Study of contract farming practices in Punjab
2013
Kumar, Babita | Banga, Gagandeep | , Aslam
Among the array of agribusiness activities, the one which entails the most direct and complex relationships between large corporations and small farmers is contract farming (CF). In this system, a firm replaces or supplements company production of agricultural commodities with purchases from local farmers through contracts. The contracts specify several conditions of sale and obligate the firm to provide technical assistance, agro-chemicals and other services. The system is well established in developed countries, while its use in developing countries is significant and increasing. The system is used by both domestic firms and transnational corporations. The Indian agri-food system is undergoing rapid transformation and there is growing evidence that contract farming will have an important role in this transformation. The approach is widely used for cash crops, fruits and vegetables, poultry, pigs, dairy produce and even prawns and fish.The objective of the present study was to understand and compare the contract farming practices of selected public and private companies of Punjab and farmers having contract with these companies. Primary data was collected from 10 companies (5 public and 5 private) and 100 farmers of these companies who are engaged in contract farming. Data was collected through a non disguised pre-structured questionnaire. The results indicated that there is larger area and large number of farmers under contract farming with public sector as compared to private companies. The crops grown under contract were wheat, rice, potatoes, mint, chili, Barley, baby corns etc. Mostly all companies provide seed as input to farmers. The major problems that the companies faced in contract farming were that farmers did not adhere to the delivery schedules, did not follow the advice of the company and supplied poor quality of produce to company. In case of farmers, mostly large farmers (land holding >10) are engaged in contract farming. Farmers adopted contract farming to earn more income, better adjustments in crop rotation and secured returns. Farmers faced the major problem of less than required, poor quality and untimely availability of seeds, and other inputs. Other problems were untimely payments and lack of advisory extension services. Price is the most significant factor in contract farming which is highly fluctuating in case of vegetables. Contract farming of cereal crops in public sector is more successful as compared to private sector. Contract farming of vegetable crops is more successful in private sector.
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