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Effectiveness of contract farming practices in India
- 1. Roopam Singh Linu Mathew Philip Sampath Raghavan Annual Conference on Agri Business Management Bangalore June 29, 2009
- 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
- 9. Contract Farming Arrangements Profile of Land Holding (Contract) CF in Potato – A ‘Large Farmers’ game? Basmati N = 25; Potato N = 15
- 10. Contract Farming Arrangements Land Leased & Owned (in acres) Under contract … Proportion of area leased in more than twice the area owned
- 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. 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. 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