Many argue that it is a new innovation in the farming sector that is already beneficial to small farmers. It is argued that by introducing these types of contract farming methods, farmers will have greater control over their productive assets while also enjoying a far lower level of paperwork.
An Overview of What is contract farming:-
The basic definition is that this refers to the practice of farming where an agreement is entered into between two parties concerning the use of a particular property. This agreement can relate to any number of activities that are undertaken on the property. These agreements can involve the transfer of land or other assets or any number of other related rights or obligations.
The main theoretical interest cited concerning what is contract farming is the need for greater control of the economic interests of rural households. This can be supported because many households have suffered financial setbacks in the past year due to the global credit crunch. The current situation has seen many families receive further reductions in their income and struggling to recover; this is harming the incomes of rural households across the world.
Another type of agreement commonly mentioned when discussing contract farming in India is the Joint Venture. This type of agreement involves two farmers who come together to buy a tract of land to grow a specific number of acres of agricultural produce. When one of the partners dies or moves to another location in India, the other partner can purchase the remaining share of the land.
The benefits to both parties are that each partner has access to a larger area of land. For example, if one partner grows cotton and the other’s crop is large, both partners have access to new lands with high yield potential. While negotiation plays an important role in contract farming in India, the yield potential determines whether the contract is successful. This means that the farmer’s interest is well protected in that they are only paying for the crops that will actually produce.
The main reason why negotiations often fail is that farmers often do not have enough bargaining power over contract farming in India. For example, in cotton, some contracts are based upon yield rather than the production of the crop itself. This means that if the yield is low, a farmer might be locked into paying too much for the cotton. Agreements are made on what is a reasonable rate based upon the experience of the individual farmer. However, when the contract is based upon what is considered a reasonable rate for the area as a whole then, the farmer has more bargaining power.
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