Roopam Singh Linu Mathew Philip Sampath Raghavan Annual Conference on Agri Business Management  Bangalore June 29, 2009
<ul><li>Objectives </li></ul><ul><ul><li>To study the effectiveness of contract farming practices in providing better oppo...
<ul><li>Hoshiarpur, Punjab </li></ul><ul><li>Sample size </li></ul>Sources: Statistical Abstract of Punjab 2006  http://ww...
<ul><li>Markfed (Basmati) </li></ul><ul><li>PepsiCo (Potato) </li></ul>Contract Farming Arrangements
Contract Farming Arrangements Particulars PepsiCo Markfed Pre Contract Assessment Direct Direct & thru middlemen Texts of ...
<ul><ul><li>How  equitable  are contract farming practices vis-à-vis the two major stakeholders that is,  farmers and cont...
Contract Farming Arrangements Playing it safe? Particulars Potato Basmati Contract Non-Contract Contract Non-Contract Tota...
Contract Farming Arrangements Particulars Potato Basmati Contract Non-Contract Contract Non-Contract Area owned (ac) <ul><...
Contract Farming Arrangements Profile of Land Holding (Contract) CF in Potato – A ‘Large Farmers’ game? Basmati  N = 25; P...
Contract Farming Arrangements Land Leased & Owned (in acres) Under contract …  Proportion of area leased in more than twic...
Contract Farming Arrangements Land Leased > Owned Under contract … Basmati – Small holders dominant  Potato  – Large farme...
Contract Farming Arrangements A ‘Win-Win’ game? Particulars PepsiCo Markfed Farmers Company Farmers Company Assured market...
Contract Farming Arrangements The Power Equation Particulars PepsiCo Markfed Farmers Company Farmers Company Participation...
<ul><li>Strengthening Legislative Framework </li></ul><ul><li>No acts at the state level to oversee contract farming arran...
<ul><li>Managing Distributional Issues </li></ul><ul><li>Participation of small land holders (1–5 ac) –  Limited </li></ul...
<ul><li>Scope for future research </li></ul><ul><li>Applicability of the model to scale-neutral or small scale feasible cr...
<ul><li>An independent, not-for-profit organisation based at New Delhi  </li></ul><ul><li>Working on policy research and a...
<ul><li>Thank You </li></ul>
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Cf Presentation 25 Sep 08

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Cf Presentation 25 Sep 08

  1. 1. Roopam Singh Linu Mathew Philip Sampath Raghavan Annual Conference on Agri Business Management Bangalore June 29, 2009
  2. 2. <ul><li>Objectives </li></ul><ul><ul><li>To study the effectiveness of contract farming practices in providing better opportunities to the farmers in terms of technology transfer, increase in incomes and improved marketing facilities. </li></ul></ul><ul><ul><li>How equitable are contract farming practices vis-à-vis the two major stakeholders that is, farmers and contractors? </li></ul></ul><ul><ul><li>Are contract farming arrangements equally accessible to all the sections of the farming community, irrespective of size of holding ( i.e. small and large farmers)? </li></ul></ul>
  3. 3. <ul><li>Hoshiarpur, Punjab </li></ul><ul><li>Sample size </li></ul>Sources: Statistical Abstract of Punjab 2006 http://www.punjabpolice.org/map11/index.html Basmati Potato Contract 25 15 Non Contract 25 15 Total 50 30 % Farmers Population (no.) 2,08,841 40.68 Area under CF (ac) 35,855 16.15 Small & Marginal holdings (no.) 37,212 50.21
  4. 4. <ul><li>Markfed (Basmati) </li></ul><ul><li>PepsiCo (Potato) </li></ul>Contract Farming Arrangements
  5. 5. Contract Farming Arrangements Particulars PepsiCo Markfed Pre Contract Assessment Direct Direct & thru middlemen Texts of Contract Written (English) Written (Local dialect) Type of Contract Bipartite Tripartite Copy provided to farmers No Yes Registration fee No On the farmers (Rs.100) ID Cards No Yes Inputs supplied Seed, Tech know-how Brands specified w.r.to. Fertilizers & Pesticides No credit Seed (Optional) Tech know how No credit Procurement of produce Direct Direct & thru middlemen Transportation By the farmers upto the collection centers At the farm gate Price realization Market rate + Rs.15-25 / q Market rate
  6. 6. <ul><ul><li>How equitable are contract farming practices vis-à-vis the two major stakeholders that is, farmers and contractors? </li></ul></ul><ul><ul><li>Are contract farming arrangements equally accessible to all the sections of the farming community, irrespective of size of holding ( i.e. small and large farmers)? </li></ul></ul>
  7. 7. Contract Farming Arrangements Playing it safe? Particulars Potato Basmati Contract Non-Contract Contract Non-Contract Total area under cultivation <ul><ul><li>Mean </li></ul></ul>75 45 19 23 <ul><ul><li>Min </li></ul></ul>10 18 8 6 <ul><ul><li>Max </li></ul></ul>300 80 50 52 Area under contracted crops <ul><ul><li>Mean </li></ul></ul>55 25 8 10 <ul><ul><li>Min </li></ul></ul>4 5 4 3 <ul><ul><li>Max </li></ul></ul>150 65 20 21 % of area under contracted crop <ul><ul><li>Mean </li></ul></ul>77% 56% 48% 47% <ul><ul><li>Min </li></ul></ul>25% 13% 20% 11% <ul><ul><li>Max </li></ul></ul>100% 100% 100% 100%
  8. 8. Contract Farming Arrangements Particulars Potato Basmati Contract Non-Contract Contract Non-Contract Area owned (ac) <ul><ul><li>Mean </li></ul></ul>25 20 7 9 <ul><ul><li>Min </li></ul></ul>4 2 2 2 <ul><ul><li>Max </li></ul></ul>53 45 20 30 Area Leased (ac) <ul><ul><li>Mean </li></ul></ul>50 25 13 14 <ul><ul><li>Min </li></ul></ul>4 11 4 3 <ul><ul><li>Max </li></ul></ul>280 45 35 40
  9. 9. Contract Farming Arrangements Profile of Land Holding (Contract) CF in Potato – A ‘Large Farmers’ game? Basmati N = 25; Potato N = 15
  10. 10. Contract Farming Arrangements Land Leased & Owned (in acres) Under contract … Proportion of area leased in more than twice the area owned
  11. 11. Contract Farming Arrangements Land Leased > Owned Under contract … Basmati – Small holders dominant Potato – Large farmers Basmati Contract N = 20, Non Contract N = 16 Potato Contract N = 8, Non Contract N = 10
  12. 12. Contract Farming Arrangements A ‘Win-Win’ game? Particulars PepsiCo Markfed Farmers Company Farmers Company Assured market for produce   Assured supply of raw materials or produce   Higher incomes from contract Vs no contract  Lower transaction costs per unit of produce    Flexible terms for buyback     Technical support & know how   Assistance for credit  
  13. 13. Contract Farming Arrangements The Power Equation Particulars PepsiCo Markfed Farmers Company Farmers Company Participation of Small Farmers Low High Level of commitment in the contract arrangement High High Equal Equal Costs of breach of contract by the other party High Moderate Equal (Low) Equal (Low) Alternatives in case of default by the other party Few -- Equal Equal Terms of Contract Highly Binding Moderate Binding Equally binding Equally binding Risk sharing in the contract arrangement High Low Equal Equal
  14. 14. <ul><li>Strengthening Legislative Framework </li></ul><ul><li>No acts at the state level to oversee contract farming arrangements - Only rules </li></ul><ul><li>No concrete provisions to discourage defaulters – Still evolving </li></ul><ul><li>Implementation of rules at the ground level – Questionable </li></ul><ul><li>Sorting out Legal issues thru PAFC – Long & tedious </li></ul><ul><li>Fixing the prevailing market prices – Disputable </li></ul>Points to Ponder
  15. 15. <ul><li>Managing Distributional Issues </li></ul><ul><li>Participation of small land holders (1–5 ac) – Limited </li></ul><ul><li>Land holders under 1 ac – Totally absent </li></ul><ul><li>Small holders often forced to lease out & work as labourers in their own fields - Statistically hidden </li></ul><ul><li>Prevalent among large farmers – Absenteeism </li></ul><ul><li>Terms more favourable towards companies & large farmers - Power (Un)equation ? </li></ul>Points to Ponder
  16. 16. <ul><li>Scope for future research </li></ul><ul><li>Applicability of the model to scale-neutral or small scale feasible crops - to be explored in detail </li></ul><ul><li>Promotion of High input intensive agriculture Vs soil health and pests & diseases epidemics - Environmental concerns </li></ul><ul><li>Corporatized version of Slash & Burn cultivation – Is Crop diversity a casualty? </li></ul>Way Forward
  17. 17. <ul><li>An independent, not-for-profit organisation based at New Delhi </li></ul><ul><li>Working on policy research and advocacy on issues around WTO, trade and development issues with a focus on South Asia. </li></ul><ul><li>Some of the core work programmes </li></ul><ul><ul><li>Trade & Agriculture, Food Security, Livelihoods & Rural Development. </li></ul></ul><ul><ul><li>Trade & Climate Change </li></ul></ul><ul><ul><li>Trade & Public Health - IPR </li></ul></ul><ul><ul><li>Trade & Services Sector </li></ul></ul>About CENTAD
  18. 18. <ul><li>Thank You </li></ul>
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