods. The increasing cost of cultivation was

the reason for the emergence of CF in Japan and Spain in the 1950s (Asano-Tamanoi,

1988) and in the Indian Punjab in the early 1990s (Singh, 2002).

CF can be defined as a system for the production and supply of agricultural and

horticultural produce by farmers/primary producers under advance contracts, the essence

of such arrangements being a commitment to provide an agricultural commodity of a

type (quality/variety), at a specified time, price, and in specified quantity to a known

buyer. In fact, CF can be described as a halfway house between independent farm

production and corporate/captive farming and can be a case of a step towards complete

vertical integration or disintegration depending on the given context. Due to the

efficiency (co-ordination and quality control in a vertical system) and equity

(smallholder inclusion) benefits of this hybrid system, it has been promoted

aggressively in the developing world by various agencies (Glover, 1987). It basically

involves four things - pre-agreed price, quality, quantity or acreage

(minimum/maximum) and time (Singh, 2002). It is generally undertaken when there is

market failure expressed in perishability of produce, quality of produce and technicalities

of producing a new/different product (Bijman, 2008).

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On the other hand, „contact farming‟ is the practice adopted by most retail chains in

India which refers to just having registered farmers without any commitment to buy

or sell or a pre-agreed price or quantity specified.

CF is known by different variants like centralised model which is company farmer

arrangement, outgrower scheme which is run by government/public sector/joint venture,

nucleus-outgrower scheme involving both captive farming and CF by the contracting

agency, multi-partite arrangement involving many types of agencies, intermediary model

where middlemen are involved between the company and the farmer, and satellite

farming referring to any of the above models (Eaton and Shepherd, 2001; GoI, 2003;

Bijman, 2008). In fact, CF varies depending on the nature and type of contracting

agency, technology, nature of crop/produce, and the local and national context (Swain,

2011).

The contracts could be of three types; (i) procurement contracts under which only sale

and purchase conditions are specified; (ii) partial contracts wherein only some of the

inputs are supplied by the contracting firm and produce is bought at pre-agreed prices;

and (iii) total contracts under which the contracting firm supplies and manages all the

inputs on the farm and the farmer becomes just a supplier of land and labour. The

relevance and importance of each type varies from product to product and over time and

these types are not mutually exclusive (Hill and Ingersent, 1987; Key and Runsten,

1999; Bijman, 2008). Whereas the first type is generally referred to as marketing

contracts, the other two are types of production contracts (Scott, 1984; Welsh, 1997).

But, there is a systematic link between product and factor markets under the contract

arrangement as contracts require definite quality of produce and, therefore, specific

inputs (Scott, 1984; Little, 1994). Also, different types of production contracts allocate

production and market risks between the producer and the processor in different ways.

The price of the contracted produce can be growers‟ fixed price, residual (profit/loss)

sharing by sponsor and grower, open market based price, spot market price, consignment

based, two part split price, tournament price (fixed plus variable based on relative

performance), base price plus quality based incentive price, or administered price.

For different reasons, both farmers and farm product processors/distributors may prefer

contracts to complete vertical integration. A farmer may prefer a contract which can be

terminated at reasonably short notice. Also, contracting gives access to additional

sources of capital, and a more certain price by shifting part of the risk of adverse price

movement to the buyer (Hill and Ingersent, 1987). Farmers also get an access to new

technology and inputs, including credit, through contracts which otherwise may be

outside their reach (Glover, 1987; Eaton and Shepherd, 2001). For a processor or

distributor, contracts are more flexible in the face of market uncertainty, make smaller

demands on scarce capital resources, and impose less of an additional burden of labour

relations, ownership of land, and production activities, on management (Kirk, 1987). The

firm even gets an access to unpaid family labour (White, 1997) and can make use of

state funds indirectly through agricultural production sector which are directed at farmers

by development agencies (Clapp, 1988). Also, food processors can minimise their

overhead costs per unit of production by operating their plants at or near fully capacity as

contracting gives assured and stable raw material supplies from farms. The firm can also

project an image of working with local producers as a partner when it undertakes CF and

may even obtain statal and international agency incentives for its activities as

developmental projects, instead of corporate farming (Kirk, 1987). Contracts also help

6

improve product quality by directly introducing incentives and penalties as there are

problems of adverse selection and moral hazard in any contractual arrangement resulting

in underinvestment or shirking by any of the parties (Wolf et al, 2001).

At more macro economic level, contracting can help to remove market imperfections in

produce, capital (credit), land, labor, information and insurance markets; facilitate better

co-ordination of local production activities which often involve initial investment in

processing, extension etc.; and can help in reducing transaction costs, including for the

farmer (Grosh, 1994; Key and Runsten, 1999; IFPRI, 2005; Bijman, 2008).). From an

institutional economics perspective, the logic for CF could also come from the creation

of positive externalities like employment, market development or infrastructure, if

agribusiness firms create them better than the open market or the state (Key and

Runsten, 1999). In other words, can CF help people other than those who have direct

stakes and pay for it?. CF figures as an institutional arrangement/innovation for

agricultural development (Glover, 1987).

Some others recommend CF as the only way to make small scale farming competitive

as the services provided by contracting agencies can not be provided by any other

agencies (Eaton and Shepherd, 2001). CF is also an alternative to corporate farming

which may be costly, risky, and difficult to manage and still not viable (Payer, 1980).

Further, in India, supermarket chain growth including likely Foreign Direct

Investment (FDI) in retail, international trade and quality issues like Sanitary and

Phyto-Sanitary measures, organic trade, fair trade, and ethical trade, promotion of CF

by the central and state agencies, banking and input industry push for CF, farming

crisis and reverse tenancy, and failure of traditional cooperatives, will help spread of

CF across crops and regions as they provide new space to this arrangement in the

context of withdrawal of state from agricultural space. Even new Intellectual Property

Regime (IPR) which encourages protection and exploitation of proprietary genetics is

likely to accelerate CF practice (Wolf et al, 2001). Further, under the new agricultural

policy regime, public-private partnership is the main route being taken to bring about

transformation in agriculture and the state is providing incentives to corporates to

enter agribusiness sector, including through CF.

2.1 CF and natural resource sustainability

Though it is known that CF has resulted in a transfer of responsibility for many

production decisions from the individual farmer to the contracting company (Opondo,

2000), it is not yet understood that responsibility for environment impacts has also

shifted (Rickson et al, 1993 in Eaton, 1998). If that is the case, then there is a clear

case for ecological considerations in designing and monitoring CF. But, there is

hardly any rigorous evidence on the environmental impacts of CF as the focus, most

of the time, has been on its impact on small producer livelihoods in terms of removing

poverty or risk in their activities (Minten et al, 2006).

CF influences the direction of ecological change through two actors. One, the

contracting agency lays down the production schedule for the farmers at the farm

level. By determining the crop to be grown and the husbandry practices the farmer has

to follow, the contracting agency influences the impact CF will have on the

environment. The government is the second actor as the main source of conservation

measures i.e. advisory, financial and material. The farmer‟s access to these measures

7

is, to a large extent, is determined by the government policy. Thus, the contracting

agency and the government have a larger role to play in environmental/ecological

change than the farmer, since they occupy a „privileged‟ position in the realm of

decision making (Opondo, 2000).

Contracts tend to be concerned with land management measures which ensure crop

growth and quality and production levels only in the short-term agricultural cycle.

Land management measures geared to maintaining resource quality over the long

term are not specified. The grower is responsible for decisions about investment in the

longterm maintenance of land quality and productive capacity in conditions where

contracting companies influence the land use practices through contracts which tie

growers to larger markets and encourage production growth (Morvaridi, 1995).

Environment is also impacted through rejection of some produce of the grower by the

contracting agency as the cost of not harvesting results in soil loss through tillage and

excessive use and wastage of chemicals causing nutrient depletion (Lawrence, 1999).

The environmental implications of CF include monocultures leading to depletion of

soil quality, and effect of fertilizers and pesticides on natural resources, environment,

humans and animals (Opondo, 2000; Requier-Desjardins and Borray, 2004). The

contracting firms tend to aggravate the environmental crisis as most of the contracts are

short term (one or two crop cycles) and the firms tend to move on to new growers and

lands after exhausting the natural potential of the local resources, particularly land and

water, or when productivity declines due to some other reason (Morvaridi, 1995;

Raynolds, 2000). The over-exploitation of groundwater, salination of soils, decline in

soil fertility, and pollution are examples of environmental degradation due to CF

(Siddiqui, 1998; Rickson and Burch, 1996). The firms do not pay heed as the costs of

such effects are externalised so far as the firm is concerned. It is also argued that CF as

part of the globalisation process might lead to increasing investments in developing

countries which have low environmental standards and, thus, the natural resource base

might end up irreversibly depleted or damaged (Minten et al, 2006).

There are many studies of impact of CF on natural resource base in local areas. In

Tasmania region of Australia, local environmental problems were not on the agenda

of the vegetable processing firms, despite individual interest by their managers. There

was no evidence of any policy about land or water conservation. Since farmers

generally contracted with more than one company, no single firm wanted to take

responsibility of soil conservation. There were only „information days‟ and

workshops on soil conservation offered to growers, but it was more of tools to signal

legitimacy and to convey that companies were concerned about local soil erosion

problems (Rickson and Burch, 1996). Soil management was an issue in which

contracting agencies influenced the decision making process but left it largely to

growers (Fulton and Clark, 1996). In Fiji, 30% of the sugarcane crop was grown on

unsuitable lands despite adequate land use legislation and CF being done under the

Fiji Sugar Corporation. In fact, the farmers did not even recognize the problem of soil

erosion like their counterparts in Tasmania in Australia (Eaton, 1998). In Kenya,

tobacco CF resulted in land degradation due to the felling of trees by contract farmers

despite the fact that the BAT stipulated that farmers could only become contract

growers if they agreed to plant 1000 eucalyptus trees a year on their lands. But,

enforcement of this policy was not effective (Madeley, 1999).

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Similarly, in fruit and vegetable production in Kenya, 2/3 of the farmers started using

fertilizers and pesticides when they became contracts farmers. But, the contractor did

not provide any information on the side effects of fertilizer use. The farmers learnt

only from experience. In fact, the contractors, especially fresh produce exporters and

agents, did not show much concern about the possible relationship between soil

erosion and CF. They thought it to be the responsibility of the government to control

soil erosion. In fact, most of them did not even recognize that CF had led to soil

erosion due to monoculture and cultivation on steep slopes. Only food industries

contracting with growers offered material assistance to them for curbing soil erosion.

On the other hand, farmers were of the view that the contractor generally did not

provide all the information about the contract crops and the tendency was to

emphasise only the rosy side of the picture. But, due to the market implications, the

contractors were more anxious to keep the required Maximum Residue Limits

(MRLs), lest their products were rejected in the European markets. Thus, farmers

were strictly asked to adhere to type and amount of prescribed agrochemicals

(pesticides) and in fact, the contracts preferred to supply such agrochemicals to the

farmers (Opondo, 2000).

In Thailand, which has been the pioneer in CF in Asia, “Contract production of cash

crops – usually tacit in the local fashion rather than formalized – (has) led small

farmers to use increasing quantities of inputs in a system dictated by the demands and

advice of village intermediaries who work for commercial companies. Thus, a typical

input „kit‟ composed with total disregard for the environment or any serious technical

reference, supplied to illiterate (in Thai) Mon and Karen cotton farmers in

Kanchanaburi province in 1991, included seeds from high potential varieties, but

susceptible to the main insects/pests; a product for dry dusting treatment (half of

which does not adhere to the seeds and is lost to the environment); smart bottles for

insecticides in small half litre packs (consumption of 10-20 litres per hectare), with

active ingredients that are usually highly toxic yet of doubtful effectiveness, given the

resistance that pests have acquired over recent years; expensive compound fertilizers

in granule form, even for leaf applications (beneficial effects not proven); and

herbicides. Some packs also included hormones and growth regulators” (Tribul, 1995;

79-80). In north Thailand also, CF had led to higher levels of chemical and pesticide

use in contract crops as “Potato growers in San Sai are not only facing competition

from farmers in other areas, soil degradation has also made it harder and more

expensive to grow high quality potatoes in this district. In the long run, it will be

necessary to use more organic fertiliser (instead of chemical), to maintain and

improve the structure of the soil” (Ornberg, 1996, p. 12). Burch (1996) and Christian

Aid (1996) also report many social and environmental consequences which have been

particularly serious in prawn aquaculture CF.

In Cyprus, fruit production contracting by a Multi-National Corporation (MNC) led to

problems of ground water depletion and salination of irrigation water due to intrusion

of seas water, leading to drying up of fruit trees and rendering large area of land

unproductive. The MNC was fully aware of the problems of salination but since the

costs were externalized, it could afford to ignore it (Morvaridi, 1995). In eastern

Turkey, sugar beet production expansion in Igdir province encouraged by the

government policy aimed at increasing crop yields without any resource based

conservation policies, led to overexploitation of land and water, amounting to the

9

depletion of landesque capital. The intensive commercial production under the Sugar

Corporation (a state agency) led to considerable reduction in and even elimination of

fallow periods and the degraded land went up to 2% of the total land area of the

village by 1995 from nil in 1992. This environmental degradation in terms of land and

water quality, including water logging and salinity, was largely due to mistrust

between farmers and the corporation wherein the corporation supplied only chemical

inputs and tried to monitor inputs and yields of sugar beet, but the farmers often

deliberately ignored the corporation‟s advice in order to secure increase in beet weight

on the basis of which they were compensated. The corporation externalised the

environmental costs from production contracts as it was only interested in one crop

cycle production and thus avoided any long term responsibility for resource

conservation (Morvaridi, 1998).

But, there is also evidence that CF can contribute to environmental sustainability. In

Africa, CF programs which evolved from corporate farming inherited all the

ecological concerns of the previous management and continued to meet ecological

responsibilities (Eaton, 1998). Similarly, as an exception, in Tasmania in Australia,

there were companies contracting growers for pyrethrum- a natural pesticide and

poppies for opium which had integrated soil conservation into its structures and

programs as it was must for the crops grown and the company owned the biological

material. Even the crop (pyrethrum) was planted by the company. These companies

also insisted on crop rotation and weeding (Rickson and Burch, 1996). Another

recent study in Madagascar (Minten et al, 2006) found that CF had important positive

environmental effects, resulting from spillover effects on land use and land

intensification, reducing pressure on valuable forest land. In the export oriented

vegetable supply chain locally managed by a local company, the strict standards

practiced by the company ensured this. The pesticide application was either monitored

by the company or in several cases applied by the representatives of the company to

ensure correct dosage and timing. Similarly, compost application was supervised. It

even taught farmers how to make compost. Compost use for contract crops had

spillover effects for many years. The growers were not using compost earlier and as

part of the contracting arrangement, all of them were using it and had even started

using it on their non-contract plots as well. They even reported that even if CF stops,

they would continue making and using compost. Though compost making training

was a small contribution, it was a clear case of technology improvement in a local

area where extension never happened.

In Australia and New Zealand, two corporate entities (Uncle Tobys and Heinz Wattie)

proactively promoted organic production systems and greening of agriculture which

contributed to environmental sustainability (Lyons et al, 2004). On the other hand, in

California, the entry of corporate entities into organic agriculture led to damage to the

organic agriculture rooted in ecological principles as these entities further

mainstreamed the organic agriculture through conventional agriculture-like practices

(Guthman, 2004).

2. 2 Practice of CF in India

There is a growing rationale for CF in India due to the entry of wholesale cash „n‟

carry players as well as domestic food retail chains besides international food quality

and cost competitiveness issues and new market segments which need tailor made

10

food products. Besides, in India, the banking and agricultural input industry is also

eyeing CF for leveraging it for better rural market penetration. The amendment of the

APMC Act has given a policy boost to CF and this is increasingly accompanied by

declining role of statal and co-operative agencies in agricultural markets.

Though CF is receiving a push from many stakeholders, there are many factors like

the APMC regulation in Gujarat and Haryana, improving open market efficiency,

Minimum Support Price (MSP) policy, corporate farming including leasing of

wastelands, and an overwhelming presence and interest of NGOs in farming sector,

which will act as dampeners to the growth and spread of CF. However, corporate

farming can also work favourably if corporate agencies resort to leasing of these lands

to contract growers or provide contractual access to these lands to small and marginal

farmers and landless labour, as corporate farming is unlikely to be viable. In fact,

corporate farming is a double-edged weapon. It can help small farmers in better

access to technology, but can also weaken their bargaining power with the company

(Glover, 1987).

CF is spread across crops, regions and agencies (public, private and multinational) in

India (table 1 in Appendix). There are different models being practiced by different

players in the sector which range from bi-partite to multi-partite and intermediary

based. It is interesting to note that given the diversity of rural and agricultural

landscape in India, a single contracting agency (Frito Lay) practices five different

models in different states of India for the same crop (chip potatoes). The table shows

that most of the crops covered under CF are those with some market failure either in

terms of farmer involvement or the market signals. Most of these are high value crops

which require new and higher investments for producing for the market. Therefore,

they need risk coverage- both production risk and market risk and, more of the latter.

Benefits of CF

Most studies of the CF system in India examine the economics of the CF system in

specific crops, compared with that of the non-contract situation and/or competing

traditional crops of a given region, e.g. in gherkins (hybrid cucumber) in Tamilnadu

(Chidambaram, 1997) and Andhra Pradesh (Haque, 2000; Dev and Rao, 2005; Swain,

2011), tomato and other vegetables in Punjab (Bhalla and Singh, 1996; Haque, 2000;

Rangi and Sidhu, 2000; Singh, 2002; Dhaliwal et al, 2003) and Haryana (Dileep et. al.,

2002), potato in Punjab, Gujarat and Haryana (Singh, 2008; Tripathi et al, 2005) and

cotton in Tamilnadu (Agarwal et al, 2005). It is found that contract production gave

much higher gross and net returns compared with that from the traditional crops of

wheat, paddy, and potato in case of tomato, with some exceptions like peas in Punjab

(Bhalla and Singh, 1996; Rangi and Sidhu, 2000; Dhaliwal et al, 2003), and tomato, and

onion in the case of gherkin in Tamilandu (Chidambaram, 1997), and with those under

non-contract situations (Haque, 2000; Dileep et. al, 2002; Agarwal et al, 2005; Tripathi

et al, 2005; Swain, 2011). This was due to higher yield and assured price under contracts.

But, in Punjab, except oilseed crops (hyola and sunflower), the net returns from

contract crops were found to be lower than what farmers would have got from the

wheat crop (Dhaliwal et al, 2003). However, production cost was also higher (Dileep et.

al, 2002; Kumar, 2006; Singh, 2008). But, in the case of cotton in Tamilnadu, the

11

contract growers had lower input cost, lower interest loans, faster payment for produce

than in non-contract situation, and had the crop insurance facility (Agarwal et al, 2005).

Breach of contracts and farmer problems

Defaults by farmers as well as firms has been reported (Bhalla and Singh, 1996; Singh

2002; Haque, 2003; Singh, 2004). Though CF in gherkin and iceberg lettuce crop was

smooth as there was no local market or very thin market for the crop, there was

flexibility in contracts due to the short duration of the crops, and farmers maintained

alternative sources of income (Singh and Asokan, 2005; Khairnar and Yeleti, 2005). But,

still, there was partial breach of contracts in gherkins as the firm did not procure as per

contract in case of 63% of contract farmers in Andhra Pradesh (Swain, 2011). This was

so only in 30% cases in case of paddy seed.

The studies in the states of Punjab, Haryana and Andhra Pradesh reveal that contract

growers faced many problems like undue quality cut on produce by firms or on-

procurement of produce, delayed deliveries at the factory, delayed payments, low

price, poor quality inputs, and pest attack on the contract crop which led to crop

failure or raised the cost of production (Bhalla and Singh, 1996; Singh, 2002; Rangi

and Sidhu, 2000; and Dileep et. al., 2002; Satish, 2003; Swain, 2011). The firms also

manipulated provisions of the contracts in practice, e.g. in case of broiler chickens in

Tamilnadu, they picked up birds before due date or delayed it depending on the

demand which meant losses for contract growers. They also delayed payments upto

60 days. But, growers were locked into these contracts due to the firm specific fixed

investments they had made (Singh and Asokan, 2005). Infact, broiler CF can not

really be representative of the CF in agriculture as it is more of a case of „putting out

work‟ or „wage labour contracting‟ as the contracting agency provides all the inputs

ranging from day old chicks to feed and vaccination, and the contract grower just

provides labour for feeding the birds and supervision where land requirement is not a

big factor.

Even state sponsored programme of CF did not deliver in Punjab. The contracted

winter maize and hyola crops failed almost completely due to inclement weather and

poor quality seeds. In case of green peas, the contract growers were forced to dump

their produce in open market, after being rejected by the Punjab Agro Industries

Corporation (PAIC) on quality ground as per the contract specification, as there had

been fungus infection due to inclement weather. Some farmers found fault with the

fungicide supplied by the contracting company in this regard. The dumping of

contract-produced crop in open market led to fall in local market prices and it was

being sold at Rs. 3 per kg. as against a promised price of Rs. 5 per kg. by the PAIC

(Singh, 2003; Rangi and Sidhu, 2003). In general, across crops and regions, the CF

program could not achieve the stated area goal. Not only it fell short in terms of

contracted area being less than that stated by the agency, but also the farmers did not

plant the entire contracted area with the contract crops. The gap was much larger in

latter case and even as high as 50% in winter maize in Ludhiana and 20% in hyola in

both Ludhiana and Patiala. There was a different private seed company for each crop

and they only provided seed and no other extension service. Finally, none of the

companies procured the produce and advised the farmers to sell in open market either

because open market prices were higher than contract price or quality was not as

desired. Most of the problems farmers faced related to production and quality (like

quality of seed and extension) and not marketing of produce (except peas) as open

12

market could take care of contract produce. Due to this experience, a large majority

(60%) were not willing to enter into CF arrangement again (Dhaliwal et al, 2003).

There have also been instances of corruption and malpractice in the PAFC run CF

program due to conflicts of interest among implementing agencies and lack of

monitoring (Ramachandran and Dogra, 2006; Singh, 2006). Since most of the CF

agencies do not provide crop insurance or other protection, production risk is no

covered most of the time.

The World Bank reports also point to the deficiencies in the CF program launched by

the state Government of Punjab. It states that for the programme of CF to be

successful, it should take into account the aspects of selection of crops for contracting,

development of quick and effective contract enforcement and dispute resolution

system, limiting fiscal risks to the state government, limiting the number of parties in

a contractual arrangement, and developing farmers‟ organizations capable of

contracting with sponsors, with a view to reduce transaction costs, increasing

information flow, and improving farmers‟ negotiation position (WB, 2003; WB,

2004).

Pricing

The contracting agencies, including those contracting organic produce, and the fresh

food retail chains give market price based prices to their contract or „contact‟ farmers

(Singh, 2009; Singh and Singla, 2011). The question which should be asked is: Is it a

fair practice, as in India, market prices fluctuate so widely? If market prices were

efficient, why did the chains have to go to growers? Most of the liberalization in the

farm sector including abolition of the APMC Act in Bihar has been on the basis of the

assumption that APMC markets have behaved monoposonistically and, therefore,

need to be done away with or made to compete with other channels. If that was true,

why should a buyer go back to the same mandi to discover procurement price? This is

a serious issue as even a significant premium over market price may not help a farmer

if open market prices go down significantly which is not uncommon in perishable

produce markets in India. Thus, the issue of what is fair price for the primary grower

in a chain remains as there is little transparency in pricing and costing of operations.

This kind of practice also compromises the market risk reduction role of CF.

2.3 CF and natural resources/environment

In India, irrigation intensity of contract crops, i.e. tomato, potato and chilly, was more

than that of wheat in Punjab during the late 1990s under Pepsi Foods (a Pepsico

subsidiary) CF. For example, potato required 8-12 irrigations compared with only 5-6

for wheat and other crops. Pesticides and fertilisers were also used at much higher

levels than in the traditional crops. Potato cultivation required 108 kg. of NPK

(inorganic fertiliser) per acre as against only 78 kg. for wheat and 60 kg. each of

phosphorus and potassium per acre. Tomato crop required 60-90 kgs. of nitrogen, 60-

100 kgs. of phosphorus, and 60-120 kgs. of potash per acre depending on the quality

of soil. Similarly, the chip potato crop required 4-5 pesticide sprays and the seed

potato crop 6-7 sprays (Singh, 2002). This, despite the fact that the company

(Pepsico) website states that it follows a policy of “application of environmentally

sound agricultural practices with its suppliers of agro-materials (Aragon-Correa and

Rubio-Lopez, 2007). Tomato crop under CF required as many as 14 sprays, which

was even higher than that in cotton (Singh, 2002). This, in a situation where farmer

awareness of the negative effects of pesticides on the environment, other than human

13

and animal lives, especially food-related aspects, was very low (Gandhi and Patel,

1997). Recently, the use of fertilizers in contract farmed gherkins and paddy seed has

been found to be very high compared with that in non-contract crops (Swain, 2011).

More recently, in Punjab, it was found that CF promoted by the provincial

government to encourage diversification of cropping pattern away from wheat and

paddy led to less water consumption on contract farms as against non-contract farms.

The water consumption for paddy was 265.71 hours per acre compared with only

183.86 hours for Basmati paddy promoted and grown under the CF arrangement.

Similarly, maize under CF led to water use of the order of only 18.35 hours per acre.

This meant that crops being grown under CF arrangement were water saving. That

was so due to the provincial government plan to promote those crops. Overall,

contract growers‟ weighted water consumption per acre was 120.49 hours compared

with 129.58 hours in case of non-contract growers. But, reduced water consumption

on contract farms was due to greater area devoted to the new crops (Basmati and

Maize) and not due to any new agricultural practices promoted by the contracting

agencies. In fact, the contract farmers were practicing more intensive agriculture than

the non-contract farmers and were devoting significantly higher number of water

hours to basmati and maize than that by non-contract farmers across all crops. Thus,

increased commercialisation of the various crops under CF propelled these contract

farmers to use various inputs more intensively. Further, crop combination of potato

and sunflower promoted under CF was more water intensive, though more

remunerative than wheat (the alternative traditional crop) and therefore, defeated the

very purpose of CF in the state (Singh, 2007). More recently, a study of gherkin and

paddy seed CF has found higher irrigation intensity of the contract crop compared

with non-contract crops (Swain, 2011).

McCain Foods, a subsidiary of the Canadian MNC-McCain which has entered India

recently with a processing plant for French fries and practices CF with growers in

Gujarat, had made it compulsory for the contract growers to go in for micro

irrigation given the low groundwater table in the area which can have larger

implications for both the farmer and the society if not attended to. Banaskantha

district where the company undertakes CF of potato, had the seventh highest level of

exploitation of ground water in the state. This condition about micro-irrigation is not

even mentioned in the contract of the company, but all the contract farmers had

sprinkler systems, and mostly without any subsidy as the imported equipment

adopted by growers was not recognized for subsidy at that time. This and other input

supply support led to low farmer defaults and reflected high level of involvement of

the firm with growers (Singh, 2008). Earlier, Pepsi in Punjab advised farmers to

apply insecticide just after the white-borer larvae had broken out of their eggs and not

when they matured as farmers used to do earlier. This way, lesser insecticide was used

more effectively. Also, the company promoted the use of locally relevant traditional

techniques like use of a local grass called “Sarkanda” for protection of plants from

winter, and black ash for covering the soil to prevent crust formation and to give

warmth to seeds (Singh, 2001).

Gherkin contract production started in India in the early 1990s in the southern

Indian states. In 1993, Unilever started sourcing for the Amora and Maille brands.

However by 1998, it was clear that yields were poor and quality was not good

enough. Now, Unilever works with 7 suppliers who have contracts with 6000-7000

14

small farmers across 3 states- Karnataka, Tamil Nadu and Andhra Pradesh. It started

focusing on package of agricultural practices to help farmers to improve their yields

in 1999. Gherkins suffered from 3 major pest/disease problems:

• Gherkin fruit borer

• Melon fruit fly

• Downy Mildew

The first step was pest/disease identification wherein a straightforward guide to the

main pests, with clear photos and cultural control options in the local language was

provided to the contract growers. Pesticides could only be applied after

recommendation from a field officer of the buyer. The Integrated Pest Management

(IPM) products were distributed through field visits. It also used a „Bollywood‟

style film at village meetings to overcome literacy issues. Equally important were

field meetings and demonstration days.

The Downy Mildew was tackled by:

• Introduction of rotation

• Closed growing period in Monsoon season

• Introduction of tolerant varieties and variety trials

• Improved irrigation leading to reduced humidity and reduced need for

fungicides.

The Melon Fly was controlled through:

• Introduction of sticky traps and pheromone traps

• Banana/Gherkin fruit bait traps for Melon fly

Similarly, for Fruit borer, pheromone traps were introduced and natural pests for

fruit borer control were identified. Besides, training was provided to growers in the

basic use of pesticides in which Unilever sponsored demonstrations in good

practice including use of pesticides, storage and protective clothing, and explained

the pesticide application link to chemical residues in gherkin resulting in export

issues. Consequently, yields doubled and the reduction in fungicide use on Gherkins

was dramatic. Besides, there was reduction in insecticide usage which was a result

of the total agricultural improvement package (Ramesh, 2007). Most of the organic

production takes place under CF arrangements and the contracting agencies provide

various bio-inputs to the contract growers as was in the case in organic cotton and

organic basmati which had helped resource conservation and improvement (Singh,

2009).

What comes out from the above analysis of the CF situations is that increasingly

environmental concerns are dictated by the market demand e.g. the case of chemical

residues or organic practices. In Kenya, most of the environmental management

efforts were influenced by consumer preferences in the industrialised countries. This

led to drastic reduction in misuse and abuse of the pesticides (Opondo, 2000). But,

markets may not signal the importance of ecological concerns in all situations and all

times due to various imperfections in the market and externalities in the presence of

weak monitoring. For example, in Kenya, soil erosion was not attended to by the

contracting agencies as that was not reflected in the product quality and was an

externality of the contract production. It continued to be seen as the responsibility of

the farmer and the government (Opondo, 2000). Similarly, price premiums for

environmentally friendly food may not encourage genuineness due to incentive to

15

cheat and mislabel due to information asymmetry (Hobbs, 2003). Therefore, it is

important to proactively provide mechanisms to ensure environmental compliance

and concerns.

But, it is not that CF per se leads to environmental degradation in agriculture. It only

contributes to it as it also adopts the existing production processes prevalent in the

sector. But, it can come handy to rectify the situation as export oriented firms which

need chemical free raw materials due to international market pressure, can make

contract growers switch to less environmentally harmful/more environmental friendly

production processes as they have the resources, including technologies and markets,

to promote this kind of farming. It makes both business as well as development sense.

These firms can also help farmers adopt Good Agricultural/Farm Practice (GAP/GFP)

similar to the concept of Good Manufacturing Practice (GMP) in industry as the

international market is increasingly demanding this kind of system in agro products.

3. Small Producer Exclusion

Given the dominance of smallholders in developing country farming, the crucial

question about CF is whether it is inclusive or smallholders. Globally, there is

evidence to show that contracting agencies in general exclude smallholders and prefer

larger holders for various reasons like transaction costs, extent of default, though there

is some evidence that for the same reasons, sometimes smallholders are preferred or

agencies keep moving from large to small or other way round overtime (Bijman,

2008). But, generally, contracting agencies, especially private, tend to prefer large

farmers for CF because of their capacity to produce better quality crops due to the

efficient and business-oriented farming methods, large volumes of produce which

reduces the cost of collection for the firm, their capacity to bear risk in case of crop

failure, and various services provided by these large producers like transport, storage,

etc (Wilson, 1986; Winson, 1990; Burch and Pritchard, 1996; Fulton and Clark, 1996;

Key and Runsten, 1999).On the other hand, small farmers are picked up by firms for

contracts only when the area is dominated by them, there is government directive to do

so or they are found to be low cost producers in certain areas and crops (CDC, 1989).

Further, firms may work with small farmers to make use of the state support (financial

and technical) to these producers under various development programmes (Glover and

Kusterer, 1990) and to benefit from lower cost production on these farms as these

farmers have access to cheaper family labour, and being residual claimants of their

labour, work more conscientiously than hired labour (Key and Runsten, 1999). In fact,

some of them even use large growers, rural elite, and local small processors as sub-

contractors to procure from the small growers for the company (Kirk, 1987). The seed

companies in India use small companies as subcontractors to procure seeds produced

under contracts (Shiva and Crompton, 1998). In Canada, small tomato growers were

preferred as the crop required hand-picking which only small farmers do as the large

ones do mechanical harvesting, especially when weather limits the use of mechanical

harvesters (Winson, 1990). Similarly, in India, gherkin CF is carried out by small and

marginal farmers as the crop requires plenty of labour inputs which these faming

families can provide from within (Dev and Rao, 2005). Also, working with many small

farmers in the case of small processors gives the required flexibility in procurement

schedule helping to extend the processing season and use the equipment efficiently; and

helps spread risk of supply failure as compared to working with a few large farmers.

16

It has been found by many studies in India that most of the contracting firms work

mostly with large and medium farmers (Bhalla and Singh, 1996; Singh 2002; Haque,

2003; Dev and Rao, 2005; Singh and Asokan, 2005; Kumar, 2006; Khairnar and Yeleti,

2005; Singh, 2008; Swain, 2011) with the exception of firms in Karnataka, Tamilnadu,

and Andhra Pradesh which worked with small and marginal farmers due the nature of

the crop/produce (cucumber/gherkin, and broiler chicken). But, even in gherkins, a

recent study shows that the land holdings of contract growers were much larger (7.4

acres) and more irrigated compared with those of non-contract growers (4.9 acres)

(Swain, 2011). This bias in favour of large/medium farmers is perpetuating the practice

of reverse tenancy in regions like Punjab where these farmers lease in land from

marginal and small farmers for contract production (Singh, 2002; Haque, 2003). Table 1

also shows that except NGO, organic and gherkin contracts, all other contracts have area

under contract crop which is much larger than the average size of holding in India. In

fact, this is only the area under contract crop which means the total land holdings of

these contract growers are much larger.

Though average size of contract growers‟ holdings compared with that of the

area/state is not an exact indicator of exclusion of small, micro studies point to the

exclusion of small holders. For example, in Gujarat, among the sample farmers, only

one contract grower with McCain had operational land holdings of less than five acres

(although McCain did buy from some small growers without contracts) with average

land holing of contract farmers being 19 acres compared with only 5 and 9 acres for

farm gate and APMC sellers respectively. Similarly, contract growers for Frito-Lay

(Pepsi) in Punjab had average operational holdings of 63 acres, with only 22 acres

owned and the rest leased. None of the sample contract grower with Frito-Lay had

less than 10 acres of land, in spite of the fact that the average size of holdings in the

state was 9 acres and 70% holdings were below 10 acres each (Singh, 2008). Another

study of CF in Punjab showed that the average size of the operational holding of

contract growers was more than one and a half times that of the non-contract growers.

It found „no marginal farmer (in the size group of below one hectare) [...] operating

under CF. A handful of small farmers (in the size group of one to two hectares) were

operating‟ (Kumar, 2006; p. 5369). Another study noted „the majority of the acreage

registered in the project (CF by Punjab Agro Foodgrains Corporation (PAFC)) is held

by larger farmers, who tended to receive greater benefits from participation (in CF)‟

(Witsoe, 2006; p. 16). Table 2 gives a detailed account of the average profile of

contract growers across crops and regions based on empirical studies.

Infact, one of the para statal agencies in Punjab (Punjab State Co-operative Marketing

Federation (Markfed)) placed advertisements in local newspapers a few years ago

publicising its basmati paddy CF program where it asked potential contract growers to

contact its district managers if they were willing to grow at least three acres of

basmati paddy under CF with Markfed. The questions which arise from this kind of

offer are: first, how many small farmers can spare three acres for basmati paddy?

How many can spare it for CF? and how many would like to spare it for CF with

Markfed?

17

Table 2:Crop and agency wise average size of holding of contract growers (acres)

Study and

year

Contracting

agency and

place

Crop

under

contract

Average size

of contract

grower

holding

Average

size of op.

holding in

the state

Average %

area under

contract

crop Singh, 2002 Frito Lay

(Pepsi), Punjab

Potato 53 9.5 8

-do- Nijjer Agro,

Punjab

Tomato 22 9.5 23

-do- HLL, Punjab Tomato 78 9.5 33 -do- Frito Lay

(Pepsi), Punjab

Chilly 90 9.5 4.5

Dev and

Rao, 2005

AP Govt. and

various

processors

Oil palm 10 3 40

-do- BHC Agro

India, AP

Gherkins 7 3 15

Asokan and

Singh, 2006

A M Todd,

Punjab

Mint 57 9.5

Kumar,

2006

Many MNCs

and local firms

in Punjab

Many

crops

together

37 9.5 12

Singh, 2008 McCain Foods,

Gujarat

Potato 19 6.45 21

-do- Frito Lay

(Pepsi) Punjab

Potato 63 9.5 53

-do- A M Todd,

Punjab

Mint 40 9.5 27

R Singh,

2008

Frito Lay,

(Pepsi) Punjab

Potato 75 9.5 -

Pritchard &

Connell,

2011

Karnataka and

Andhra (AVT

McCormick)

Chilly 35 (Karnataka)

22.5; 42; 22.5

(AP-3

locations)

60 and

70;25;70

respectively

Source: various studies.

It is not incidental that most of the CF projects are in the states of Punjab, Haryana,

Gujarat, Maharashtra, Karnataka and Tamilnadu which are agriculturally developed

states. On the other hand, vast areas of India such as Bihar, Jharkhand, Chhatisgarh,

Orissa, West Bengal, the entire north-east India and areas of Uttarakhand, Himachal

Pradesh, Kerala and Jammu and Kashmir have been bypassed by CF projects. Does it

mean that these areas and farmers would not benefit from commercialization and

vertical co-ordination of agriculture? These are areas with highest concentration of

small and marginal farmers (Gill, 2004). This essentially means that contracting

companies do not encourage participation of those who need to be helped to

participate as risk preference and innovativeness require not just attitude but also

resources and risk taking capability to undertake risky crops and ventures (Glover,

1987).

Similarly, as part of the more recent retail chain penetration in the Indian farm sector,

the Food Chain Partnership (FCP) program of Bayer Crop Science (BCS)- an

agricultural input MNC, in India was found to be highly selective in terms of regions

18

which are included, the farmers who can participate, the crops that are covered, and

the information passed on to the farmers. The potential of such market-driven

structures which concentrate only on those regions and products that promise the

highest profits is, therefore, questionable. BCS launched its FCP program in those

areas where retail and processing industries are most active in procuring from farmers

and where private centralized procurement infrastructure, such as collection and

distribution centers, has already been set up. Those areas are located within five

`nodes' in (1) Punjab and Haryana, (2) Maharashtra, (3) Gujarat, (4) Karnataka and

Tamil Nadu, and (5) Andhra Pradesh. Within these states, there are clusters of

intensified production of a certain vegetable crop. This focus on selected regions

excludes permanently the majority of the Indian farmers from the program. The FCP

program, in its initial phase, targets exclusively vegetable crops. The focus of the

program on specific crops excludes a big majority of farmers (Trebbin and Franz,

2010).

In the emerging fresh fruit and vegetable retail chain led procurement of vegetables, it is

medium and large growers who are the „contact‟ (not contract) growers for these chains

with only a few exceptions like Namdhari Fresh which involved small holders and

practised CF with the vegetable growers (table 3). Though it is argued that vegetable

crops are more suitable for small holders due to their labour intensity and regular

income, but the market/buyer does not seem to favour small holders. This is also

corroborated by another recent study of a retail chain in Karnataka (Reliance Fresh)

where the average size of a retail supplier varied from 2.5 hacs (6.25 acres) to as much as

8.2 hacs (20.5 acres) and 9.3 hacs (23.25 acres) across locations within the state and this

was many times the average size of holding in the state or even the study areas (Kolar

and Belgaum) which were 4 acres (state) and 2.9 acres (Kolar) and 5 acres (Belgaum)

respectively (Pritchard et al, 2010). Another study (Mangala and Chengappa, 2008) on

the impact of a food retail chain (FRC) in the same state (Karnataka) also reports data

which shows that land holding size as well as the size of irrigated and dry lands was

higher for food chain farmers (6 acres; 4.5 acres and 1.5 acres respectively) than

traditional market farmers (2 acres; 1.5 acres and 0.5 acres respectively).

Thus, retail chain linkage is selective not only in terms of regions reached by the

program, but also in terms of the crops covered which are only those that are of

corporate interest. Further, it is selective in terms of farmers that are selected (size of

farms, literacy, access to mobile phones, and irrigation facilities). Thus, those whose

needs are most urgent i.e. the marginal and the small farmers, farmers lacking

irrigation facilities and basic education, or farmers in more remote regions, are

excluded.

The organic produce contracting agencies also tend to exclude small producers due to

reasons of high certification costs, smaller volumes produced, and tighter control by

the chain leaders in the absence of any local market outlets for the organic producers

(Raynolds, 2004; Singh, 2009). In Madhya Pradesh, in case of an organic cotton

project organized by a private corporate textile chain, out of a total of 44 farmers

interviewed 5% were marginal (less than one hectare of land), and 22% small (1-2

hectares of land) given 40% and 24% of the holdings in the state are marginal and

small respectively. Average land holding was found to be is 15.3 acres with 50%

holding as high as 25 acres (10 hectares) which was much larger than the average size

of operational holding in the state (2.28 hectares or 5.6 acres) and in the Nimar valley

19

(study area; 2.83 hectares (7 acres) (Shankar, 2005). This shows that the organic

cotton contracting company largely worked with large and medium farmers as 50% its

growers were really large growers with more than 10 hectares of land each. Further,

the average land under contract was 12.8 acres which reconfirms the large farmer bias

of the company‟s organic project. The correlation coefficient between ownership

holding and organic acreage was 0.84 which again showed that larger farmers put

larger acreage under the organic project. Similar was the case of organic Basmati CF

in Haryana where average size of operated land of the contract grower was 32 acres

compared with the average size of operated land in the state which was 5.26 acres

(Singh, 2009).

Table 3: Crop and agency wise average size of holding of retail chain

contact/contract vegetable growers

F&V chain Location Crop under

contract

/purchased

Average size (in

acres) of

contract/contact

grower holding

(operational)*

Average size

of

operational

holding in

the state

Average

% area

under

vegetabl

es

ITC‟s

Choupal Fresh

Chandigarh

region (

Punjab/Har

yana)

Cauliflower,

bottlegourd

9.91 9.36 (Punjab)

and 5.26

(Haryana)

37

Reliance

Fresh (RF)

Ahmedabad

region

Cauliflower,

cabbage

15.9 6.45 47

ABRL‟s More Ahmedabad

region

Cauliflower,

tomato

15.43 6.45 71

ABRL‟s More Bangalore

region

Cauliflower,

tomato

7.52 4(2.9)** 65

RF/ABRL‟s

More (thru

supplier)

Belgaum

region

Cauliflower,

tomato

16.97 4(5)** 33

Namdhari –

Fresh

Bangalore

region

Okra, baby

corn

4.56 4(2.9)** 64

*- there was no major difference between owned and operated land as leasing in/out was

not significant.

**- figures in brackets are average land holding size in the study district/region.

Source: Singh and Singla, 2011.

3.1 Reasons for Exclusion

The aspects of CF which contribute to exclusion of small producers are: enforcement

of contracts, high transaction costs, quality standards, business attitudes and ethics

like non/delayed/reduced payment and high rate of product rejection, and weak

bargaining power of the small growers (Kirsten and Sartorius, 2002). The organisers

of CF also find it costly to work with small producers due to their scattered location

and smaller volumes though there are also many advantages of working with them

like easy availability of family labour, better commitment levels, helping spread risk

of default, giving corporate agency a social face, and lower cost of production due to

lower mechanisation of smaller farms (Boselie et al, 2003). The eligibility criteria for

participation in CF projects/schemes like irrigated land, suitable land, land near main

road, literacy level of the farmer are themselves discriminatory in terms of who can be

20

a contract grower. In fact, in CF everywhere, private agribusiness firms have less

interest and ability to deal with small scale farmers on an individual basis (Hazell,

2005).

Even in modern retail driven arrangements with farmers like that of BCS‟ FCP

program, there are several preconditions as to who can become a partner farmer in the

program, including: minimum land holding size of one acre (0.4 hectare), irrigation

facilities, literacy, and a certain `business sense', as well as access to a mobile phone

to enable the flow of information. Although there are differences between and within

states and regions, such criteria are generally hard to fulfill. This, and the focus on

certain core areas of vegetable production, results in the exclusion of many farmers

(Trebbin and Franz, 2010).

4. Mechanisms for Inclusion

The crops which are suitable for smallholder participation should also be chosen

carefully e.g. they should be short duration. It is seen that voluminous crops like

potato are not fit for smallholders as they can be produced on large scale and are

amenable to mechanised cultivation. On the other hand, crops which are more labour

intensive like gherkins or tomatoes and are not amenable to mechanical handling, are

more suitable for smallholders as they require constant and regular crop care. Many of

these crops are also those which would not be grown without a contract e.g. organic

cotton or gherkins as they have no open markets which are attractive.

If CF is going to be the way for participation in most high value produce chains, then

it is important to make a place for smallholders. One way to do that is to encourage

and promote group CF. The state should make it attractive for agencies to work with

groups rather than individuals which will lower transaction costs for agencies as well.

All incentives given for CF should be for those working for smallholders or their

groups as was the case in Thailand which promoted group CF thru national plans

(Singh, 2005). More recently, the government of Maharshtra has started organising

potential contract farmers into groups of 10-15 farmers each and facilitating their

contract linkage with buying agencies like Tata Chemicals. But, interestingly, here

too, the average size of holding of such farmers ranges from 7 hectares to as much as

30 hectares (The Financial Express, Ahmedabad, Oct 15, 2011).

The CF agencies should proactively involve NGOs into their CF operations and even

organise farmer co-operatives or groups for more sustainable CF programs (Mayers

and Vermeulen, 2002; Pingali and Khwaja, 2004). In contract arrangements with

small producers in west African countries, the cotton companies started transferring

some of the operational or functional responsibilities like distribution of inputs,

equipment orders, and credit repayment management, to the village associations

during the 1970s itself. They provided these associations with management skills for

these tasks. The companies relied on traditional village authority structures for

organising the associations but limited the associations to one per village to simplify

company purchasing, delivery and marketing procedures. This arrangement accounted

for a significant part of each cotton company‟s success (Bingen et al, 2003).

Major conditions for successful interlocking between agribusiness firms and small

producers include increased competition for procurement instead of monopsony,

guaranteed market for farmer produce, effective repayment mechanism, market

21

information for farmers to effectively bargain with companies, large volumes of

transactions through groups of farmers, for lowering transaction costs, co-operation

among genuine agribusiness firms in the area, and no alternative source of raw

material for firms (Kirsten and Sartorius, 2002; Bijman, 2008). Further, for the

sustainability of company-farmer partnership schemes, it is important that the

company is able to successfully market its products so that farmers do not suffer from

lack of market (Baumann, 2000; Haque, 2000). Building of relationships of trust with

farmers through company reputation rather than marketing gimmicks is crucial. This

requires mutual respect, fair and transparent negotiation process, realistic assessment

of benefits, long term commitment, equitable sharing of risk, and sound business

plans (Mayers and Vermeulen, 2002). Innovative pricing mechanisms like bonus at

the end of the processing cycle, shares in company equity, dividends, producer‟s fixed

price, and quality based pricing, which reward performance can help contract

performance.

The state and development agencies can also make it attractive for agencies to work

with smallholders by way of extending lower interest credit and free training and

extension to such growers as was done in Thailand where state bank (Bank for

Agriculture and Agricultural Co-operatives (BAAC)) provided such loans and

Department of Agricultural Extension (DOAE) provided extension support to contract

growers and their groups (Singh, 2005). There are many cases of such support by state

agencies in Malaysia and South Africa to facilitate inclusion of specific types of

smallholders into CF arrangements (Bijman, 2008; Morrison etal, 2006). This can be

achieved thru public-private partnerships which is being encouraged anyway. Specific

tax and other incentives like market fee waiver could be offered to those proactively

involving small holders or their groups/agencies in their operations.

The state should also provide inclusion incentives which are specific to smallholders

instead of being neutral. For example, the Government of Punjab through its Punjab

Agro Foodgrains Corporation (PAFC) was reimbursing extension cost to the CF

agencies/facilitators at the rate of Rs. 100 per acre for three years as part of its

diversification plan. But, doing it irrespective of the size of holding of the contract

growers defeats the purpose as it does not ensure that small and marginal farmers who

can not afford to pay for extension and need to be brought into the contract system are

included. Similarly, the Ministry of Food Processing industries had been providing an

incentive during the 9th

and the 10th

5-year Plans in the form of a reimbursement of

five per cent of the value of raw materials procured through CF with farmers with a

maximum ceiling of Rs. 10 lakh per year for a maximum of three years with the

condition that any organization (private/public/co-operative/Non-Government

organization (NGO)/joint venture/assisted) should work with at least 25 farmers under

contract for at least three years irrespective of the size of the contract grower.

Contracting agencies can also be permitted to do limited corporate farming alongside

CF to reduce their procurement risk and undertake innovative production and research

activities on such leased farms. This is called nucleus-outgrower model of CF or more

recently „partial vertical integration‟ and has been used by contracting agencies in

India and elsewhere (Suzuki et al, 2011; Singh and Singla, 2011).

Finally, in India, the practice of „contact farming‟ should be discouraged as it does not

reduce the market risk of the grower as procurement quantity and price are not pre-

agreed.

22

4.1 Beyond Inclusion

Legal protection to contract growers as a group must be considered to protect their

interest. There are cases of legal protection given to subcontracting industries in Japan

in their relations with large firms. These laws specify the duties (to have a written and

clear terms contract with the subcontractor) and forbidden acts for the large parent

firm. The latter include refusal to receive delivery of commissioned goods, delaying

the payment beyond agreed period, discounting of payment, returning commissioned

goods without good reason, forced price reduction, compulsory purchase by

subcontractors of parental firm's products, and forcing subcontractors to pay in

advance for materials supplied by the parent firm. These provisions are monitored by

the Fair Trade Commission. Interestingly, most of the violations by parent firms were

on the written form and clear terms of the contracts (Sako, 1992). If CF is only the

flexible production systems prevalent in industry applied to farm production, then it is

only logical to extend such legal provisions with necessary modifications to farming

contracts. In farming sector per se, there is the Model Producer Protection Act, 2000

of Iowa State in the USA which requires contracts to be in plain language and

disclose material risks. It provides a three days‟ cancellation period for the producer

to review and discuss production contracts with their advisors. It also provides for

producers to be first priority lien for payments due under a contract in case of

contracting company bankruptcy. Besides, it protects against undue cancellation of

contracts by companies and prohibits „tournaments‟ (contracts where compensation to

grower is determined by his performance relative to others)

(www.flaginc.org/pubs/poultry/poultrypts.)

The model contract agreement (under APMC Act) is quite fair in terms of sharing of

costs and risks between the sponsor and the grower (GoI, 2003). But, it leaves out

many aspects of farmer interest protection like delayed payments and deliveries,

contract cancellation damages if producer made firm specific heavy investments,

inducement/force/intimidation to enter a contract, disclosure of material risks,

competitive performance based payments, and sharing of production risks. Also, there

are state level variations in the amended Acts as agriculture is a state subject in India.

For example, in Gujarat, the amended Act makes the APMC as a party in the tripartite

contract (earlier mandatory, but now optional) stating the logic that APMCs have a

useful role as facilitator as they have long standing relationship with farmers and can

disseminate the CF concept and practice besides monitoring its practice. Though the

union model Act exempts contract procurement from market fee, the Gujarat Act

makes it mandatory to pay the prescribed cess to the concerned APMC or in case of

multi-location operations, to the GSAMB which will apportion it to the concerned

APMCs. Haryana and Gujarat also prescribe bank guarantees for preventing defaults

by contracting agencies. On the other hand, Bihar has abolished the APMC Act

instead of amending it and that makes the agricultural market in the state totally

unregulated. Table 4 provides a status of the progress in amending the state APMCs.

23

Table 4: Status of reforms in APMC Acts as on 30.09.2011

Source: Working Group, 2011.

Contracts need to be transparent and require frequent and independent scrutiny so that

they remain competitive both with similar contracts and with open market

transactions. Wide publicity of contract terms can help to stimulate competition.

The functioning of traditional markets (APMC) needs to be improved to enhance their

cost efficiency so that producers can realize better prices and see APMCs as

alternative to CF. The amended APMC Act allows for the setting up of private

markets; it is also necessary to require an open auction system, improve buyer

competition in markets, provide better facilities such as cold storage and improve

farmers‟ access to market information. These markets are important to small farmers

and even a significant proportion of medium and large farmers, who still depend on

them; they also serve as the main competitors to CF and can improve the terms

offered to contract growers (Singh, 2008).

4.11 Producers' organizations

Collective action to deal with scale requirements needs to be designed to satisfy new

product and process standards or to avoid exclusion from the value chain. Collective

action through cooperatives or associations is important not only to be able to buy and

sell at a better price but also to help small farmers adapt to new patterns and much

greater levels of competition (Farina, 2002). There is also a need to strengthen small

farmer organizations and provide technical assistance to increase productivity for the

cost competitive market, provide help in improving quality of produce, and to

encourage them to participate more actively in the marketing of their produce in order

to capture value added in the chain (Schwentesius and Gomez, 2002).

Producers‟ organizations amplify the political voice of smallholder producers, reduce

the costs of marketing of inputs and outputs, and provide a forum for members to

Sl.

No.

Type of Reforms Name of States/ Union Territories

1. Direct Marketing;

Contract Farming and

private (non-APMC)

markets

Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Goa,

Gujarat, Himachal Pradesh, Jharkhand, Karnataka, Maharashtra,

Mizoram, Nagaland, Odisha, Rajasthan, Sikkim, Uttarakhand

and Tripura.

2. Partial amendments a) Direct Marketing:

NCT of Delhi, Madhya Pradesh

b) Contract Farming:

Madhya Pradesh, Haryana, Punjab and Chandigarh

c) Private market

Punjab and Chandigarh

3. No Act and hence does

not require reforms

Bihar* (repealed on Sept. 1, 2006), Kerala, Manipur, Andaman &

Nicobar Islands, Dadra & Nagar Haveli, Daman & Diu, and

Lakshadweep.

4. Act already provides

for the reforms

Tamil Nadu

5. Further action is

required for reforms

Meghalaya, Haryana, J&K, West Bengal, Puducherry, NCT of

Delhi and Uttar Pradesh.

24

share information, co-ordinate activities and make collective decisions. Producers‟

organizations create opportunities for producers to get more involved in value adding

activities such as input supply, credit, processing, marketing and distribution. On the

other hand, they also lower the transaction costs for the processing/marketing

agencies working with growers under contracts. Vigorous bargaining co-operatives or

other agricultural producer organisations are needed to negotiate equitable contracts

(Goldsmith, 1985; Key and Runsten, 1999). These types of organisations have been

able to secure the standardisation of contracts and their scrutiny by a government

agency in the USA (Wilson, 1986) and the bargaining groups have negotiated input

purchase and output sale collectively (Welsh, 1990). In Japan as well, farmers have

managed their relationships with companies well through co-operatives (Asano-

Tamanoi, 1988). The groups or farmers‟ organisations like co-operatives not only

lower transaction costs of the firms but also lower input costs for the farmers and give

them better bargaining power as was the case of a potato growers‟ co-operative in

north Thailand which acted as a link between the growers and the company (Ornberg,

2003).

Producer companies

A producer company can be registered under the provisions of Part IX-A, Chapter one

of the Companies Act 1956. (for details see Singh, 2008a). Already, there is good

progress, though a bit late, on the use of this Act under which there are 130 such

companies in India now. A large proportion of these are in the south and west regions

of India. Major states with sizeable numbers of producer companies include

Tamilnadu, Orissa, Maharashtra, Rajasthan, Gujarat and M.P. Besides these, 17 such

companies have been organised in MP under the District Poverty Initiative Project

(DPIP) in sectors of seed, grain, rice and tomato, chilli, poultry, potato, coriander,

turmeric, ginger, milk, and biofertiliser production. Earlier, in Sri Lanka, such

producer or farmer companies have been able to engage in CF with food processing

and food retail companies (Esham and Usmi, 2007).

Though the concept of producer companies is noble, the companies organized under

the Act face many problems which are stumbling blocks in their teething years.

Firstly, the producer companies are not yet recognized by the union or state

government for any incentive or support. Secondly, banks refuse to lend to these

companies due to lack of state or government guarantees. They also face difficulties

in getting APMC licenses due to traditional co-operatives already having licenses in

some places. Finally, and most importantly, these companies are not allowed to

mobilize capital from the market. This capital constraint, like their traditional

counterparts, makes it difficult for producer companies to set up facilities to do value

addition and marketing. It is sad that even after six years of existence of the law on

producer companies, neither the state nor the development agencies have tried to

create awareness of the concept and its practice. Most importantly, the JJ Irani

Committee has now recommended that the producer company clause should be taken

out of the purview of the Companies Act. It is of the view that the producer company

does not fit the definition of a company. If need be, there could be separate legislation

for producer companies. This recommendation of the Committee has come at a time

when the concept was just picking pace in terms of its practice at the producer level

and many development agencies seemed to have found a way to organize producers in

a market oriented economy. Any tinkering with the law at this juncture will certainly

create trouble for the existing and the new producer companies. The government, both

25

the union and the state, should recognize producer companies as producer co-

operatives and extend all the support as extended to traditional co-operatives (Singh,

2008a).

5. Conclusions

Though there are concerns about the ability of the small farms to survive in the

changing environment of agribusiness, still there are opportunities for them to exploit

like in product differentiation with origin of product or organic products and other

niche markets. But, the major route has to be through exploitation of other factors like

external economies of scale through networking or clustering and alliances like CF

(Kirsten and Sartorius, 2002). For this, intermediation is required for small farmers to

link them up with global or national markets in processing and marketing (Lipton,

2002). This intermediation could be by a local private enterprise, domestic or

multinational, a statal or para-statal organization, or a co-operative or farmer

association, all of which could use CF as a mechanism to work with small growers.

Marketing extension which includes better product planning at farmer/group level,

provision of market information, securing markets and alternative markets for farmers

and improving marketing practice at farmer level in terms of grading, sorting,

packaging and primary processing is much needed and could come from CF linkage.

There is also need to communicate effectively with producers about the various

benefits of the CF linkage, not just price. It could be lower cost of production, lower

transaction cost or better quality of produce or other benefits like resource

conservation or brand building in the market.

The experience of CF across the globe suggests that it is not the contract per se which is

harmful as a system but how it is practised in a given context. If there are enough

mechanisms like group contracts, producer companies/associations, NGOs, and

regulation of contracts, to monitor and use the contracts for facilitating development of

smallholders, it can certainly lead to a betterment of all the parties involved, especially

small and marginal farmers. In the emerging environment of „triple bottom line‟ of

people, planet and profits, corporate agencies need to incorporate the „people‟ and

„planet‟ concerns into their strategies and actions so that sustainability of both

business as well as smallholders is achieved and sustained.

It is also important to recognize that there is so much diversity in the type of firms,

farmers, crops, and nature of contracts besides the local socio-economic environment

that it is better to focus on a specific situation of CF than the generic institution of CF.

The context of CF is very important to understand to examine its usefulness as many

actors and factors influence the working and outcomes of CF. Therefore, there is no

single blueprint of CF suitable for all situations but a series of alternatives. Any

assessment of CF should be done in terms of how it reduces contract growers‟

production and market risks and how it impacts on their resource base, compared with

the alternatives.

CF agencies can bring better environmental compliance by adopting procedural

justice perspective instead of higher levels of monitoring which may be

counterproductive and damage buyer-supplier relationships due to their being

autonomy reducing for the supplier and conflict generating between the two parties.

26

The procedural justice includes using unbiased, transparent and correctable criteria

and procedures for making and executing decisions which can improve levels of trust

and commitment between the buyer and the suppler. The basic principles include

consistency in applying criteria, suppressing bias, using accurate information,

affording opportunity for correcting errors, providing adequate representation in the

decision making process, and ensuring ethical treatment (Boyd et al, 2007). It is also

known that pro-active environmental strategies can be profitable and sustainable ways

to deal with natural environment (Aragon-Correa and Rubio-Lopez, 2007) and

environmental management improves market related and image related drivers of

economic performance if integrated with other managerial functions (Wagner, 2007).

There is a need to provide for ecological concerns into CF programs and policies.

This can be done by way of land use planning based on soil depth, soil quality, land

slope and suitable water availability. It is also important to understand previous land

use and make it mandatory to follow crop rotation, if necessary.

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Appendix

Table 1: Crop, and Company wise spread of contract farming in India

Company Location Type of linkage Crop/Product Farmers (no.) and

acreage (acres)

Average area

under contract

(acres)

UB group Punjab,

Rajasthan

Thru Pepsi Barley 1300,

10000

8

SAB Miller Rajasthan CF Barley 8150 farmers

Field Fresh

Foods

Punjab,

Maharashtra

Direct CF and

Thru franchisee

Baby corn and

sweet corn 1000

4000 acres

4

Global

Green

Karnataka,

A,P,, and

Tamil Nadu

CF

Gherkin

25,000 (31000 in 2008)

(10,00+4000+11000)

15,857 acres

0.64

Intergarden

Karnataka

CF

Gherkin

4460 farmers (2004)

Vishal Karnataka

CF

Gherkin

600 farmers

Namdhari

fresh

Karnataka CF vegetables 1200; 4800 acres 4

TN project Tamilnadu CF Guar

(clusterbean)

80 acres

Safal

(NDDB)

UK/UP CF- thru

associations

vegetables 150 associations

18000 farmers

AVT

McCormick

Karnataka

and AP

CF Chilly 430

2125 acres

5

DFV

(P&PAG)

Gujarat,

Maharashtra

CF Banana 2150

8600 acres

4

Sanghar

exports

Maharashtra CF(for Bahraini

group N&E)

Banana 100

400 acres

4

Jain

irrigation

Maharashtra CF White onions 1800

4200 acres

2.3

Pepsi Punjab/hary/

Mah/Jhar/Ka

/WB/Guj

CF:Direct/indirec

t

Potato 12000 (6500 in WB

alone)

16000 acres (2600 acres

in WB alone)

1.33

McCains

Foods India

Gujarat CF Potato 750

Siddhi

vinayak agri

Maharashtra CF thru

franchisees

Potato 1000

1500

1.5

MSSL Maharashtra CF Grapes 400

2000

5

Nandan

biomatrix

AP and three

more states

CF thru

franchsiees

jatropha 40000 acres

Trikaya

Foods

Maharshta CF Pacholi/lettuce

Deepak

fertilizers

Maharashtra CF Grape/pomegna

te/onion/banana

2000 farmers

Tina Oils &

Chemicals

Maharashtra CF Soybean and

Sunflower

60,000

236000

4

Biotor

(formerly

Jayant)

Maharashtra,

Gujarat,

Punjab

CF Castor 25000

1,00,000 acres (65000 in

Mah alone)

4

Shakti soya Tamil Nadu CF-indirect Soyabean

37

C & M

Group,Nasik

Maharashtra CF Soyabean and

maize

2200 farmers

HUL Gujarat CF-direct Chicory 1700

4500 acres 2.5

L&T Chhatisgarh CF Safed musli

Herbs India Kerala CF Safed musli,

steevia

AM Todd

Punjab/UP/U

K/Har

CF Mint 2000

10,000

5

Dabur West Bengal CF Pineapple

Nadukuda

pvt. ltd

Kerala CF Pineapple

Garlico

industries

MP CF Garlic and

white onion

Sami Labs Karnataka CF Med, plants

Sunstar

organics

Haryana CF Organic

Basmati

280

1200

4.3

Satnam

Overseas

Haryana/Pun

jab

CF Basmati

Agrocel Gujarat/Hary

ana

CF Organic

Basmati/cotton/

seasame

2200 farmers and 3500

acres 1.6

UOCB Uttarakhand CF Organic

Basmati

440

500 acres

1.1

HAFED Haryana CF Basmati

Markfed Punjab CF Basmati

LT Overseas

Punjab/Hary

ana

CF thru pepsi Basmati 4000

10,000

2.5

Pepsi Punjab CF Basmati 300 farmers

2000 acres

6.67

Satluj agri Punjab./Hary

ana/Uttar

Pradesh

CF Organic

basmati

50

2200

44

Rallis U.P. CF Wheat 19000 acres (2003)

TCL North India F-informal Basmati 45000 aces

Adat

Farmers‟

Co-op. Bank

Trissur CF for Nest

Group, Cochin

Paddy rice 2300 farmers, 250 acres 0.1

Suminter

India

Organics

Across north

India

CF Organic

produce

13,000

71000 acres

5.5

Sresta

natural

products (24

letter

mantra)

Across India,

mainly AP,

Maharashtra

CF –direct and

thru NGOs

Organic

produce

5000 farmers

10000 acres

2

Ion

exchange

farms

Maharashtra CF Organic fruits-

cashew, mango

Maikal

BioRe

MP CF Organic cotton 1700

12885 acres

7.6

Amit Green

Acres

Gujarat CF Organic cotton

and sesame

500

3200

6.4

Eco farms Maharshtra CF Organic cotton 7000

50000

7.1

Mahima MP CF Organic

produce

600

10000

16.7

Pratibha MP CF Organic cotton 2700 8.1

38

syntax 22000

NCC shri

cotton,

AKOLA

Maharashtra CF Cotton 1684; 16818 acres 10

Virchand

narsingh

cotton

Maharashtra CF Cotton 1551; 4632 acres 3

Mohta

spinning

Maharashtra CF Cotton 1294; 3717 acres 30

Shri NCC

Santosh

fibres

Maharashtra CF Cotton 3720; 18785 acres 5

Super

spinning

Tamil Nadu CF Cotton

Apachi

cotton

Tamil Nadu CF Cotton

INHERE Uttarakhand CF Organic

produce

2269 (350 SHGs)

1000 acres

0.44

Morarka

foundation

All India CF Organic

produce

Himalaya

health care

Karnataka CF Ashwagandha 07 1750 acres

Dhawan intl Uttarakhand Direct Med. Plants

Dabur India AP CF Amla (Indian

gooseberry)

1042 acres

HUL Gujarat CF Chicory

Seed

companies

(35-40)

All over

India

including

NSC/SSCs

CF-Direct and

thru organisers

Seed Each one with a few

hundred farmers for each

crop and a few hundred

acres

Palm oil

(Godrej,

Palm Tech,

SICAL,

Radhika)

AP CF-direct Palm 95000 acres

Cauvery oil

palm

Tamil Nadu CF-direct Palm 209; 4375 acres 21

Suguna

poultry and

hatcheries

Tamil Nadu CF Chicken 15000 across 8000

villages and 11 states

Venkateshw

ara

hatcheries

Mah/AP/TN CF Chicken

Swathi

hatcheries

Tamil Nadu Chicken Of the total broiler

production 37% is under

contract farming and 78%

of it is from south India

Arambagh

hatcheries

West Bengal Chicken

Patel farms

Gujarat

CF

Emu

35 farmers

Champion

Agro

Rajkot,

Gujarat

CF Baby corn 2500 acres

Source: Corporate Interventions in Indian Agriculture: FICCI, 2010; Singh, 2009; Singh and Singla,

2011; Vaswani et al, 2003; Gurdev Singh and Asokan, 2005; Pritchard, 2011; Pande, 2008, Kalamkar,

2011; company websites and field studies of the author.