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Farming Contracts in India: Benefits and Drawbacks

Contracts Farming : Agriculture is the only source of income in India. A majority of Indians rely on agriculture for their livelihood. About 58% of Indians are employed in agriculture, which contributes to the country’s economy. Our economic system depends on it. Explore the world of contract farming.

Growing good to eat plants and working on the surface of the ground is farming.

contract Farming
contract Farming

Why do we need contract farming?

 Farmers and cooperatives use contract farming to supply and produce agriculture goods under predefined agreements and prices.

The agriculture industry has been boomed for a long time, but farmers face a new challenge when it comes to accessing the market and achieving profitability.

Farmers and corporations were able to maintain a profit balance by introducing contract farming into the market.

There is a detailed partnership contract between farmers and processors, where the producers must supply the agreed quantity and quality of crops in a specific amount of time. Furthermore, the farmers agree to purchase the cooperative company’s crop at a predetermined price at which they both have agreed in advance.

Agricultural contracting goals

  • Furthermore, farmers are able to generate a permanent source of income as a result of this.

  • A number of agricultural jobs are also created in rural areas by this industry. Farmers are paid for working on their fields and for many other agricultural activities.

  • Consequently, the occupation system at the state and federal levels is less burdened.

  • The private sector is also investing in agriculture with the help of contract farming.

  • Additionally, it emphasizes the importance of crop selection by Indian farmers for the market.

  • Because of the unemployment conditions in India, rural people are migrating to cities.

What is the need for contract farming?

Contract Farming
Contract Farming

 

Following are some points about why India needs contract farming? Let’s take a look.

  • Contract farming reduces the risk of farmers at 80% whenever there is an infestation, production is destroyed by bad weather, or any other cause, the company will bear it, not the farmers, they will get their compensation, so risk is zero.

  • Farmers will get to pay at market prices due to the no middleman aspect of contract farming.

  • Farmers can get reasonable profits from their production by contract farming, which was introduced for their benefit.

  • Farmers should be paid a set percentage of their production.

  • As a result of Contract Farming, farmers receive seeds and farm equipment that they need to produce crops.

  • Increasing knowledge and market value are two key benefits of Contract Farming.

Farming Contracts in India: Challenges, Opportunities

In contract farming, farmers have to deal with the following problems:

  • In comparison to large farmers, small farmers earn less profit from contract farming because it benefits large farmers more in terms of production.

  • In India, the fulfillment of contracts is not governed by strict rules and regulations, which leads to contract failure.

  • Compared to corporate buyers, there are many sellers (farmers). Lack of buyers results in a monopoly.

A Good Contract Has a Few Basic Formulas

Farmers and corporations should have a mutual understanding about their contract in order for those contracts to be successful.

When farmers gain experience dealing with buyers through contract farming, they gain knowledge about record-keeping, efficient use of farm resources, and how to apply fertilizers correctly.

Therefore, to achieve a long-term partnership, both parties need to make a transparent contract between them, and the three keywords to help accomplish that are as follows:

  • Quantity:- Determining how much product farmers must deliver

  • Quality: – Level of quality of the product Farmer will produce for the company.

  • Price: – The price the corporation is required to pay for the crops.

    Contract farming: advantages and disadvantages

The benefits and disadvantages of everything are both present. There are some good and bad points to contract farming as well. Following are some advantages and disadvantages of contract farming.

Contract farming has many advantages

 

  • Farmers are better able to produce because of Contract Farming’s guaranteed markets.

  • Companies provide farmers with good quality products, such as breeds and best advisors who can provide farmers with efficient advice.

  • The contract farming system reduces rural unemployment by paying more farmers and enabling them to live a better lifestyle.

  • We can increase our country’s economic value through contract farming.

 

There are disadvantages to farming by contract

  • Farmers earn maximum profits because of the guarantee market.

  • In the absence of consumer feedback, farmers cannot improve their production because they can’t communicate with consumers.

  • As part of a contract, farmers are required to produce a certain amount of crop at a certain time.

    Companies vs. Farmers

    Are you wondering what the difference is between farmers and companies in contract farming? Please find below some points that will help you clear up any doubts.

 

 

Basis

 

  

  Farmers

 

Companies

 

Guarantee

 

Guaranteed market and return.

 

Form Long term commitment.

 

Risk Elimination

 

Security from the price fluctuation.

 

 

Security from the market price fluctuation.

 

Benefits

 

 

Increase in employment opportunities.

 

Increases the goodwill of the company.

 

 

Bhumika

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