Will Contract Farming Cook 'Potatoes'?

The issue of contract farming has once again come to the fore due to a recent dispute between a handful of potato growers in Gujarat and PepsiCo.

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The issue of contract farming has once again come to the fore due to a recent dispute between a handful of potato growers in Gujarat and PepsiCo. Potato chips made by PepsiCo, that is, certain varieties of potatoes used in 'Ledge' were being produced by some farmers in Gujarat. PepsiCo had a patent for the potato product and was preparing to levy a fine of over Rs 1 crore each from the farmers concerned. However, social activists fired at the issue. He raised the issue of farmers' rights in Indian law. Noticing this dissatisfaction, PepsiCo withdrew its punitive action against the farmers and offered contract farming to the farmers. Under this, farmers will be able to produce FC5 type potatoes. However, they will be obliged to sell the produced potatoes only to PepsiCo.

Contract farming has been practiced for many years in the potato growing regions, especially in West Bengal, a major potato producing state in India. PepsiCo currently grows potatoes on a contract basis with 24,000 farmers. In addition to providing farmers with seeds, chemical fertilizers and insurance coverage, it also buys their crops at fixed prices. This is vertical coordination between farmers and buyers. Due to these and some such success stories, the Policy Commission has insisted on adopting contract method for all types of crops. A year ago, the Policy Commission also implemented a model code for contract farming.

Contract farming is beneficial for farmers in many ways. Those who grow potatoes or other crops on contract basis can cultivate without any hindrance. They don't have to worry about going to the market and selling the crop. Moreover, there is no need to provide crop insurance for compensation. They get a safe and stable source of income. Contract farming has relatively zero risk. As a result, many studies have shown that farmers who work on a contract basis for large companies are satisfied.

It is hoped that contract farming will continue to grow in our country in the future. This is because the majority in the government is of the opinion that agriculture is the panacea for all the diseases of the farmers.

In contract farming, a wide variety of high quality seeds and other raw materials, post-production services, crop sorting, grading etc. are easily available to the farmers. The outcome of it, farmers produce  and income gain. Contract farming has not only brought prosperity to the farmers but also alleviated their worries about the future.

Opponents of contract farming point to the environmental damage caused by this practice around the world. He claims that taking the same crop over and over again upsets the balance of the environment. Consumption of a single crop over a period of years increases the risk of pests and diseases. If that happens, the entire crop is in danger of being destroyed. Contract farming has eroded biodiversity around the world. Forests around the world have been destroyed and wildlife bases have been deprived. Large profit-making companies do not seem to be embracing organic farming with the help of natural fertilizers and pesticides.

In India, contract farming does not benefit small farmers, especially women farmers. In fact, such farmers are in dire need of agricultural seeds, implements and financial assistance. However, these farmers do not get the opportunity of contract farming. Only farmers with medium size, specific acres of land get that opportunity. Millions of wage laborers do not get the benefits of contract farming. As a landless laborer, he is destined to spend his days on meager wages.

The future of their rights depends on the implementation of amendments to the Central Government's 2016 Agricultural Land Lease Act. However, for this law to be more effective, state governments need to adopt it.

Big companies make huge profits by selling their products. However, farmers who actually grow crops have to be content with wages. For example, PepsiCo has a monopoly on the potato chips market. Similarly, other large companies are making huge profits in the agricultural trade worldwide. Even in India, companies' gross profit margins have been steadily rising compared to agricultural wages. This is due to the neglect of various tax concessions and rules in the last few years.

Due to the large financial strength of large companies, their burden is always heavy when dealing with farmers. Initially, these companies pay the farmers for their labor and expenses. However, over time, these companies start to falter. Farmers have no choice but to face the blows. If the products of contract farmers do not meet the required criteria or if they are rejected on quality criteria, farmers face major difficulties. They find it difficult to find another buyer. In such cases, the state government has to intervene and provide relief to the farmers. Overall, this is an unbalanced relationship between small farmers and large companies. However, contract farming is relatively safer and easier than costly and tedious individual farming.

Farmers who are in need of agricultural processing industry and produce perishable crops are in dire need of help. For him, contract farming is a boon. Because it deals limited to such crops. Contract farming is useful for sustaining fresh fruits and vegetables in the country.

Contract farming practices help in reducing the population dependent on agriculture. There are many difficulties in agriculture. The reason is that half of the country's population is dependent on agriculture. Agriculture accounts for only 15 per cent of the country's GDP. Extremely low productivity is the main reason. That is why the government's goal is to reduce dependence on agriculture. With large companies entering the agribusiness trade, only two to four per cent of the population will be dependent on agriculture in the future. This will be possible if small farmers bring their land under contract on a large scale in collaboration with each other.

However, for all this to happen, strict regulations are needed. So that the rights of the farmers remain unaffected and their lands do not go to the throats of big companies. If the agri-producers' associations take the responsibility of dealing with big companies, the farmer will be able to do contract farming at full capacity without any risk.