Indian corporate sector has had a long association with the farming community either in the form of an input supplier or as an output buyer. It is this association, which if leveraged and structured into a formal Farmer-Corporate-Partnership (FCP) could play a crucial role in addressing the problems of the agriculture sector.
There are several cases in India where these FCPs have worked well. Pepsi Co has an agri-outreach program with farmers in Punjab for their snacks business. Hariyali Kisaan Bazar, the retail venture of DSCL, also works with the farmers on contract farming for production of high quality varietal seeds which it buys from the farmers. Another example is the sugar industry which has also made a significant impact on all these fronts. The above examples focus on educating the farmer about the latest agricultural practices, ensuring quality production and provide the farmer with an assured market and better income. The direct interaction between the corporate and farmer is supposed to eliminate the inefficiencies in the food chain which arise due to multi-layers these erode the margins of the farmers and also result in higher pricing for the end consumers. The FCP model will help in removing these layers and be a win-win for both the farmer & end consumer.
Instead of stifling the agriculture sector with increasing regulation, the Government needs to focus on building FCPs. FCP can help accessing markets for farmers, if large group of farmers can collectively decide what to produce and access markets with the help of the corporate. The Farmer-Corporate-Partnership Models may also be structured to include efficient transfer of farming technologies through qualified agronomists which will help in improving agriculture productivity and quality. Such direct linkages would help address all segments of the Indian farmers, majority of who have very little land holding.
As the FCP model would cover a large part of the food chain, this might result in collaborations amongst various stakeholders, each of who specialize in a specific area. A collaborative effort could be formed between Agri Input Companies, Financial Institutions and Retailers who could partner with a group of farmers for production and sourcing of a specific agriculture product.
On certain crops there is a MSP/SAP safety net which is not applicable on most cash crops hence in contract farming if the farmers and corporate mutually conclude a pre determined price irrespective of market prices, which will be enforceable by a security policy it could help develop the FCP model going forward.
While some initiatives in this direction are being started, they have been largely limited in scale and scope. Today there is no proper legislation protecting the farmer interest or corporate interest in contract farming hence given an enabling policy environment, we might see a large scale proliferation of such FCP models. While the farmers are assured of right inputs and market access, the industry would be assured of adequate availability of quality output, leading to a win-win situation for both the partners.
About the Author Ajay Shriram is the chairman and senior managing director at DSCL (DCM Shriram Consolidated Limited)