useful purpose in India in its own limited sphere. Contract Farming has been promoted in the recent threedecades as an institutional innovation to improve agricultural performance in less developed countries.This system was accepted and used as one of the promising institutional frameworks for the delivery of price incentives, technology and other agricultural inputs. Local Governments, private local firms,Multinational companies, some international aid and lending agencies etc have been involved in thesecontract farming schemesContract farming generally involves: a pre-agreed price between the company and the farmer,along with measures of quality, quantity, acreage to be farmed, and/or duration of the contract. Inthis system, the contractor supplies all the inputs required for cultivation, and the farmer isresponsible for land and labor.However, the terms and nature of the contract vary according to the crops grown, the agenciesinvolved, the farmers themselves, and the technologies and context in which contract farming istaken up. The farmers' participation is generally limited to production.At a very fundamental level, contract farming is essentially a means of allocating the distributionof risk, between processor & grower. The latter assumes risks associated with production whilethe former assumes the risks of marketing the final produce. As has been observed however in practical terms, there exists, considerable interdependence between the two parties. Thedevelopment of contract farming will succeed if both parties share the risk & rewards.
To reduce the load on the central & state level procurement system.
To increase private sector investment in agriculture.
To bring about a market focus in terms of crop selection by Indian farmers.
To generate a steady source of income at the individual farmer level.
To promote processing & value addition, thereby generating gainful rural employment.
To reduce migration from rural to urban areas.Managed correctly, contract farming can facilitate a response and adjustment mechanism tochanging economic forces. Identifying the nature of the crop, its marketability and then evolvingthe technology to be used for production and processing are critical determinants of contractfarming. In general, crops easily incorporated in the contract farming are those that have highrevenue per hectare and where the technological model gives significant improvements in yields.Recognizing that Indian agriculture holds the key to its own development, it will be required tocreate our own region & crop specific contract farming models.