Impact of Contract Farming for Basmati Rice upon Small Sized Farmers in the PunjabState of India
Veena Goel, Sr Economist (Marketing)
Punjab Agricultural University, Ludhiana, India
Chapter Proposal
In the midst of existence of Land Ceilings Act which stipulated that agribusiness firms cannot own and cultivate land for raw materials liberalization of the Indian economy during 1991 thereupon amendments in the Agricultural Produce Marketing Committee (APMC) Acts in several states have opened up opportunities for contract farming in the country. This has drawn major corporates, MNCs, financial institutions, agri-input agencies and other organizations, however, contract farming models have varied over crops, regions and the sponsoring organizations. In the PunjabState that had been since the mid 60s i.e. during the Post-green Revolution Period crippled with wheat-paddy rotation due to the availability of assured markets for both these crops. State government encouraged contract farming for crop diversification. Accordingly, Punjab Agro Food Corporation (PAFC) had been set up during 2002 as a nodal agency for contract farming, State Agriculture Marketing Board (PSMB) reduced its market and rural development fees (each from 2% to 0.25%) for the purchase of crops grown under contract farming while to win farmer’s confidence he had been given the option to buy back new crops at the pre-fixed contract prices. This gave a boost to contract farming and its area in the state increased from 9033.20hec during 2002-03 to 82614.98hec during 2009-10. In the beginning this included several crops both during the rabi i.e. summer and kharif i.e. winter seasons but during 2009-10 basmati rice has emerged the leading crop under contract farming and it had been cultivated in 20 of the total 22 districts.
During 2009-10 (Kharif season) three agencies, namely PepsiCo (MNC), Markfed (State level Cooperative Federation) and Gee Gee Agro Tech (private firm in partnership and its owners also act as commission agents from the Moga wholesale food grain market in the State) had been engaged in contract farming. The three agencies had entered into contract farming during 1997-98, 2006-07 and 2007-08 respectively. Each agency registers its contract farmers and provides the extension services and other agricultural inputs. Among these Markfed, does not presently own processing facilities for non-traditional basmati paddy i.e., Pusa 1121 variety though it has one processing unit for the traditional variety and exports it also while the other two emphasize exports. Gee Gee Agro Tech had set up its plant (imported technology) recently i.e., during 2006-07 at Moga while PepsiCo has its plant in the adjoining state of Haryana. Farmers sell unhusked basmati paddy in the wholesale food grain markets that is purchased at the contracted prices with conferment to the quality requirements both by PepsiCo and Gee Gee Agro Tech for own plants while farmers registered with Markfed are free to sell to millers but if market price falls below the contract price Markfed stands to purchase it. Of the three agencies, Markfed and Gee Gee Agro Tech emphasize on the cultivation of Pusa 1121 while of PepsiCo is upon basmati 134 and 160 varieties. Nielsen’s survey carried out during 2008 for about 30 villages in the Jalandhar and Amritsar districts in the state (for 200 farmers - 160 partnered and 40 did not partner with PepsiCo) for basmati paddy showed that it has enhanced farmers’ incomes thereby reduced indebtedness.
Proposed study shall examine the differences in the nature of contracts of the three agencies, developmental impacts upon contract farmers particularly small sized in terms of access to services, productivity, economic returns, factors contributing to its success and acting as hindrances and how could these be enhanced. It shall be based upon primary data obtained both through interviews and unpublished documents from the PAFC, Markfed, PepsiCo and Gee Gee Agro Tech. A representative sample of about twenty farmers registered with each agency having holding sizes up to 5 acres under basmati rice shall also be obtained from the major areas under contract farming. Data shall be collected from them through interviews relating to an access to various services, physical inputs, input saving, monetary gains, constraints, etc.