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  • 1. cooperative versus contract farmingPresentation Transcript 1. 28/12/2013 Department of Agricultural Extension 2. COOPERATIVE VERSUS CONTRACT FARMING IN INDIA PRESENTATION BY GOPALA, Y.M PALB-1028 III Ph.D (Agril. Extn.) 3. INTRODUCTION • Decline in natural resources has become a global phenomenon and India is not exceptional. • The per capita availability of land in the country has declined from 0.89 hectare in 1951 to 0.32 hectare in 2001 • It is projected to further slip dow n to 0.20 hectare in 2035. • The per capita availability of w ater and the nutritional status of soil are also experiencing declining trend over the years 28/12/2013 Department of Agricultural Extension 3 4. SOLUTION? • Judicious utilization of natural resources to ensure food and nutritional security of ever grow ing population and improve living condition of the farmers. • This calls for organized arrangements for farming such as cooperative farming and contract farming. 28/12/2013 Department of Agricultural Extension 4 5. OBJECTIVES OF THE SEMINAR 1 • To understand the concepts of cooperative and contract farming 2 • To know the advantages and challenges of cooperative and contract farming 3 • To review the studies related to cooperative and Contract farming 28/12/2013 Department of Agricultural Extension 5 6. Concept of cooperative farming Chandy (2001) “A voluntary form of organization in w hich farmers and landless cultivators pool their uneconomic holdings and other resources w ith a view to facilitate the rational use of resources, economies of scale, and adopt scientific methods of cultivation”. 28/12/2013 Department of Agricultural Extension 6 7. FEATURES OF COOPERATIVE FARMING 1. Members pool their land, man-pow er and other resources into a single unit. 2. Ow nership of land continues to be w ith the individual members. 3. The society is formed voluntarily and is run on coprinciples. 4. Members receive remuneration according to the w orkdone and the land contributed for joint cultivation. 5. Members w ill have the option to leave the organization. 28/12/2013 Department of Agricultural Extension 7 8. CLASSIFICATION OF COOPERATIVE FARMING The Cooperative Planning Committee envisaged four types of co- operative farming : 1. 2. 3. 4. Cooperative better farming Cooperative tenant farming Cooperative joint farming Cooperative collective farming. 28/12/2013 Department of Agricultural Extension 8 9. HISTORY OF COOPERATIVE FARMING IN INDIA 1944- Cooperative farming w as introduced in India through action plan launched by Bombay Government. 1945- Cooperative Planning committee suggested four types of cooperative farming societies. 1947- Economic Program Committee recommended a Pilot schemes for cooperative farming. 1949- Congress Agrarian Reforms Committee recommended the states to promote cooperative farming. R.G. SARAIYA 28/12/2013 Department of Agricultural Extension 9 10. COOPERATIVE FARMING IN FIVE YEAR PLANS 1st FYP (1951-1957) -2000 cooperative farming societies w ere formed 2nd FYP(1956-1961)- Indian delegation sent to China to study their cooperative farming. Target to setup about 5000 for the w hole country. 3rd FYP (1961-1966) -40% of the cooperative farms w ere not functioning properly. 300 pilot projects in selected district w ere implemented. 4th FYP (1969-1974) - Cooperative farming programs have not made any substantial progress. 5th FYP (1974-1979) - No mention of cooperative farming. 28/12/2013 Department of Agricultural Extension 10 11. ADVANTAGES OF COOPERATIVE FARMING 1. 2. 3. 4. 5. 6. Serves as an instrument for planning. Development of democratic spirit. Reduces the cost of production. Increases agriculture production. Achieves the economies of scale. Accessibility of services and technology. 28/12/2013 Department of Agricultural Extension 11 12. Status of Cooperative Farming in India • 200 cooperative farming societies functioning in India • The government of Andhra Pradesh prepared a draft policy on cooperative tenure farming. • The government of Kerala is promoting cooperative farming through Kudumbasree project. • The phud system of joint farming is w idely practiced in the Kolhapur region of Maharashtra. 28/12/2013 Department of Agricultural Extension 12 13. Why w e need cooperative farming India Average size of operational holdings Source: Agriculture Census, 2011,Ministry of Agriculture, Government of India. 28/12/2013 Department of Agricultural Extension 13 14. Excluding the leave period, holidays, an extension w orker attends office for about 250 days in a year 28/12/2013 Department of Agricultural Extension 14 Source: Gautam et al, 2006. Agricultural Extension in India: A Journey since 1952 . At least 50 percent of the time goes for administrative w ork, official correspondence, reports and travel to reach villages  At least, 25 percent of extension w orkers are administrators /supervisors DECLINE OF MANPOWER IN EXTENSION • The extension w orker: farmer ratio is very w ide in India i.e. 1: 1000.
  • 2. 15. Failure of Cooperative Farming in India 1. Indifference of state government 2. Lack of financial facilities. 3. Lack of co- ordination. 4. lack of administrative staff. 5. Lack of dedicated non-official leadership. 6. Opposition of political parties. 28/12/2013 Department of Agricultural Extension 15 16. COUNTRIES SUCCESSFUL IN COOPERATIVE FARMING • • • • • • The cooperative farming has been tried successfully in various countries like United Kingdom Germany France Sw eden. Russia Israel 28/12/2013 Department of Agricultural Extension 16 17. The challenges ahead of cooperative farming in India 1. 2. 3. 4. Impracticability of cooperative farming in India Lack of trained person Individual liberty Increase in managerial and administrative expenses 28/12/2013 Department of Agricultural Extension 17 18. Suggestions for improvement of cooperative farming in India 1. Strong policy back up 2. Establishment of societies in the areas w hich offer potential for grow th 3. Financial assistance for the cooperative farming societies 28/12/2013 Department of Agricultural Extension 18 19. CONTRACT FARMING 28/12/2013 Department of Agricultural Extension 19 20. CONCEPT OF CONTRACT FARMING Singh (2006) Contract farming is an agreement betw een farmers and processing and/or marketing firms for the production and supply of agricultural products under forw ard agreements, frequently at predetermined prices 28/12/2013 Department of Agricultural Extension 20 21. Marketing contract Only purchase at predetermined price No input supply Partial contract Provides only some inputs at predetermined price Purchase of product Total contract All the inputs at predetermined price Purchase of produce 16/1/2010 21  3.   2.  TYPES OF CONTRACTS 1. 22. The advantages of contract farming 1. 2. 3. 4. 5. 6. Provision of inputs and production services. Access to credit Introduction of appropriate technology Skill transfer Guaranteed and fixed pricing structures and Access to reliable markets. 28/12/2013 Department of Agricultural Extension 22 23. History of contract farming in India • British colonel period- First introduced indigo and opium cultivation in the Bengal Region. • 1920s -ITCs contracts w ith the farmers of Andhra Pradesh for grow ing Virginia tobacco. • 1990s-Pepsico started contracts on tomato farming in Punjab. • 2003- Model APMC act w as enacted. 28/12/2013 Department of Agricultural Extension 23 24. Models of contract farming in India Three models of contract farming 1. Bipartite Agreement model 2. Tri-partite Agreement model 3. Quad-partite Agreement model 28/12/2013 Department of Agricultural Extension 24 25. Bipartite Agreement model 28/12/2013 Department of Agricultural Extension 25 26. Tri-Partite Agreement Model 28/12/2013 Department of Agricultural Extension 26 27. Quad-Partite Agreement Model 28/12/2013 Department of Agricultural Extension 27 28. Status of contract farming in India • Nearly Five lakh hectares is under contract farming India • More than 600 national and multinational companies are in contract farming • In Karnataka nearly 15000 hectares is under contract farming. • More than 25 companies have established contract farming in Karnataka 28/12/2013 Department of Agricultural Extension 28 29. State-w ise Area under Contract Farming in India STATES/UTS Assam Bihar Goa Gujarat Haryana Karnataka Mizoram Orissa Punjab Tamil Nadu India 16/1/2010 AREA UNDER CONTRACT FARMING (IN HECTARES) 160 20 1924 2000 1416 15000 2447 5900 121457 236610 475834 29 30. PARTIAL LIST OF COMPANIES ESTABLISHED CONTRACT FARMING IN INDIA • • • • • • • • • 16/1/2010 HUL ITC SUGUNA POULTRY VENKATESHWARA HATCHERIES PEPSICO RALLIS NESTLE NSC KSSC 30 31. Contract farming initiatives in Karnataka Sl.No. Crop Company 1 Ashw aganda Himalaya Healthcare Ltd 2 Dhavana Mysore SNC Oil Company 3 Marigold and Caprica chilli AVT Natural Products Ltd 4 Coleus Natural Remedies PVT Ltd 5 Gherkin 20 Private Companies 6 Cotton Apacchi cotton 7 Potato PepsiCo 8 Fruits and Vegetables Rallis India 16/1/2010 31 32. Challenges ahead for contract farming in India 1. 2. 3. 4. 5. 6. 7. Diversion of inputs to other purpose. Default of the farmer. Ill effects of technology disseminated. Monopsony in the locality by the company. Farmers bear most of the risk. scope for corruption. Manipulation of quotas and quality specifications. 28/12/2013 Department of Agricultural Extension 32 33. COOPERATIVE VS CONTRACT FARMING 28/12/2013 Department of Agricultural Extension 33 34. SIMILARITIES BETWEEN COOPERATIVE AND CONTRACT FARMING SL. NO. CRITERIA COOPERATIVE FARMING CONTRACT FARMING 1 Objective Production through consolidation of land holdings Production through contract 2 Credit
  • 3. availability Available through banks Available through banks and companies 3 Inputs for production Available through cooperative society Available through company 28/12/2013 Department of Agricultural Extension 34 35. Differences betw een cooperative and contract farming Sl. No. Criteria Cooperative farming Contract farming 1 Income Membership fee and Percentage turnover Sales 2 Customers One or multiple One or limited 3 Required production skills High Average 4 Price Mechanism Supply and demand Fixed prices 28/12/2013 Department of Agricultural Extension 35 36. Model for Integration of Cooperative and Contract Farming 37. Advantages of integrated model 1. 2. 3. 4. Reduction in farmers defaults. Facilitation by specialised NGOs. Control over the companies specification and quotas. Inclusion of small and marginal farmers in contract farming 5. Backw ard and forw ard linkages to the farmers. 28/12/2013 Department of Agricultural Extension 37 38. SUSTAINABILITY OF THE MODEL • Maintaining an revolving fund in the farmers organization • Technical support from the developmental departments • Financial support from the banks. • Linkages w ith research and extension systems. 28/12/2013 Department of Agricultural Extension 38 39. Case studies On Cooperative farming 28/12/2013 Department of Agricultural Extension 39 40. CASE-1 Title -Cooperative Nature Farming by Unemployed youth • Adarsh Yuvak Sw ayamrojgar Sew a Sahakari Sanstha based in the village of Tarodedi in Shegaon taluka of buldana • Started in 2001 w ith the assistance of vikasa sahayog prahtistana • Registered in the year 2007 • 11 members started the cooperative • Pooled in the share capital of Rs 1,500 each. Some members are from families w ith medium-sized farm holdings; 28/12/2013 Department of Agricultural Extension 40 41. Cont……. • Took seven-acre plot on lease from a relative of one of the members for an annual rent of Rs 14,000 in 2007 • Crop insurance to avoid the risk of crop loss • Returns Year First year 28/12/2013 Crop Cost /acre Sunflow er 2700 Returns /acre 5000 Department of Agricultural Extension Total returns 35,000 41 42. Case-2 Co-operative Farming of Organic Paddy in Trissur: • Around 2,400 small farmers in Thrissur of Kerala state started organic paddy cultivation w ithin a cooperative framew ork during 2006. • Interest free loan from Adat Farmers Cooperative Bank (AFCB). • Members pool in their holdings and jointly cultivate the land using improved practices. • Received w ages daily. 28/12/2013 Department of Agricultural Extension 42 43. Contd……… • • • • The total cost of cultivation w as Rs 2.10 crore Gross returns w ere Rs 5.10 crore. Rs 3 crore w as distributed among the farmers Based on proportionate to their landholdings and the labour contributed 28/12/2013 Department of Agricultural Extension 43 44. RESEARCH STUDIES ON CONTRACT FARMING 28/12/2013 Department of Agricultural Extension 44 45. RESEARCH STUDY-1 TITILE OF THE STUDY India’s Agrarian Crisis and Corporate-Led Contract Farming: Socio- economic Implications for Smallholder Producers RESEARCHER SHARMA YEAR 2008 28/12/2013 Department of Agricultural Extension 45 46. Methodology • The study w as conducted in three districts of Punjab viz., Amritsar, Jalandhar and Ludhiana • 87 contract farmers and 40 non contract farmers w ere selected • Econometric model w as used to know the impact of contact farming on productivity 28/12/2013 Department of Agricultural Extension 46 47. Fig 1. IMPACT CONTRACT FARMING PRODUCTIVITY OF RICE AND WHEAT 28/12/2013 Department of Agricultural Extension 47 48. Table 1. Perceived Benefits of Contract Farming as Reported by Respondents (n=127) SL. No. 1 2 3 4 5 6 7 8 9 28/12/2013 REASONS Access to assured market Assured price Access to better seed Access to better extension services Less w ater requirement Higher returns than competing crops Inspired by other contract farmers Less incidence of crop diseases Personal relations Department of Agricultural Extension PERCENT 76 67 50 42 26 18 15 10 8 48 49. RESEARCH STUDY-2 TitleImpact of Contract Farming on Economic Status of Farmers in selected Districts of Karnataka. Researcher Mallika Meti Year 2009 28/12/2013 Department of Agricultural Extension 49 50. Methodology • The study w as conducted in Hassan, Tumkur, Kolar and Koppal districts during 2009. • 30 farmers from each district w ere selected as sample. • Total 120 farmers w ere the sample. • Compared economic status before and after contract farming 28/12/2013 Department of Agricultural Extension 50 51. Results Table-1.Economic status of farmers practicing contract farming in selected districts of Karnataka (n=120) Mean score Districts Hassan Tumkur Kolar Koppal Total 28/12/2013 Before contract farming 262.66 252.79 232.19 253.65 250.25 After contract farming 294.52 290.32 299.85 300.16 296.25 Department of Agricultural Extension Per cent increase 12.12 14.85 29.13 18.34 18.38 51
  • 4. 52. Table 2. Cost and Returns under contract farming in the selected district. (n=120) Gross returns Districts Total cost Net returns B:C ratio Hassan (n=30) Before 80,733 6,139 73,133 13.15 Af ter 146,383 9,031 154,990 16.20 Tumkur (n=30) Before 57,700 4,474 48,087 12.89 After 108,667 7,119 91,535 15.26 Kolar (n=30) Before 77800 8419.83 69380.17 9.24 After 112066.7 9,706 100444 12.00 Koppal (n=30) Before 110,733 15,340 103,770 7.00 After 266,000 20,180 245,783 13.18 Before 81,741.5 8593.20 73592.50 10.57 After 1,58,279.7 11509 1,48,188 Difference in B:C ratio 14.16 Pooled 28/12/2013 Department of Agricultural Extension 3.05 2.37 2.76 6.18 3.59 52 53. RESEARCH STUDY-3 TitleA Study on Contract Farming in Karnataka. Researcher Sahana Year 2013 28/12/2013 Department of Agricultural Extension 53 54. Methodology • The study w as conducted in six districts of Karnataka viz., Chickballapura, Tumkur, Davanagere, Haveri, Gadag and Bellary. • Six crops selected for the study viz., tomato, marigold, Gherkin, Cotton, w atermelon and pearl millet. • 240 respondents w ere selected • Studied social impact and economical impact 28/12/2013 Department of Agricultural Extension 54 55. RESULTS Table-1. Social impact of contract farming on farmers grow ing crops under contract (n=240) Sl. No Crops Mean score Before After Paired t value 1 Tomato (Chickballapur) 161.19 902.38 5.16* 2 Gherkin (Haveri and Tumkur) 391.73 3295.27 4.48** 3 Marigold (Davanagere and Haveri) 187.33 717.21 6.38** 4 Cotton (Gadag and Tumkur) 956.45 2606.77 2.47* 5 Watermelon (Tumkur) 749.98 2122.46 3.45** 6 Pearl millet (Bellary) 332.11 1451.47 3.12** *=significant at 5 per cent 28/12/2013 *=significant at 5 per cent Department of Agricultural Extension 55 56. Table-2. Economic impact of contract farming on farmers grow ing crops under contract. N=240 Sl. No Crops Mean Score Before After Paired t value 1 Tomato (Chickballapur) 22146.79 92731.40 9.82** 2 Gherkin (Haveri and Tumkur) 23621.22 693421.80 12.75** 3 Marigold (Davanagere and Haveri) 9985.05 281992.90 12.13** 4 Cotton (Gadag and Tumkur) 65583.47 878983.00 7.91** 5 Watermelon (Tumkur) 161918.90 1203545.00 7.06** 6 Pearl millet (Bellary) 41732.89 561962.90 5.49** *=significant at 5 per cent 28/12/2013 *=significant at 5 per cent Department of Agricultural Extension 56 57. Implications of the study • The contract farming is beneficial to small and marginal farmers hence it can be popularized for the other crops • There is a need of separate dispute handling mechanism for dispute settlement. 28/12/2013 Department of Agricultural Extension 57 58. CONCLUSION • Natural resources are shrinking in terms of per capita availability year after year and the population grow th is increasing. • Ratio of extension personnel w ith its clients is also declining. • Organized formal groups in farming becomes all the more important now than before. Therefore, future research in extension needs to w orkon this issue w ith major focus on interdisciplinary approach. 28/12/2013 Department of Agricultural Extension 58 59. 17/11/2012 59 60. 28/12/2013 Department of Agricultural Extension 60 61. Impact of farm size on land productivity The results show w eakcorrelations betw een fragmentation and productivity. Land fragmentation seems to be positively correlated to productivity due to more use of fertilizers and labour input. The communes that have consolidated their land are more productive, but this seems to be explained by initial differences in productivity. Our results suggest that there are no immidiate gains in land consolidation. • Keyw ords: LISA ANDERSSON, 2006, A study of the impacts of land fragmentation on agricultural productivity in Northern Vietnam. Bachelor thesis, DEPARTMENT OF ECONOMICS , Uppsala University 28/12/2013 Department of Agricultural Extension 61