MUMBAI - Against the backdrop of hundreds
of farmer suicides in the debt-ridden farmlands of
the western Indian state of Maharashtra, big
corporations are powering into contract farming -
dangling the carrot of a better deal for
operators.
According to government
estimates, contract farming - which involves
farmers cultivating specific crops under a
buy-back agreement with a company or agency - will
double agricultural exports to US$20 billion by
2010, but some cooperatives fear the agreement
will simply reap more misery for farmers. Another
perceived risk is that land
currently used to produce staple crops such as
rice and wheat will be swallowed up to feed the
$3.5 trillion global food-processing industry.
Reliance Industries, Indian tobacco giant
ITC, Godrej and Pepsi are discussing major
contract-farming projects with the Maharashtra
state government.
The Financial Express
reported that these companies are targeting rich
western Maharashtra, pumping in investments to
complete unfinished irrigation dams and canal
projects, and to "educate" farmers on changing
their crop patterns to reduce their
"over-reliance" on sugarcane. They offer jobs,
health care and an assured income for farmers.
The Communist party-led government in West
Bengal has said that while technology-based
foreign direct investment is welcome, it will not
allow multinational companies to introduce
contract farming in the state.
Generally,
the buyer seems fonder of contract farming than
the seller. "I have visited Germany and seen the
success of contract farming there," C B Holkar,
farmer and vice chairman of the New Delhi-based
National Agricultural Cooperative Marketing
Federation of India Ltd (NAFED), told Asia Times
Online. "The misplaced fear among some of our
farmers is that their lands are under threat, but
contract farming is based only on a better price
for the produce.
"We have done some
contract farming in Punjab, and it would be wrong
to say that farmers are being exploited." However,
he himself is a buyer, purchasing contract produce
from grape vineyards in Maharashtra's Nashik
district.
Tata, India's largest
private-sector group (with 93 companies generating
revenues of $17.8 billion in 2004-05), says its
contract-farming companies will help to educate
farmers so they can defend themselves against
exploitation, ensuring that they know how to use
the Internet and computer software.
But to
some the present reality of contract farming seems
a lopsided deal. One is Dr Sukhpal Singh of
India's leading business school, the Indian
Institute of Management (IIM), Ahmedabad, whose
study "Contract Farming for Agricultural
Development: Experience of the Indian Punjab and
Northern Thailand" says this type of farming has
not benefited the country's farmers.
Dr
Singh observed in his study: "Contract farming, in
political economy, is one mode of capitalist
penetration of agriculture for capital
accumulation and exploitation of the farming
sector by agribusiness companies." The new
concept, he said, was spawned by trends in
marketing, food habits, technology and agriculture
in the new economic environment.
The IIM
study called for institutional arrangements and
legal provisions to protect India's 235 million
farmers. The Confederation of Indian Farmers'
Associations says 86% of India's farmers own less
than 5 acres (2 hectares), compared with US
farmers, who own an average of 178.5 hectares.
"The possibility for abuse certainly
exists - and it's not all one way," Michael
Coleman, managing director of Aisling Analytics
Pte (a Singapore-based hedge fund with US$370
million in investments), told ATol. "Many
contractors have experienced farmers who take the
money/inputs and don't deliver the produce and are
then faced with limited or no viable redress or
remedy - because of weak legal systems or the
power of farmer lobbies."
Coleman says
cooperatives can play a major role in ensuring
benefits in contract farming that "can potentially
allow the agricultural sector to leapfrog decades
or even centuries of development".
"In our
country, contract farming has considerable
potential where small and marginal farmers can no
longer be competitive without access to modern
technologies and support," said a market-reforms
study by the Department of Agriculture and
Cooperation. "The contractual agreement with the
farmer provides access to production services and
credit, as well as knowledge of new technology.
Pricing arrangements can significantly reduce the
risk and uncertainty of the marketplace."
In earlier decades, Indian farmers could
primarily sell to state-owned companies, but the
free economy left farmers grappling with soaring
fertilizer, seed and pesticide costs as the
selling price of their produce nosedived.
Asian countries are turning more and more
to contract farming, particularly the Philippines
and Thailand. The Export-Import Bank of Thailand
wants to finance contract-farming projects, and
Myanmar's military junta has invited Bangladeshi
interests to join Thai businesses in establishing
contract-farming operations in the country.
However, many farmers are unimpressed.
Krishan Bir Chaudhary, executive chairman of
Bharat Krishak Samaj, a New Delhi-based group that
represents 5 million farm families, opposes
contract farming because he says international
companies will benefit while farmers suffer.
"At the heart of the issue lies a profound
ideological question," said Michael Coleman. "Do
you believe in free markets or autarky [a closed
economy]? Is food security better delivered by
economic specialization driven by comparative
advantage and free markets, or by protecting
domestic farmers? Is Malaysia worse off because it
imports rice and wheat and produces palm oil and
rubber for export? Should England not have
repealed the Corn Laws and still have 40% of the
labor force working in the fields? [These are]
emotive issues in India."
Indian farmers
are asking life-and-death questions, not
ideological ones. In its current cover feature
probing farmer suicides in Maharashtra, Frontline
newsmagazine quotes a distressed farmer in
Kshirsagar: "Why is the government willing to
import wheat at Rs1,400 [$30] a quintal [100
kilograms] but won't pay its own farmers more than
Rs800-900 a quintal? Why do city people and the
media raise such a ruckus if the price of onions
or tomatoes goes up? Can't they spend Rs50 a month
more for their food, so that those producing it
don't starve?"
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