Perils of contract farming

Rajat Panwar | Updated on December 24, 2020

It excludes small farmers and under-delivers on promises

On the basis of occupation, farmers — and farming dependent households — comprise the largest chunk of electorates in India. Every political party, no matter its ideology, projects itself as a champion of farmers’ causes. It is, then, not surprising that the ongoing protests by farmers against the provisions of newly enacted Farm Bills have stirred up India’s political environment.

What is troubling though is that this political clatter is smothering critical reflection. Through my upbringing in a family of farmers in Western UP, I know first-hand that farming, for most farmers, is much more than a means to an economic end. It defines their way of living; it is fundamental to their entire social edifice. These Farm Bills, specifically the provisions of contract farming, raise significant apprehensions because they will inescapably dismantle the social fabric of rural India that meshes economic activities and community relationships.

Research, including my own, shows that contract farming is a contentious practice. Its stated intentions are always cheery: helping farmers access mainstream markets, providing stable and fair price for agriculture products, increasing farm productivity, and many others.

However, the outcomes of contract farming programmes are often starkly different. Not only it under-delivers on economic promises, it also engenders a social divide through exclusion of small farmers. This is the most critical of all concerns for a country like India where the majority of farmers hold small acreages.

Decimates market channels

Research also suggests that contracting corporations decimate established market channels but they do so in indirect and insidious ways. Overtime, farmers are left with no choice because the founding premise of contracting corporations is resource monopolisation. That is why contract farming is often dubbed disguised land grabbing. It essentially means that farmers remain legal owners of the land but the core decisions are dictated by contracting corporations. In plain language, it is called dis-empowerment.

A multi-year doctoral research project reveals that participating farmers almost always enter into contract farming agreements with high expectations of economic returns, but most of them leave disappointed because contracting firms often exploit them, dictate their terms, and leave little bargaining power with farmers.

In a purely technical sense, getting out of these contracts is not difficult. However, as alternative market channels dry up, farmers no longer have a good option. The choice then is between a bad and a worse deal.

Leaders of various farmers’ organisations have raised these concerns in their negotiations with Agriculture Minister Narendra Singh Tomar and Home Minister Amit Shah. Both of them, as well as Prime Minister Modi, have characterised these concerns as ill-founded and untrue. On what basis can they assure that contracting corporations will not do what they have done everywhere in the world?

A technical legal document is not going to protect a small farmer against a resourceful corporation that will steer market forces as it wishes. Farmers’ interests in contract farming are not usurped visibly through exploitative legal stipulations, rather they are crushed through the power of markets.

It may be politically astute to go on saying that farmers’ concerns are implanted by political opponents.

Every single concern that Indian farmers have raised against contract farming is overwhelmingly supported by empirical evidence in not one, but in many parts of the world. Indian farmers are not misguided. Their concerns deserve fair analyses, not off-the-cuff responses and symbolic assurances.

Moving forward, a constructive resolution is needed. India certainly needs comprehensive agriculture reforms to feed its population of around 1.4 billion people, protect its fast-depleting underground water resources and soil quality, and to indeed increase the economic contribution of the agriculture sector.

Contract farming can have a small role, but it is important to contain it only to the perishable crops sector where large capital investments are needed.

The writer is an Associate Professor of Sustainable Business at Appalachian State University in North Carolina, US

Published on December 24, 2020

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