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Contract Farming

Thursday October 21 2004 08:45 IST

By Karmayogi

EID Parry and Co. has a sugar factory at Nellikuppam, near Cuddalore. It is more than 150 years old. Before the World War, fertile lands were yielding a total return of less than Rs. 100 per acre, while sugarcane growers were making more than Rs. 400 per acre.

In the villages around the factory, it was a common saying that if a farmer owned a brick-built house, he was a sugarcane farmer. It was a period when Madras State or Madras Presidency as it was then called, had only 1600 pump sets of which 1500 were in this part of the district.

Before planting sugarcane, the farmer entered into a contract with the factory that he would sell off his cane to the factory and the factory agreed to buy all his cane at a price fixed by the contract. It is this legal arrangement which is called contract farming.

One main reason for the extreme prosperity of the sugarcane farmers was the existence of this form of cultivation known as contract farming.

A dynamic young man in Coimbatore educated in the USA tried contract farming with cotton farmers. It does not always work, as when the market offers a higher price, the farmer sells his produce not to the mill to which he had contracted, but to the market.

The farmer does not realise that when the price is low in the market, the mill will pay him a higher price. He takes the short term advantage and ruins his permanent welfare. There is no law to enforce the contract, such as the Revenue Recovery Act, which enables the mill to enforce the contract without going to the court.

It is not the mill that is hurt so much as the bank that advanced on the crop whose money is not returned. It is not even the bank that is the real loser, as much as the shortsighted farmer who harms his kamadhenu, an eternal source of his prosperity.

What would make the farmer rich is horticulture and floriculture. Extensive horticulture is possible only by farmers supplying to fruit processing units, not only fresh produce to the limited market. That will be possible if the government offers legal support to the expansion of horticulture by enacting appropriate laws.

One important aspect of today's middle class comfort and status is hire-purchase, which is accepted by the market and enjoys some support from legal provisions. Should contract farming come of age enjoying its own right of full legal status, commercialising agriculture will become a reality. Near here is a village famous for brinjal cultivation.

The whole village has accepted it. Even thirty years ago, there was not a SINGLE hut in that village. Prosperity for the village first expresses as a good house. Indian villages should lose the huts they abound in now. That is an early sign of prosperity.
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