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Resource centre on India's rural distress
 
 

Contract farming silence in farm bill -Sambit Saha
-The Telegraph

Calcutta: Private companies will be able to buy farm produce directly from farmers in Bengal.

But the widely-anticipated whoop of exultation from Indian industry over the amendment in the state's agri-marketing act was somewhat muted because of the lack of clarity on the issue of contract farming and the absence of clear guidelines on whether the state government would provide incentives and help in the acquisition of land for private terminal marketing complexes.

Industry leaders from the retail and food processing sectors across the country welcomed the changes in the West Bengal Agricultural Produce Marketing (Regulation) (Amendment) Bill, 2014, passed in the Assembly while cautioning that the change may not yield immediate results.

"You cannot fault what has been done today. If I were to do this (amendment), it would have been the same. I had only hoped that there would be greater clarity on contract farming," said the head of a national retail chain who did not wish to be named.

There are three key elements in the model legislation that the Centre had prepared in 2003 to help states re-draw the contours of agriculture marketing in the country: contract farming, direct marketing of farm produce to consumers and the creation of private mandis.

Only 16 states have embraced all three elements listed in the model legislation: Andhra Pradesh, Arunachal Pradesh, Assam, Goa, Gujarat, Himachal Pradesh, Jharkhand, Karnataka, Maharashtra, Mizoram, Nagaland, Odisha, Rajasthan, Sikkim, Uttarakhand and Tripura, according to a report on the food processing industry prepared by Indian Council for Research on International Economic Relations (ICRIER).

The bill passed today is silent on the aspect of contract farming even though it allowed private players like Reliance Retail, Spencer's, Big Bazaar and Keventer to buy farm produce directly from the farmers or through a commission agent, set up brihat krishak bazaars or terminal markets while promising to hand over to private players block-level markets that have been developed by the state.

The block-level markets are called krishak bazaars.

"Buying directly from farmers is all very good and we are doing it already with due licence. However, the game changer would have been contract farming. We need certainty that the fresh produce would be made available at the right size, quality and cost throughout the year," a retailer said.

Contract farming has always been a hot potato for the political establishment in Bengal with the erstwhile Buddhadeb Bhattacharjee government also shying away from such reform.

The Left Front had balked at the idea of agriculture marketing reforms because of stiff opposition from Forward Bloc, which used to control the terminal markets across Bengal.

In contract farming, both the farmer and the private company have certain cast-iron obligations. Private companies provide the technology, seed varieties, pesticides and credit to the farmer. In turn, the farmer promises to sell his entire produce to the private company at a pre-determined price.

Companies are unwilling to invest money or enter into such arrangements unless the farmer is prepared to make a firm commitment on the sale of his entire produce to them.

Bengal politicians have been wary of such arrangements as they fear that the big boys of business would eventually control the crop and determine the farmers' fortunes, which could damage the rural vote bank.

However, a section of retailers and processors said direct buying might help in specific cases. "If you have large-scale and specific requirement for a particular variety of produce, this would help," said a retail executive.

A national retail chain with deep pockets said large corporates would be interested in investing in Bengal after today's changes in the bill.

For instance, Reliance Industries Ltd holds land in several districts of Bengal. The land parcels could now come in handy to build markets or processing units that will cater to its stores across India. The company could not be reached for comment.

But for retailers running on wafer-thin margins, the option of setting up a terminal market may not be immediately feasible.

"There is an established system in mandis. The market participants provide credit and ensure home delivery to the seller. Can we do that? Plus, if the buyers don't turn up, the farmer will also not come to the private market to sell his produce," said an industry veteran.

The bill is silent on whether any incentive will be provided to the private players to build terminal markets.

In 2009, then minister of state for agriculture and consumer affairs K.V. Thomas had said in reply to a question in the Lok Sabha that a subsidy of up to 40 per cent of the project cost, or a maximum sum of Rs 50 crore, could be offered to a private entrepreneur intending to set up a terminal marketing complex under the National Horticultural Mission Scheme.

He went on to add that the subsidy would only be given in those states that undertook reforms in agricultural marketing. The private entrepreneurs would be picked under a bidding process to be carried out by the respective states. He had also said that land for the terminal market complex "will be made available by the respective state governments".

The Bengal bill makes no mention of the subsidy or the provision of land for the private marketing complexes.

Across Asia, buyers tend to source fresh produce from local markets instead of modern retail stores. This trend is even more discernible in India.

"Even if somebody buys dry groceries from modern retail stores, the buyer goes to the local market for fresh produce," said a retailer.

PROS AND CONS

What the bill proposes

 

Private players can buy produce directly from farmers 
Government to hand over block-level markets to private investors 
Private investors can develop district-level markets 
Licences to private companies for a fee to buy, store, process and sell agriculture produce
Companies can engage commission agents 
Bill silent on

 

 

Contract farming
State help in acquiring land for district markets 
Incentives such as power, tax relaxation
Upper limit for procurement