Small farmers in India holds less capital and cannot make major
investment in land improvement and modern inputs. Contract farming
can fill up this gap by providing the farmers with quality inputs,
technical guidance and management skills.The company and the farmers
enter into contracts to supply or purchase a specified quantum of the
commodity at agreed prices. The agreed contract may be either formal
or informal and may cover supply of inputs and marketing of
output.The company reduces the risk of non-availability of raw
material and the farmer reduces the risk of market demand and prices
of his produce. The inputs and services supplied by firms may include
seeds, fertilizers, pesticides, credit, farm machinery, technical
advice, extension etc., or may involve only the supply of hybrid
seeds and marketing of produce.
Success Stories of Contract Farming
There are few success stories on contract farming such as Pepsico
India in respect of potato, tomato, groundnut and chili in Punjab,
Safflower in Madhya Pradesh, oil palm in Andhra Pradesh, seed
production contracts for hybrids seed companies etc. which helped the
growers in realization of better returns for their produce.
Other success stories of contract farming are Amul and NDDB for milk
procurement, sugarcane cooperative in Maharashtra, and prawn-acqua
culture in Andhra Pradesh.
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