DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

SABBAVARAM, VISAKHAPATNAM, A.P., INDIA

PROJECT TITLE: PAUCITY OF AGRICULTURAL CAPITAL, AND ISSUES

ON CORPORATIZATION OF AGRICULTURE.

SUBJECT: ECONOMICS II

NAME OF THE FACULTY: MR. ABHISHEK SINHA

NAME OF THE CANDIDATE: SWETHA SREE.M

ROLL NUMBER: 21LLB120

SEMESTER: III

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 CERTIFICATE

“I, Swetha Sree.M, hereby declare that this project titled “ PAUCITY OF
AGRICULTURAL CAPITAL, AND ISSUES ON CORPORATIZATION OF
AGRICULTURE” submitted by me is an original work undertaken by me, I have duly
acknowledged all the sources and references from which ideas and extracts have been sourced.
This project is free from plagiarism and does not utilize any unfair means whatsoever”.

(SWETHASREE.M)
21LLB120
Semester III

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TABLE OF CONTENTS:

Table of Contents
I. ACKNOWLEDGEMENTS……………………………………………………………………….4
II. ABSTRACT……………………………………………………………………………………………5
III. INTRODUCTION…………………………………………………………………………………..6
A. OBJECTIVE OF THE STUDY…………………………………………………………….7
B. LITERATURE REVIEW…………………………………………………………………….7
C. RESEARCH METHODOLOGY………………………………………………………….7
D. SCOPE OF THE STUDY…………………………………………………………………..7
E. SIGNIFICANCE OF THE STUDY………………………………………………………8
F. RESEARCH QUESTIONS………………………………………………………………..8
G. MODE OF CITATIONS……………………………………………………………….....8

PAUCITY OF AGRICULTURAL CAPITAL, AND ISSUES ON CORPORATIZATION OF AGRICULTURE 9-20

1. CAPITAL FORMATION IN AGRICULTURE…………………………………….9-10

1.1 THE NEXUS BETWEEN PUBLIC AND PRIVATE INVESTMENTS……………………………11
1.2 CONSTRAINTS ON PUBLIC AND PRIVATE CAPITAL FORMATION IN AGRICULTURE…..11-12
1.3 IMPACT OF ACCESS TO INSTITUTIONAL CREDIT IN CAPITAL FORMATION…………..12-13
1.4 WAY FORWARD…………………………………………………………………………………………………..13-14
2. CORPORATIZAITION OF AGRICULTURE……………………………………………………………………..15
2.1 ISSUES PERTAINING TO CORPORATIZATION OF AGRICULTURE………………………….16-17
2.2 CORPORATIZATION OF AGRICULTURE UNDER THE COMPANIES ACT, 2013: ……..18
2.3 FARM LAWS (2020)………………………………………………………………………………………….19-20
IV. CONCLUSION…………………………………………………………………………………………….21
V. BIBLIOGRAPHY……………………………………………………………………………………………22

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 ACKNOWLEDGEMENTS
“I wish to sincerely express my profound gratitude and deep reverence to our respected
Economics II professor, Mr. Abhishek Sinha, who bestowed me with an opportunity to work
on a very insightful topic : “PAUCITY OF AGRICULTURAL CAPITAL AND ISSUES ON
CORPORTIZATION OF AGRICULTURE”

This project has helped me to critically analyse and build my perspective on it. Timely
guidance and support has helped me to unravel and navigate to the core and epicentre of the
project. The constant advice and encouragement of my professor is immeasurable.

I would also like to extend my deep regards to the DAMADORAM SANJIVVAYA

NATIONAL LAW UNIVERSITY Vishakhapatnam, library and academics department for
their all time support in providing e- resources, journals and books , without which this project
is incomplete.

I have tried my best to collect information about the project in various possible ways to depict
a clear picture of the subject.”

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 ABSTRACT

Indian Agriculture, has been the backbone, of the Indian Economy. Given that it contributes to
around 20% of India's GDP and employs over 52% of the population, agriculture is
nevertheless vital to the nation's economy. In order to ensure food security, provide a living for
a large portion of the workforce, contribute to economic growth by producing goods for wages,
raw materials for industry, and goods for export, generate surpluses, and serve as a market for
non-agricultural goods, a thriving agriculture sector is therefore required. The relationship
between capital formation, agricultural growth, and the reduction of poverty has been well-
articulated in research. The beneficial effects of agricultural expansion on reducing poverty,
the importance of capital formation as one of the main drivers of agricultural growth has been
appropriately positioned from the context of development policy.

The corporatization of agriculture is a highly bone of contention for not just India but for the
majority of the world, especially developing nations like India where a larger population is
involved in the primary sector of production. The recent, crisis on the three contentious farm
bills has gave glarion call, on the issues which farmers are concerned, in this project we shall
make an attempt to address in a comprehensive manner. The corporatization of agriculture
involves corporate structures managing and controlling aspects that affect input costs, such as
the price of seeds, irrigation, fertilisers, and electricity. However, it is not free of flaws, wherein
the farmers are at the mercy of the corporates, and the suffer with lack of bargaining power.
By virtue of this project, we shall examine into the significance of agricultural capital as an
engine for agricultural growth and also understand its scarcity and address this issue, whereas
on the corporatization aspect, the merits and demerits are looked into and the issues pertaining
are also of grave concern which is to be investigated diligently.

Key Words: Indian Agriculture, Scarcity of Capital, Corporatization of Agriculture, Policy

concerns, Farm Laws (2020) and its aftermath.

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 INTRODUCTION

Since independence, significant institutional and technological advancements made during

various policy regimes have influenced the evolution of Indian agriculture through various
phases. Before the Green Revolution the Green Revolution in the 1960’s, the growth rate of
agricultural sector used to less than 2%. However, the sector had some growth as a result of a
change in legislative priorities and technological intervention in the late 1960s, including the
adoption of Green Revolution technologies. In the following ten years, in the 1980s and in the
early 1990s, the growth rate of output rebounded to 2.5–3%. Again, though, the sector lost its
speed as a result of the shift in policy regimes toward reform, and a slowing came to the fore.
The Indian agriculture sector's growth rate has not yet attained the desired 4%. The underlying
reasons for this decline in the primary sector have undergone extensive research. Some
attribute it to lack of irrigation, rural illetracy, others attach to the cropping intensity, as neglect
of agriculture, many agree for all these to facilitate, investment’s i.e capital is needed.

On Corporatization of Agriculture, is seen to be an effective method to bring in public and

private investments, and these are efficiently managed by the bodies concerned. The
corporatization of agriculture entails giving corporate entities influence over things like the
price of water, fertiliser, and energy as well as the market value of the agricultural produce.
Once more, it can be argued that allowing corporations to dominate the methods of production
and supply chains for agricultural products constitutes corporatization of agriculture. In this
project, we shall look into the paucity of agricultural capital in Indian context and issues
circumscribing corporatization of agriculture.

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OBJECTIVE OF THE STUDY:

The study aims

1. To understand the determinants which result in paucity of agricultural capital.

2. To understand the needed remedies to fill the scarcity in capital formation.
3. To examine the issues pertaining to corporatization of agriculture.

LITERATURE REVIEW:

The present study is a cumulative effort derived and adopted from various resources, of
academicians, research scholars, and government reports. The project is mainly derived from
the materials available on open access, and includes

PRIMARY RESOURCES: It includes, research papers, government reports of RBI, NABARD

etc..

<https://www.mvnadkarni.com/files/Agricultural%20Policy%20in%20India.pdf >

<https://rbidocs.rbi.org.in/rdocs/Content/PDFs/cap_ad.pdf >

SECONDARY RESOURCES: It includes, journal articles, newspaper reports, opinion

columns from JSTOR, Hein Online, J- Gate, Mondaq, Times of India, The Hindu etc..

RESEARCH METHODOLOGY:

This project is DOCTRINAL in its nature and EXPLANATORY in its methodology.

SCOPE OF THE STUDY: The study, is limited to the scarcity of capital and issues with capital
formation in Indian Agriculture and undertakes to examine into the factors effecting capital
formation and address with suggestions, and the study, is set to understand the corporitization
in Indian Agriculture, the recent backlash and issues pertaining to it.

SIGNIFICANCE OF THE STUDY: The reader shall be in a position, to appreciate the

resilience of the Indian Agricultural sector, and shall understand the crucial aspect of
agriculture which has been in neglect for decades and its revival, in context for capital

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formation in agriculture, along with the future of agriculture in corportizaiton is uncertain, but
shall be in a place to appreciate the merits and demerits and issues revolving around it.

RESEARCH QUESTIONS:

1. Whether private investments be a boon or bane to the growing problem of paucity of

capital in primary sector.
2. Whether, Corporatization be the future of Indian Agricultural scenario.

MODE OF CITATIONS:

This researcher, has utlitsed the Oxford, OSCOLA 4th edn of citations in the project.

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PAUCITY OF AGRICULTURAL CAPITAL AND ISSUES ON CORPORATIZATION
OF AGRICULTURE

1. CAPITAL FORMATION IN AGRICULTURE:

Agriculture continues to the pulse of Indian Economy, accounting for around 20% of GDP and
two thirds of the population dependent on it as livelihood and as way of life. The growth of
other sectors largely depends on the forward and backward linkages of primary sector ,
However, it suffers from various constraints ranging from traditional methods of cultivation,
dependence on monsoon rains, small scale land holdings, low productivity and low investment.
Over time, the falling investment had been a major cause of concern . Inadequacy of capital
slowed the pace of investments in the sector. In order to compete with global market, it became
imperative to meet the growing needs for domestic and export transactions impetus of
technology and managerial aspects are critical. Hence, there was ever growing need for
investments in agriculture.1

Agriculture development and capital formation have a strong relationship. The prevalence of
externalities, high risk, and inadequate agricultural institutions, however, have caused the
government financing or overall public capital formation in Indian agriculture to stagnate or
decline since the beginning of the 1980s. Comparing the pre-reform period to the post-reform
period, there has been a sizable growth in capital formation in Indian agriculture. Injecting
capital into the agricultural sector at an increased rate since 2003 challenges the perception of
"neglect of agriculture" that developed during the 1990s. During the 12th Five-Year Plan, the
government also plans to speed up spending in rural energy, research, extension, and
education. 2

The word "capital" refers to "assets" that are used as inputs in the production process to create
new commodities and services. Thus, it differs from money in that it refers to assets whose
creation requires both financial and labor-intensive "investments." Thus, a second attribute of

1
Seema Bhatla, ‘Public and Private Capital Formation and Agro Growth in India’ (2014) 27 (1) Agricultural
Economics Research Review 19,20,21.
2
Ashok Gulati and Seema Bathla,’ Capital Formation in Indian Agriculture: Re-Visiting the Debate’ (2001) 36
(20) Economic and Political Weekly 1697,1698.

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capital is that the asset must have been produced via "human activities" and cannot be found
in its natural state. Land is not regarded as capital, despite being the most significant basic
resource in agriculture. But since it meets the requirements of "human labour" and a "asset"
helpful in the agricultural production process, any investment made in land development would
be referred to as capital.

On the other hand Capital Formation, refers to the process of building the stock of capital. It is
accomplished by setting aside a portion of the economy's current income and investing it in the
creation of capital goods such as vehicles, tools, plants, and equipment, as well as
transportation, storage, and communication infrastructure. The quantity of additional invested
money in a specific asset determines whether the capital stock grows.

Investment in any sector, results in capital formation, as in infrastructure, transport, and

economic overheads. Investments in agriculture, is usually undertaken to realise the long term
potential, where in by augmenting natural resources, enhancing the use of existing sources, and
creating value addition , it means acquiring physical assets that enhance in creating income
over a period of time. Capital formation in investment in primary sector, improves, the tools,
equipments, productivity of natural resources, which supports the farmers in using their fixed
assets (land) more productively. 3 Investment in agriculture, is undertaken by both public and
private sectors. Mostly, public investments, are taken for build the needed infrastructure, helps
in reducing rural poverty, augments agri business, lower food prices. Private investments, are
those made by households and corporate companies, they invest on farm machinery, irrigation,
land reclamation, 90% of present times, households dominate the private investments , however
among many things it largely depends on the availability of infrastructure, returns on
investment, availability of credit, . It is true, lack of access to financial credit, emerges to be
one of bottlenecks, hindering the investment in agriculture.4

However, the fact that capital is increasing on both public and private accounts has not yet
resulted in a faster pace of agricultural expansion raises questions about the sector's future,
particularly in light of declining productivity, rising farmer discontent, and enduring poverty.

Numerous studies have emphasised the crucial part that capital plays in raising labour
productivity and income in agriculture. Infrastructure for irrigation, highways, and electricity
generation has always been heavily reliant on public sector investment. Public GCFA, or gross

3
Ashok Gulati, Seema Bhathila, ‘ Capital Formation in Indian Agriculture’ (2002) 24 (7) National Bank for
Agricultural and Rural Development 1,8,9.
4
Ibid,

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capital formation in agriculture, accounts for almost one-fourth of all investments in the
sector, a ratio that has historically been smaller than private GCFA. Periodic ups and downs
are evident, with a greater rate up until the 1970s, a major decrease in the 1980s, a minor
recovery in the 1990s, and a significant improvement in the 2000s. 5

1.1 THE NEXUS BETWEEN PUBLIC AND PRIVATE INVESTMENTS:

Since, the globalization era, the rate of increase in share of private sector in agricultural
investment has been less than during pre reform period, though, in other sectors private sector
has controlled major stakes. The most important, is the impact of public investment on private
investment is found to be assymetric. An increase, in public investment is found to have
positive impact on private investment, but a decline in public investment is found to have
increased private investment. And it was emphasised in many studies, there has to be a shift of
emphasis from present day domination of public sector in infrastructure and shift to public-
private partnerships. The interconnection between technology, terms of trade and private
investment needs to taken in view, while framing policies to stimulate private investments. On
the aspects of research, it is important to note, that traditionally, public sector was vested with
the duty to agricultural research. However, private funded research are more impactful in
developed countries, which accounts to nearly 30-40%. 6

1.2 CONSTRAINTS ON PUBLIC AND PRIVATE CAPITAL FORMATION IN

AGRICULTURE:

On Decline of Public Investment: A key problem is the declining share of public investment
because it is essential for both boosting total factor productivity (TFP) growth and luring
private sector investment into the sector. According to some estimates, a 10% drop in public
investments results in a 2.4% drop in agricultural GDP. The decrease in public investment in
agriculture is caused by a number of factors. The most notable ones are the substitution of
subsidies for direct investment, the rise in maintenance costs for ongoing projects, the delays
in project completion, and the stagnation of R&D investment, lower allocation for irrigation,

5
Nusrat Akber, Kirtti Ranjan Paltasingh (2021) Agricultural Growth and Investments in India: Assessment of
Recent Trends, Breaks and Linkages. Italian Review of Agricultural Economics 76(2): 17-30. DOI:
10.36253/rea12057
6
Ramesh Goliat , ‘Capital Adequacy in Indian Agriculture: A Riposte (2008) 29 (1) Reserve Bank of India
Occassional Papers

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poor infra and research7. Reduced public sector investment in the agricultural sector is mostly
due to the process of macroeconomic contraction and the state's resultant reduction in its
development role during the post-liberalization period.8 Agriculture falls under the State List,
in the seventh schedule, Due to economic mismanagement and their populist policies, the
majority of the states are in a dire fiscal situation. Actual investments in agriculture have
suffered as a result of the state governments' poor financial status. Since the mid-1990s, the
states' total cumulative expenditure on agriculture and related activities as a share of overall
expenditure has been circling at 4-6 %, down from 8 in 1980–1981.

The major factors which constrain, the investment in agriculture include, The primary sub-
sectors in agriculture, minor irrigation and farm mechanisation, have seen only modest growth
in recent years. Other major factors limiting capital formation growth in Indian agriculture
include: I declining public sector investment; (ii) limited credit absorbing capacity; (iii) a lack
of efficient technology transfer mechanisms and inadequate extension services; and (v) a lack
of adequate infrastructure for agroprocessing, storage, warehousing, value addition, and
marketing. Restraints on purchasing outside the mandis, price fluctuations, improper risk
mitigation mechanism and land records not being available.9

1.3 IMPACT OF ACCESS TO INSTITUTIONAL CREDIT IN CAPITAL

FORMATION:

One of the most important factors influencing private capital formation in agriculture is access
to credit facilities. Both institutional and non-institutional resources provide the credit needs of
farmers. A farmer may obtain a loan from a moneylender, an input supplier, a trader, a relative,
or another non-institutional source of credit. Regional rural banks (RRBs), commercial banks,
cooperative banks, and cooperative credit societies make up institutional sources. Since most
Indian farmers lack access to institutional financing, they are forced to rely mostly on non-
institutional lenders who charge extremely high interest rates of between 36 and 60 percent
annually. Because of this, the majority of farmers get caught in a debt cycle and struggle to
escape it. This has recently been a prominent factor in farmer suicides, especially in
combination with unstable market conditions. Bank credit to the agricultural sector has never

7
Nusrat Akber, Kirtti Ranjan Paltasingh (2021) Agricultural Growth and Investments in India: Assessment of
Recent Trends, Breaks and Linkages. Italian Review of Agricultural Economics 76(2): 17-30. DOI:
10.36253/rea12057
8
Capital Formation in Indian Agriculture, < https://egyankosh.ac.in/bitstream/123456789/19673/3/Unit-
15.pdf> accessed on 25 Oct 2022.
9
Capital Formation in Indian Agriculture, < https://egyankosh.ac.in/bitstream/123456789/19673/3/Unit-
15.pdf> accessed on 25 Oct 2022.

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reached this level, despite the fact that it is a priority sector and receives 18% of all institutional
credit flows. 10

There exists several factors, constraining the banks in giving credit, firstly the high tranasaction
costs, the deficiencies in rural credit system which has limited outreach, lack of collateral from
farmers, low amount of loans with high risk etc..

Highlighting the significance of investment in agriculture, several policies were initiated by the
government and RBI to provide impetus to private investment like

 The RIDF (Rural Infrastructure Development Fund) was set up in 1995 m wherein the
scheduled banks were provided with adequate funds to meet the target of 18% net bank
credit.
 In 2003, the Government of India, set up the Committee on Capital Formation in
Agriculture, to devise strategies for increasing investment in agriculture. To
recommend a road map, the RBI constituted as Expert Group on Investment Credit to
Agriculture in 2005.11
 The NAP (National Agricultural Policy) was adopted in 2000, wherein it was
emphasised, the need for adequate and timely supply of institutional credit to farmers.
The doubling of credit flow to agriculture, during 2004-2007.
 In 2005, the GOI launched the Bharat Nirman Programme, an action plan to develop
rural infrastructure, for four years (2005-09).
1.4 WAY FORWARD:

It is of no doubt that a poor rate of agricultural growth will negatively affect the expansion
of the economy in India because of the significance of agriculture in terms of GDP,
employment, and income. Adopting regionally appropriate strategies is essential, with an
emphasis on the potential for diversification and production increases using well-
established technology. Therefore, investment—the main driver, needs to be boosted to
reach the targeted level of growth. One of the key causes of the industry's deteriorating
productivity and low capital formation is the public sector's declining investment in
agriculture. This worrying trend needs to be reversed since it will put pressure on

10
Emmanuel Melchair, ‘Capital and Credit Requirements’ (1969) <
https://fraser.stlouisfed.org/files/docs/historical/federal%20reserve%20history/discountmech/capcred_meli.p
df> accessed on 25 Oct 2022.
11
Ramesh Goliat , ‘Capital Adequacy in Indian Agriculture: A Riposte (2008) 29 (1) Reserve Bank of India
Occassional Papers.

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 productivity-driven growth in the future. Agriculture-related private investment has also
lagged and needs to be promoted through effective policies. 12

 Standard investments in land improvement, irrigation, farm mechanisation, and

bringing small and marginal producers into the mainstream for marketing and
exports demand fresh consideration.
 In order to encourage more private investment, public investment in farm
infrastructure, particularly in the poorer Eastern and North Eastern states, needs to
be properly channelled. 13
 Increased focus is also needed on public investments in agricultural research and
development, animal breeding, microbiological strains, and effective technology
packages, notably those for land and water management, which can eliminate biotic,
socioeconomic, and environmental restrictions. 14
 One cannot overstate the importance of increasing term credit to farmers. Due to
the structural flaws in cooperative banks and the sparse presence of RRBs,
commercial banks may have to support private investment in agriculture.
 It is necessary to increase public investment, especially in irrigation and water
resource management, watershed development, and the reclamation of unused or
degraded land, as well as in the provision of vital infrastructure like roads, markets,
and electricity from the point of agriculture production, slow expansion. Since the
early 1980s, the primary factor for the fall in public investment in agriculture has
been surface irrigation, which has been accomplished through investment in large
and medium-sized projects. While real issues make it challenging to replicate new
irrigation systems quickly, a dedicated effort is needed to speed up ongoing but
incomplete projects.15

12
Dynaeshwar Vishnu Gore, ‘An Analysis Of Capital Formation in Indian Agriculture and Its Implication for
More Inclusive Growth of Indian Economy ‘ (2014) 6 Journal of Poverty, Investment and Development 1,3,5.
13
Ibid,
14
Ibid,
15
Supra Note 2

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 2. CORPORTIZATION OF AGRICULTURE:

The recent protest of farmers at the borders on Delhi, over the contentious farm laws, has once
again brought to the fore, to go ahead with corporatization as it can attract private investments,
and usher in modern technology, over the fear and predicted reality, which can make the
farmers vulnerable to the established corporates. In order to understand this, first we shall deal
with what corporatization mean in Indian context, its merits and demerits , the issues related to
it, and reflect upon the three farm laws.

The term "corporatization" refers to the creation of a large group of people. The word
"corporalis" in French refers to the human body. Therefore, corporatization of agriculture refers
to the establishment of a company that is exclusively engaged in agriculture. It is different from
privatization, a transition from public to private ownership or management is known as
privatisation.16 The introduction of commercial , methodical and objective resource
management practises is what corporatization includes . Therefore, privatisation involves
organisational change, as opposed to corporatization, which involves institutional changes.
Agriculture is being corporatized by allowing corporate entities to control the prices of inputs
like water, fertiliser, electricity, and agricultural products on the open market. Again, it could
be asserted that corporate control over the chain of distribution and the means of production of
agricultural goods constitutes corporatization of agriculture. 17

Features of Corporatization:

a. Commercialisation of agriculture
b. Involvement of private investment
c. Organisational frame work with the homogeneity of activities
d. Improved Product Quality
e. Competitiveness in price
f. Infusion of Modern technologies.

Corporatization, per se is not bad, as it bring in optimum utilisation of resources of machines,

seeds, fertilisers, and bring in adequate bargaining power if the farmers are all united in their

16
Corporatization of Agriculture Growth and Perspectives <
https://ir.nbu.ac.in/bitstream/123456789/1290/8/08_chapter_01.pdf> accessed on 26 Oct 2022
17
Tejender Meena, ‘Corporatization of Agriculture and Its Effect’ (SSRN, 15 Aug 2016) <
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2823387> accessed on 26 Oct 2022.

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stance, however, in reality, it is the corporates which dictates, the crop to be grown and the
price to be fixed.

On the merits, it brings in investment Institutional investment occurs during corporatization.

In actuality, the main goal of investing is to generate a profit. The latest technological
developments in the sector are undoubtedly encouraged by corporatization in order to
maximise profit. The relevant corporate authority will make it easier for farmers to get inputs
like high-yielding seeds and plant varieties, better-quality fertilisers, and pesticides under
corporatization. Additionally, through building essential infrastructure, the corporate
investment will work to increase agricultural output. In the wake of corporatization, the
relevant corporate body will make it easier for farmers to obtain inputs like high-yielding seeds
and plant varieties, better-quality fertilisers, and pesticides. 18 Backward connections between
agriculture and food processing will eventually be established as food commerce develops. All
these, will enhance better price, and agricultural marketing for the producer, wherein he need
not go anywhere to find market and price for his produce, instead the market is at his door step.
The contract entered upon him with the corporate, can act as collateral , which can enhance his
chance at access to institutional credit through banks and also secure as crop insurance. 19

In case, if the primary sector is corporatized, farmers will have more negotiating strength and
legal recourse in the event that their rights are violated, as the corporates have to satisfy a triple
test i. systematic activity, ii. Relationship of employer and employee iii. Farmers will have
greater say on production and distribution of goods20.

2.1 ISSUES PERTAINING TO CORPORATIZATION OF AGRICULTURE:

It is imperative to understand, that any private corporate works for profit and not for service.
A notion known as "corporatization of agriculture" represents the values of capitalism by
calling for the introduction of corporate entities and the subsequent commercialization of the
industry. Commercialization is another name for profit multiplication: One of the most vital
industries in our economy is agriculture, which not only meets our needs for food, clothes, and
other necessities but also employs a disproportionately large number of people compared to

18
Corporatization of Agriculture Growth and Perspectives <
https://ir.nbu.ac.in/bitstream/123456789/1290/8/08_chapter_01.pdf> accessed on 26 Oct 2022.
19
Ibid.
20
Bangalore Water Supply v. A. Rajappa, AIR 1978 SC 548

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other industries. Food security in private hands is no food security at all because corporations
are in the business of making money, not feeding people.21

The Preamble of the Constitution states that India is a socialist nation where the concept of
democratic socialism is dominant. The concept of a welfare state, which attempts to avoid
exploitation and unfettered competition without stifling human initiative or impairing political
liberties, is highlighted by democratic socialism. The major issues with this concept are:

 Corporatization of Agriculture, means liberalisation wherein , the imports on fertilisers,

removing subsidies on irrigation provide an enabling environment for the corporates
which cannot be accomadated to the Indian Farmer, as majority of them are dependent
upon the subsidies and are small and marginal farmers.
 Landlordism, is another issue, wherein the farmers are hired as labourers by the
corporates and with extensive use of mechanization it changes the sector from labour
intensive into capital intensive. The company takes all the major decisions and workers
have got no role to play. 22
 The Companies, look and work for profits, this was illustrated, in the case of Pepsico,
wherein the contract farmers of Punjab were agreed to sell their tomatoes for 0.75 per
kilo, when the farmers rejected, and the company later sold its processing plant to other,
in this way it keeps the farmers at the mercy of corporate houses.
 Another murky area of worry in this system is food security. If corporatization is not
adequately regulated, or if private corporate bodies operating in this sector are not under
control, then these private corporate entities will prioritise maximising profit over
safeguarding the interests of the general public.
 The farmers will work directly or indirectly for the corporate business and are subject
to job loss for a variety of reasons. The country's unemployment problem will worsen
as a result, as will poverty levels, and the farmers' livelihoods will be lost.

21
Globalisation of agriculture and rising food insecurity, http://www.twnside.org.sg/title/food-cn.htm
accessed on 25 Oct 2022.
22
S.P Singh, ‘Corportization of Agriculture’ (2007) Alternative Economic Survey of India 81,85,86.

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 2.2 CORPORATIZATION OF AGRICULTURE UNDER THE COMPANIES ACT,
2013:

India's agricultural sector is distinct in that it is unorganised, dispersed, and heavily focused on
output. Almost 85% of Indian farmers are poor, small, marginal, or landless, with extensively
dispersed land holdings and diverse agricultural and production practises. Organizing these
farmers into groups known as Farmer Producer Organizations (FPOs) has frequently been
viewed as the most practical way to address the majority of their problems. However, the FPO’s
in India, were plagued with Political interference, apathy, a lack of funds, a lethargic
bureaucracy, and stagnation all had an impact on FPOs in India. Due to the failure of these
FPOs, a new type of FPO known as Producer Corporations was created as a cross between
cooperative societies and private limited companies, giving farmers the advantages of working
cooperatively together with the advantages of economic growth and corporate autonomy. 23

The term "Producer Companies" refers to a type of company that has been formed by a group
of ten or more individual producers, two or more producer institutions, or a combination of ten
or more primary producers and institutions engaged in related activities. It is defined by the
Companies Act, 2013 as a corporate body that is registered as a producer company under this
act or the previous company legislation and has the purposes or activities listed in Section 378B
of that act.24

In India, the first farmer producer company was founded in 2004 under the name "Farmers
Honey Bee India Producer Company Ltd." By the end of 2020, more than 4,000 FPOs would
have been registered as producer companies under the Companies Act. The vast majority of
businesses in the nation (but primarily those in Rajasthan and Maharashtra) have been
successful in integrating themselves with the local commodity exchanges to reduce their risks.
A significant commodity exchange in India, NCDEX, reports that over the past few years,
farmer producer companies have traded 32,896 MT of agricultural products on the exchange
platform. 25

23
Anhita Tiwari, ‘Corporatisation of Agriculture Understanding the Relevance of Farmer Producer Companies
in Backdrop of the New Farm Bills: A Solution (4) 5 International Journal of Law Management and Humanities
1817, 1819
24
Ibid.
25
National Commodity & Derivatives Exchange Limited (NCDEX), Connecting Farmers to Markets FPO Update
(Sept., 2019) https://ncdex.com/public/uploads/pages/NCDEX%20Group,%20Connecting%20Farmers%20to%2
0Market,%20September%202019_111119.pdf. accessed on 25 Oct 2022.

18 | P a g e
 2.3 FARM LAWS (2020):

The three farm laws, namely, Farmers Produce Trade and Commerce (Promotion and
Facilitation) Act, (2020). The Farmers (Empowerment and Protection) Agreement on Price
Assurance and Farm Services Act, (2020). The Essential Commodities (Amendment) Act,
(2020), which were met with unprecedented protests over a year was stated to be withdrawn
by the Prime Minister.

According to the Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, a
mechanism must be established so that farmers can sell their agricultural products outside of
the Agriculture Produce Market Committees (APMCs). Farmers may sell their produce to any
license-holding trader at a price that has been agreed upon. Mandi taxes levied by the state
governments won't apply to this trading in agricultural products. Electronic trading, is
encouraged , and forbids state governments from imposing any market tax, cess, or levy on
farmers, traders, or electronic trading platforms for the exchange of agricultural products in a
"outside trade region."26

In accordance with the Farmers (Empowerment and Protection) Agreement of Price Assurance
and Farm Services Act, farmers are free to engage in contract farming and market their
products. Further, the process of price determination must be mentioned in the agreement . The
Essential Commodities (Amendment) Act amends the existing Essential Commodities Act.
Food goods like grains, pulses, edible oils, and onions can now be traded, with the exception
of extreme emergency cases.27

In here, we shall understand the reasonable issues which hinder the corporatization aspect,
wherein the foremost demand was to repeal the farm laws, as in the law is structured to benefit
large corporations that seek to control the Indian food and agricultural industries, which will
reduce farmers' bargaining leverage. Additionally, major private businesses, exporters,
distributors, and processors can gain an advantage. Due to the registration of arhatiya or
middlemen, APMCs offer a platform for accountability where confidence can be built. Without
a registration process, it is possible to defraud farmers because there is no agency to settle

26
Praachi Nagpal, ‘Three Farm Laws were to Rolled Back” (India Today, 20 Nov 2021) <
https://www.indiatoday.in/india/story/three-farm-laws-to-be-rolled-back-what-were-they-all-about-1878746-
2021-11-19> accessed on 26 Oct 2022.
27
TOI, ‘What are New Farm Laws, and Why are Farmers Protesting’ (The Times of India, 08 Dec 2020) <
https://timesofindia.indiatimes.com/india/what-are-new-farm-laws-and-and-why-farmers-are-
protesting/articleshow/79609234.cms> accessed on 26 Oct 2022.

19 | P a g e
disputes with credit or payments. 28 The law aims to settle disputes locally in order to reduce
reliance on the judiciary, which is hampered by the backlog of cases. Farmers, however, worry
that the large funds of private firms, the business-bureaucracy connection, and a lack of
resources in the event of a court dispute would result in outcomes that would favour
corporations.29

Though on the outset, the 3 laws aimed to double the incomes of the farmers, it is hurried away
by not considering the required stake holders, neither was there any fruitful debates on it in the
Parliament. On the aspect of corportizations, it is rightly stated, Farmers now operate under
the pressure to "get big or get out," which frequently leads to violation of their legal rights, as
a result of unchecked corporate power and growing political influence. The pricing practises
of companies drive small farmers out of the agrarian market. Olivier de Schutter (2008–2014),
a Belgian academic and UN Special Rapporteur on the Right to Food, condemned the pricing
pressure and claimed that low producer prices exacerbated socioeconomic conditions. He urged
governments to eliminate imbalances brought on by market forces and stop unfair trade
practises. The Indian Agriculture at present, is not yet ready for the corporitization as many of
its producers are still fighting poverty, illiteracy and lack of resources. Change should be
brought gradually not overnight, and till then, the government should concentrate on
improving the APMCs that detail the current flaws in the mandi system. A recommendation
made in the Swaminathan report from the National Commission on Farmers in 2006 that a law
be passed mandating that MSP be at least 50% higher than the weighted average cost of
production is already overdue.30

28
Kavya Dutla, ‘Farm Laws 2020: Who are they meant to serve’ (Down to Earth, 07 Dec 2020) <
https://www.downtoearth.org.in/blog/agriculture/farm-laws-2020-who-are-they-meant-to-serve--74540>
accessed on 26 Oct 2022.
29
PRS, “The Farm Laws and The Contention” (PRS Legislative, 8 Oct 2020) < https://prsindia.org/billtrack/the-
farmers-empowerment-and-protection-agreement-on-price-assurance-and-farm-services-bill-2020> accessed
on 26 Oct 2022.
30
Rutvi Duttani, ‘What Corportizations did to Agrarian Societies of the World’ (Outlook, 14 Jan 2021) <
https://www.outlookindia.com/website/story/opinion-what-corporatization-did-to-agrarian-societies-of-
world/361625> accessed on 26 Oct 2022.

20 | P a g e
 CONCLUSION

Indian Agriculture had always stood to the test of times, even in pandemic when it showed its
resilience by recording 3% growth rate, when all other sectors where recessing. It is important
that the primitive methods of farming need to be done away, in order to attain self sustenance
for the growing demands of the population and compete in exports of produce. The pace of
investment in capital formation in agricultural sector had slowed down, which will in turn slow
down the technological changes in the economy, which can have immense impact on the
economy. The public investment and private investment both play crucial role and the govt
should employ wise strategies and policies so as to induce the private investment, as most of is
through households, the access to institutional credit of finance needs to channelized.

Though Corporatization, offers, to be providing farm mechanization, bringing in huge

investments, improving the managerial efficacy , it also determines competitive prices , it also
bears in that Corporatization is not a bad thing, however the monopoly of it, is dangerous. Most
of the farmers in India, fall in the pool of small and marginal farmers whose lands are of not
much interest to big corporates, and brings in landlordism where in the large land holders can
benefit out of the capitalist techniques. It is important to take necessary safeguards in ,
protecting and balancing the interests of both the farmers and the corporates. One such step,
taken to usher in the reforms was the hurried attempt of Farm Laws, wherein the law, was not
properly considered and failed to address the present scenario of Indian Agriculture.

Thank you.

Swetha Sree.M

21LLB120

Sem III

21 | P a g e
 BIBLIOGRAPHY

1. Kavya Dutla, ‘Farm Laws 2020: Who are they meant to serve’ (Down to Earth, 07
Dec 2020) < https://www.downtoearth.org.in/blog/agriculture/farm-laws-2020-who-
are-they-meant-to-serve--74540> accessed on 26 Oct 2022.
2. PRS, “The Farm Laws and The Contention” (PRS Legislative, 8 Oct 2020) <
https://prsindia.org/billtrack/the-farmers-empowerment-and-protection-agreement-on-
price-assurance-and-farm-services-bill-2020> accessed on 26 Oct 2022.
3. Anhita Tiwari, ‘Corporatisation of Agriculture Understanding the Relevance of
Farmer Producer Companies in Backdrop of the New Farm Bills: A Solution (4) 5
International Journal of Law Management and Humanities 1817, 1819
4. Globalisation of agriculture and rising food insecurity,
http://www.twnside.org.sg/title/food-cn.htm accessed on 25 Oct 2022
5. S.P Singh, ‘Corportization of Agriculture’ (2007) Alternative Economic Survey of
India 81,85,86
6. Tejender Meena, ‘Corporatization of Agriculture and Its Effect’ (SSRN, 15 Aug 2016)
< https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2823387> accessed on 26
Oct 2022
7. Dynaeshwar Vishnu Gore, ‘An Analysis Of Capital Formation in Indian Agriculture
and Its Implication for More Inclusive Growth of Indian Economy ‘ (2014) 6 Journal
of Poverty, Investment and Development 1,3,5
8. Ramesh Goliat , ‘Capital Adequacy in Indian Agriculture: A Riposte (2008) 29 (1)
Reserve Bank of India Occassional Papers.

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 ECONOMICS II PROJECT BY
21LLB120
by Swethasree Murikipudi

Submission date: 28-Oct-2022 04:21AM (UTC+0530)

Submission ID: 1937265916
File name: economics_II_PROJECT_BY_21LLB120.docx (261.74K)
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ECONOMICS II PROJECT BY 21LLB120
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