The Hindu : Contract farming gaining ground

Online edition of India's National Newspaper
Sunday, Nov 17, 2002

Southern States

Southern States - Karnataka

Contract farming gaining ground

By Nagesh Prabhu

BANGALORE NOV. 16. Contract farming is picking up in the State with thousands of farmers entering into tie-ups with agribusiness firms because of market inadequacies such as crash in prices and the exploitation of farmers by middlemen and traders. The trend is gaining ground in many districts.

Farmers are into contract farming for crops such as gherkin, marigold, oilseeds, sugarcane, niger oilseeds, potato, cotton, rose onion, chilli, tomato, and others. As many as 14 companies have entered into a contract with 30,000 farmers to grow gherkin. The crop is spread over 15,000 acres in 10 districts.

Essentially a partnership between agribusinesses and farmers, contract farming offers many benefits. "The sponsors supply inputs, production services, credit, new technology, and assured market and prices to farmers," the Managing Director, Karnataka State Agricultural Produce Processing Corporation (Kappec), B.A. Channappa Gowda, told The Hindu. For sponsors it ensures consistent quality of output at a reasonable price.

Most of the firms are keen on gherkin since it is in demand in the United States and European countries. On an average, each firm provides employment to nearly 2,000 farmers. The farmers get Rs. 7,500 to Rs 8,000 per tonne of gherkin, depending upon the quality. Most of the exporting units are located in and around Bangalore, as the State accounts for over 70 per cent of the country's gherkin exports. The State exported gherkin worth Rs. 105 crore last year of the country's total exports of Rs. 125 crore of the produce. However, production was 50 per cent lower this year due to drought and erratic power supply, Sanjay Sanghani of Unicorn Agrotech Ltd., said.

"Except land and labour, we supply all kinds of inputs and technology and provide training to farmers. We have plans to expand the farming in vegetables too," said B.M. Devaiah of Green Agro Park Private Ltd. As the gherkin crop was labour intensive, many firms entered into contract with small and marginal farmers who owned less than three acres of land, he said.

Over 10,000 farmers have contracts with 15 companies to cultivate rose onion in Bangalore Rural and Urban and Kolar districts. The State produced 70,000 tonnes of rose onion and exported 26,000 tonnes last year. Kappec is the sole nodal agency to issue no objection certificate (NOC) to firms exporting rose onion, Mr. Channappa Gowda said.

A Coimbatore-based firm has engaged many Tibetan refugees settled in Kollegal, Bylakuppe, and parts of Hunsur in contract farming. The tie-up with the company enabled them to receive technical expertise for raising non-contaminated cotton. The sources said the refugees had shifted to cotton partially due to the elephant menace to the maize crop.

Some farmers have a contract with Ugar Sugar Factory in Bijapur to cultivate barley while others are producing marigold for AVT. Similarly, niger oilseeds are being cultivated on dry land in Tumkur, Bangalore Rural, and Chamarajanagar districts. Many firms are involved in growing tomato and potato to supply high quality products to supermarkets in cities and towns, said Amalendu Jyotishi, who is researching contract farming at the Foundation to Aid Industrial Recovery (FAIR), Bangalore.

Now the Central Sericulture Training and Research Institute (CSTRI), Mysore, is focussing on large-scale farming and giving a thrust to contract farming. It is keen on transferring technology packages and encouraging farmers to grow new crops which are pest- and disease-free.

As most of the firms are concentrated in the southern districts of the State, two companies — Ken Agritech Private Ltd. and Chalukya Agro Exports Ltd. — are doing business in the northern districts. Ken Agritech got 1,000 farmers in Dharwad, Bagalkot, Gadag, and Haveri districts to produce nearly 5,000 tonnes of gherkin last season. With financial assistance from the National Horticulture Board (NHB), it provided drip irrigation facilities to farmers, Vivek Nayak of Ken Agritech, Hubli, said.

"Contract farming is based on trust. To be successful, it requires a long-term commitment by both parties. Exploitative arrangements by firms are likely to have only a limited duration and can jeopardise agribusiness investments," Mr. Nayak said.

Many firms and farmers involved in contract farming complained that poor roads, irregular power supply, and shortage of water were dampening the prospects of horticultural crops. However, Mr Channappa Gowda said that Kappec had initiated many measures to solve the problems in the agricultural export zones (AEZs) in the State to promote horticultural crops and to bring the farmers into the mainstream of development.

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