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How farmers in Gujarat have benefitted with entry of private players and contract farming

It appears that the opposition parties are opposing the new laws only because Modi government brought them in.

The same old rhetoric of ‘farms will be sold to 4-5 big conglomerates’, ‘farmers will be rendered landless and exploited at the hands of few private players’ is being pushed forward by the kisan andolan leaders. The farmers agitating and holding Punjab and parts of Haryana and UP to ransom seem to be upset with farmers income doubling through open market and formalized contractual farming.

The fear mongering has made the farmers to believe that the private companies will take over their land. So let’s understand which section of the Farm Laws allows a company to buy a farmers land. Well the answer is none. There is no such provision in the Laws which enables a company to own farmers land or produce. However, this narrative is being played to mislead the farmers.

It is interesting to know that around 15 states in India have been practicing contractual farming in some way or the other.

What is contractual farming?

As explained in Krishi Jagran, contract farming is a method of agri-production where a purchaser approaches a farmer with specific requirements of production and marketing of a or multiple farm products. The farmer then offers to supply agreed-upon amounts of a given agricultural commodity as per the requirement stated in the contract. The farmer must ensure that the produce is as per purchaser’s quality requirements. In certain situations, the purchaser agrees to assist the farmer by providing necessary agricultural inputs, land planning, and technical guidance, among other things. 

Contractual farming in Indian states

Multiple states have loosely drafted bills in place for contractual farming which refrains a farmer from getting into such contracts. As mentioned by Tushar G in a Swarajya report, Punjab for example, introduced contract farming in the year 2002 under Captain Amarinder Singh’s government to decrease the share of cropped area under wheat and paddy and encourage diversification.

However, after the state government changed in 2007, stopped the financial help from UPA-led central government. This, coupled with lack of supply of good seeds, motivation to farmers and market support needed from state as well as central government were more or less absent. In 2013, the government made another attempt to pass Punjab Contract Farming Act which resembled the Farm laws but was met with strong opposition from the middlemen lobby.

In another report by the Indian Express, Maharashtra government had incorporated contract farming in its Agriculture Produce Marketing (Development and Facilitation) Act of 1964 in the year 2006. Just like the Centre’s Farm laws, Maharashtra had allowed farmers to enter into contracts with buyers to sell their produce at predetermined prices but the potential has remained untapped as retail chains have been reluctant to enter in contracts that last for a long period of time.

Role of Farm laws

What Centre has done with Farm laws is essentially weave the vaguely drafted state regulations in a watertight Act to ensure formalisation and protection of farmers and purchaser across the country promoting ‘one nation, one market’. Ensuring uniformity, the new laws have specific provisions to safeguard the interests of farmers. The Centre has repeatedly made it clear that contract farming is an option and not compulsion, selling outside of mandi is an option and not compulsion and no APMC will be shut.

Here is a brief round-up on what the new farm laws do:

The land remains with farmers

The land of farmers will remain with them.

No buyers can construct permanent structures on farm land

No buyer who gets into the contractual farming with farmers will be able to build permanent structures on the farm land.

No recovery can be made by selling or leasing land of farmers

The new farm laws say that there will be no action for recovery of dues against the farmers’ land.

Farmers get the choice

Further, farmers get the choice and freedom to sell their produce to whoever they wish to.

The Gujarat Model

No land has been sold to purchaser in India’s 30 years of contractual farming says a December 2020 report of online web portal DeshGujarat. In fact, the risk for farmers has gone substantially down after they got engaged into contract farming.

A moneycontrol report states that Jignesh Patel, a resident of Aravalli, Gujarat clocks Rs 25 crore annually, all thanks to contract farming. Patel’s family, who have been into potato farming for the past 26 years, began growing the LR potatoes (a special variety of potatoes) after pilot cultivation. They now produce produce 20,000 metric tonnes on an average and sell them to leading potato chips manufacturers such as Balaji and ITC.

In another report, an ITC official revealed that potato farmers in Gujarat earn as high as Rs 5 lakh per hectare. Sachid Madan, Chief Executive, fresh fruits and vegetables and frozen business, ITC said, “farmers make two times more income from growing potatoes for processing units,”. ITC is the maker of the popular potato snack brand, Bingo.

Adding to the success stories, ‘Tuber Foods Private Limited’ of Ahmedabad is all set to buy 400 tons of golden sweet potatoes at 25% higher rate than the market price from Maharajganj Vantangiya’s FPO ‘Maharajganj Vegetable Producing Company’. Specifying the deal, Ram Gulab, the director of Maharajganj Vegetable Producing Company said that the contract is for selling the produce and not the land and that contractual farming has come as a blessing for small farmers like them.

Banas Dairy, which is one of the 18 cooperative unions under the Gujarat Cooperative Milk Marketing Federation (GCMMF), is setting up a Rs 100-crore (USD 13.5 million) potato processing unit in North Gujarat to take on popular and established brands like McCain Foods India Pvt Ltd and Hyfun Foods in India. The unit will have an annual capacity to process 50,000 metric tonnes of potatoes for production of French fries, a popular snack and 12 other potato products for both domestic and international markets in the South-East Asia. The company is currently procuring 7,000 metric tonne of potatoes from approximately 500 farmers in North Gujarat.

Private players working with farmers

Companies like BigBasket, Reliance Retail, Amazon, ITV, PepsiCo have been working closely with farmers to procure desired products directly, increasing farmers income by around 20%. PepsiCo still undertakes some amount of contract farming in Punjab. Punjab farmers, who had wholeheartedly embraced the reforms few years back, are not up in arms against the very same reforms at central level. It appears that the opposition parties are opposing the new laws only because Modi government brought them in.

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