Contract Farming Advantages Disadvantages in India: The Indian agri-food system needs a rapid transformation and rightly so it is undergoing currently. There is growing evidence for the statement. We can get to know this by the increasing importance of contract farming. An important concern in Indian agriculture is that while “front end” activities are rapidly expanding and consolidating, the “back end” activities are continuously fragmenting. The challenge lies in linking the two ends and ensuring viable business opportunities for both farmers and agri-businesses.These backward linkages can be strengthened by the contract farming methods but there are many advantages although has some problems in implementing contract farming can be explained by this article
What is Contact Farming: Contract farming is nothing but an agreement between farmers and marketing firms. Farmers produce and supply the agricultural products according to the agreements, frequently at pre-determined prices.
Why Contract Farming:
- To reduce the burden on the central and state procurement system
- Increases the private sector investment in agriculture.
- To generate the steady source of income at individual farmer level
- Helps to promote processing and value addition
- To generate gainful employment in rural communities particularly for landless agriculture labor
Advantages of Contract Farming to Indian Farmers:
There are many advantages to the farmers as well as traders by following contract farming. With Contract farming, one can eliminate the middlemen. Hence they can enjoy more profits among themselves. Furthermore, we have listed some of the advantages in the below section.
To The Farmer:
- Obtains assured prices for their produce.
- They are facilitated by the inputs and new technology in the agriculture.
- Crop monitoring and technical advice free of cost at his doorsteps.
- Furthermore, Elimination of the regular market where prices fluctuate.
- Provides the credit services by collaborating with the banks.
To The Traders:
- An uninterrupted and regular flow of raw materials.
- Protection from fluctuation in market prices.
- Long-term planning made possible for the supply of raw materials.
- Dedicated supply base is provided to the company.
- Generates goodwill to the organization.
Problems or Disadvantages of Contract Farming:
- The small size of farmer holding is a creating coordination problem among the farmers and companies.
- Need to contract with a larger number of farmers.
- Lack of dedicated crop insurance schemes to protect against natural calamities.
- While there are huge expectations of maintaining the quality production of produce.
Conclusion on Contract Farming Advantages Disadvantages:
These are the various merits and demerits of contract farming. One can understand whether it has more pros or more cons by reading this information. While one can decide according to it whether one has to follow contract farming or not.