Contract Farming: Contract farming is defined as a system for the production and supply of agricultural/horticultural produce under forward

contracts between producers/suppliers and buyers. The essence of such an arrangement is the commitment of the producer/ seller to provide an agricultural commodity of a certain type, at a time and a price, and in the quantity required by a known and committed buyer. Farming is an age-old means of livelihood for millions of Indians. However, there have been few systems/models in which farmers are assured of a market for their produce, leave alone a remunerative price. Farmers have on occasion had to throw their produce away for want of buyers. This is one side of the coin. On the other is the agri-based and food industry, which requires timely and adequate inputs of good quality agricultural produce. This underlying paradox of the Indian agricultural scenario has given birth to the concept of Contract Farming, which promises to provide a proper linkage between the farm and market. Some of the major corporates, financial institutions, agri-input agencies and other organizations that have entered into contract farming in India are listed below: Private Sector Involvement in Contract Farming In India Amira Foods India Ltd Appachi Cotton Company AVT Natural Products Ltd Cargill India Pvt Ltd DD international Inc. Escorts Machinery Group Gherkin Exporters Global Green Company Pvt Ltd Green Agro Park Pvt Ltd Himalaya Drugs Pvt Ltd Hindustan Lever Ltd ICICI Bank Ltd IDBI Ion Exchange Enviro Farms Ltd ITC-International Business Division Ken Agritech Marico Industries Mahindra Shubhlabh Services Ltd Natural Remedies Pvt Ltd Nestle India Ltd Nijjer Agro Foods Ltd Pepsi Foods Pvt Ltd (PepsiCo) Rallis India Saguna Hatcheries Ltd

Satnam Overseas Ltd Soyabean-Tinna Oils & Chemicals ltd Southern India Mills Associations State Bank of India Super Spinning Mills Ltd Tinna Oils and Chemicals Ltd

Ugar Sugar Unicorn Agrotech Ltd United Breweries Ltd UTI Venkateshwara Hatcheries Ltd

State-wise Contract Farming Initiatives by Private Sector State Karnataka Karnataka Karnataka Karnataka Karnataka Crop Ashwagandha Dhavana Marigold Caprica Chili Coleus Gherkins Natural Remedies Private Ltd 20 Pvt Companies* (Major Companies Global Green Company Pvt Ltd, Unicorn Agrotech Ltd, Green Agro Park Pvt Ltd, Ken Agritech Pvt Ltd, etc) Maharashtra Maharashtra Soybean Several Fruits, Vegetables, Cereals, Spices & Pulses Maharashtra Madhya Pradesh Madhya Pradesh Madhya Pradesh Several Fruits, Ion Exchange Enviro Farms Ltd (IEEFL) Vegetables, Cereals, Spices & Pulses Madhya Pradesh Punjab Punjab Punjab Tomato & Chilly Barley Basmati, Maize Nijjer Agro Foods Ltd United Breweries Ltd Satnam Overseas, Sukhjit 250 2270 4000 Soybean ITC_IBD 1200 Safflower Oilseeds Wheat, Maize & Soybean Wheat Hindusthan Lever Ltd (HLL) 15000 Cargil India Ltd Marico Industries Tinna Oils and Chemicals Ion Exchange Enviro Farms Ltd (IEEFL) 134800 150 8000 AP) (inc of Tamil Nadu and & Company/Corporate Himalaya Health Care Ltd Mysore S N C Oil Company AVT Natural Products Ltd Area (ha) 700 400-500 4000

Starch (Mahindra Shubhlabh Services Ltd) Punjab Basmati Satnam Overseas, DD Intl Incorp, Amira Foods India Ltd Punjab Basmati, Groundnut Potato, chilli Punjab Tamil Nadu Tamil Nadu Tamil Nadu Tamil Nadu Milk* Cotton Maize Paddy Cotton Nestle India Ltd Super Spinning Mills Bhuvi Care Pvt Ltd Bhuvi Care Pvt Ltd Appachi Cotton Company 65000000 kg/day 570 800 200 260 Source: & tomato, (Escorts Ltd & Grain Around 6000 Tech) PepsiCo India Ltd 14700

* Involving about 90000 farmers in about 1600 villages NIAM (2003), Times Agriculture Journal (2003), ICRISAT: 2003 ) and Centad, Sukhpal Singh:2005)
1

(FICCI-IFPRI-

Contract Farming Models Model Type 1

Corporate Extension Arm

FARMER

Contract Farming Model Type II

Buyer Corporate

NGO/Govt. body as facilitator

FARMER

Contract Farming Model Type II

Buyer Corporate

Arhatiya as facilitator

FARMER

Contract Farming Model Type IV

Buyer Corporate Agri Input Seeds Implementing Agency Bank for Crop Loans

Agri Input Fertilizers & Pesticides

FARMER

Insurance for Crop/Life

Comparison of Contract Farming Models in India Component Cost increments due to channel partners Scale operations of Can be taken up Can be taken up with scale operations Channel Partners No channel partners Non partners Transparency in price fixation Services offered to the farmer Completely Transparent Only services services to the company extension other subjective operating Extension services and other services at the discretion of the firm Source: NIAM (2003) contracting Transparent profit Traditional channel members partners Low transparency Extension services and other associated services such as loans and other inputs Lower Transparency Wide range of services ranging to taken care from life the crop loan insurance are as Corporates act as channel partners organizations as smaller of Applicable large scale operations for of Applicable for large scale of operations with smaller scale of operations Type 1 Nil Type 2 Minimal Type 3 Considerable Type 4 Maximum

Grouping of Major Contract Farming Initiatives of Corporates Under Different Models Type Type I Initiative Nijjer Agro Tinna Oils SNC Oil AVT Natural Products Ltd Natural Remedies Pvt Ltd Himalaya Drugs Pvt Ltd PepsiCo Type II Type III Type IV Ion Exchange Enviro Farms United Breweries Ltd ITC-IBD MSSL Escorts Machinery Group Super Spinning Mills Cargill India Pvt Ltd Appachi Cotton India Gherkin Exporters Source: NIAM (2003) Crop Tomato & Chilly Soyabean Dhavana Marigold Coleus Ashwagandha Basmati Organic Produce Barley Soyabean, Wheat Basmati, Non-Basmati, Maize Basmati Cotton Soyabean, Wheat, Maize Cotton Gherkin State Punjab Maharashtra Karnataka Karnataka Karnataka Karnataka Punjab Maharashtra Punjab Madhya Pradesh Punjab, Tamil Nadu Punjab Tamil Nadu Madhya Pradesh & Uttar Pradesh Tamil Nadu Karnataka, Tamil Nadu, Andhra Pradesh