Managing Contract Farming

Introduction

Contract farming has been receiving increasing attention from agribusiness firms as well as the government for more than a decade now. While agribusiness firms view it as a tool for managing raw materials, the government considers it as an avenue to develop markets, transfer technology, provide inputs including credit, etc. to small farmers. The now repealed farm Laws of 2020 further led to enhanced policy, practice and public interest in this mechanism of co-ordination of farm production and its disposal. A large number of agribusiness firms have undertaken contract farming for a number of agricultural and horticultural crops/produce over the last two decades though seed contract farming has been in existence for more than 50 years. While some of the contract farming schemes and projects are working smoothly, others have experienced certain problems because of improper design or ineffective implementation. In some cases, the participating farmers are not happy and in some other cases, firms have had bad experience. With the multi-brand retail trade being opened to 51% FDI in late 2012 by the Government of India and the presence of wholesale ‘cash and carry’ players including those with 100% FDI since the late 1990s, and the separate Model agricultural produce and livestock contract farming and services (promotion and facilitation) Act of 2018, which has been adopted by many states, contract farming has become an even more relevant mechanism as large global supermarkets and exporters and processors may like to source quality farm produce directly from farmers under contracts to achieve quality and cost advantages in the absence of corporate farming option and poorly performing open markets for such produce in India. Already, some domestic supermarkets have been using some variants of contract farming, besides direct purchase, in procuring fruits and vegetables from farmers for almost a decade now.

The Centre for Management in Agriculture (CMA) and the Program Chair at the Indian Institute of Management, Ahmedabad has been conducting studies on contract farming and fresh food supermarkets to document the experiences of firms and farmers for two decades now and has offered this program multiple times over the last 15 years. The program has evolved over the years and has been attended by executives, including from abroad, from across agricultural and allied sectors. This programme is based on those experiences with the executives associated with contract farming and procurement activity. The objective is to develop a broader understanding of the concept and develop skills in designing and implementing contract farming programmes on a sustainable basis.

For more information or any questions, contact Mr. Rahul Gupta: rahul-exed@iima.ac.in | +91 87588 00397