Answer:

The Indian agri-food system is undergoing a rapid transformation with front end activities like wholesaling, processing, logistics and retailing are rapidly expanding and consolidating, the backend activities of production agriculture have been continuously fragmenting. The challenge lies in linking the two ends and ensuring viable business opportunities for both farmers and agri-business.

The recent growth and diversification of consumer demand and the expansion of organized agricultural processing and marketing ventures has given large scope to the contract farming. There are other various emerging scenarios which ensure wider scope and utility of contract farming. These can be summed up as follows:

♤ Loss of actual price realisation to farmers in the present system.

♤ Fragmentation of land holdings put limit on profitability of farm produce.

♤ While smallholders, by virtue of available family labour and intensive cultivation practices, can be highly productive, they typically have a small marketable surplus and face high transaction costs in marketing their produce. The contract farming can provide them direct access to market without intermediates and thus can be instrumental in development and welfare of small farmers.

♤ Contract farming provides the mechanisms for streamlining procurement and logistics services that are high on the agenda of organized retailers and agro- processors.

In order to augment the reach of bank credit and increase the production of commercial crops as also for creation of marketing avenues for the farmers, all contract farming arrangements are made eligible for availing special refinance package from NABARD.

Government need to provide necessary support for sensitising initiatives and to study the details of functioning and performance of contract farming arrangements. The government may conduct workshops for better interface among farmers and entrepreneurs, conduct crop specific studies, follow-up with National Agricultural Insurance Corporation for insurance of crops grown under contractual arrangements etc. to enhance the utility of contractual farming.

For the development of contract farming in India, the government also needs to act as a regulator and power broker between the corporates and the farm owners where the power asymmetry is huge. The arrangement needs to be backed by an effective statutory and regulatory mechanism with avenues for the farmers for speedy redressal of their grievances.