CHANDIGARH: As the debate rages on the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, which paves the way for organised contract farming in the country with more thrust on the role of the private sector, based on a field survey a research paper on contract farming in Punjab 20 years ago had stressed on the active role of the state in the whole process.
The research paper titled ‘Contract Farming for Agricultural Diversification in the Indian Punjab: A Study of Performance and Problems’, authored by Sukhpal Singh, then an associate professor in the Institute of Rural Management (IRMA) at Anand in Gujarat, was published in the June-September 2000 edition of the ‘Indian Journal of Agricultural Economics’.
Now a professor at the Indian Institute of Management (IIM), Ahmedabad, Singh had studied the contract farming undertaken by two multinational corporations (MNCs) — Pepsi Foods Limited (a subsidiary of Pepsico Limited) and Hindustan Lever Limited (a subsidiary of Unilever) — and a local company Nijjer Agro Foods Limited for potato, tomato and chillies crops in Punjab in the 1990s.
In the conclusions of his paper, Prof Singh mentioned, “Diversification can mean doing same thing or different things differently. But, here, the different things are being done in the same way, ie, new crops are being grown with the same or higher input intensity. In fact, what the state should have directed and attempted in participation with other actors has been left to the private corporate and multinational enterprises. It is important to recognise that what is needed is not less of state but better state for promotion and regulation of economic activities, and organisations and institutions for sustainability.”
He also found, “The nongovernmental and community organisations, which can play a role in information provision, and in the monitoring and regulating the working of contracts, are, unfortunately, missing from the state altogether. In fact, that was one of the reasons that the suicides of farmers due to crop failure and indebtedness in the state recently (1998) could not be prevented.”
“So, what is essential for making success out of contract system is the institutional and organisational innovations in the state’s rural sector, which it is capable of, as proved by the emergence of the secondary tractor markets in the state. Contracts require frequent and independent scrutiny so that they remain competitive both with similar contracts and with open market transactions. Wide publicity of contract terms will help to stimulate competition,” the research paper stated.
“Secondly, vigorous bargaining cooperatives, or other agricultural producer organisations are needed to negotiate equitable contracts which have been able to secure the standardisation of contracts and their scrutiny by a government agency in the past in the US. In Japan as well, the farmers have managed their relationships with companies well through cooperatives.”
When contacted, Prof Singh said, “I have been studying the issue of contract farming over 20 years. I am not against it. However, the state’s role is necessary to protect the small farmers who engage in contract farming. Right now, contract farming is only in favour of medium or large farmers. What’s more, the current law on contract farming has several weaknesses. It is badly drafted so the government needs to iron out the flaws to make it effective.”