Q.) Contract farming has many advantages, however it suffers from market failures. elaborate on what the government can do to tackle this market failure.

Ans– The term contract farming is not a new term for the world it all started in the late 19th century in Japan. then in India by the European planters during the British rule, the crops like tobacco, sugar, Jute, cotton, rubber, spices, Indigo, etc. were brought under contract farming.

From that point forward, the commercialization of agribusiness has been completed in various pieces of the country. in straightforward terms contract cultivating can be characterized as horticulture creation completed by the understanding among purchasers and ranchers.

As per the perspectives on “Father of Green Revolution in India“, M.S Swaminathan said that agreement cultivating can be advanced if it is organized based on mutually advantageous arrangements, both for the rancher and the purchasers.

Advantages of contract farming–

  1. Input and production schemes are often provided by sponsors.
  2. Production is more solid than open market buys.
  3. Advance credit to farmers.
  4. More consistent quality of production.
  5. Price assurance to farmers.
  6. Opening up new market opportunities for farmers specially outline platforms is quite significant during a pandemic.
  7. A sense of security in terms of flotation of the price off the market.
  8. With a better management introduction of Science and Technology, a buyer can avail good profit.
  9. Enables farmers to learn scientific methods of farming, cropping, and usage of Machines, etc.

Contract cultivating is characterized as an arrangement of development and supply of rural merchandise given an understanding among ranchers and handling as well as showcasing firms, much of the time at foreordained costs. In such an understanding, the buyer (commonly agribusinesses and enormous enterprises) gives a supply of data sources – seeds, manures, pesticides, and so forth and specialized expertise to the ranchers.

The farmer is expected to give the necessary product in the amounts and not entirely settled by the buyer. Current agreement cultivating developed as a framework in the United States where corporatization of farming had arrived at a high-level stage towards the finish of the 20th 100 years with global enterprises ruling the whole chain of horticultural creation and conveyance.

In spite of the advantages of contract farming, it sometimes suffers due to market failures like–

  1. Overproduction or underproduction by farmers’ duty climatic or anthropogenic causes disrupt the supply chain.
  2. Fluctuation of market prices when the prices go up will be a good situation for sponsors but when prices drop it hurts the economic sentiments of buyers.
  3. The monopoly of a single by over multiple sellers can have a negative impact.
  4. Poor storage and Logistic lead to wastage.
  5. Poor quality production and enforcement of standards Mein force the buyer to terminate the contract.
  6. Change in behaviour of customers towards the produce goods after creating market failures.

Role of government to handle market failure–

  1. Government can provide climate data and weather change reports directly to the farmers so that they can prepare themselves for the situation If comes.
  2. Government can provide incentives in case of loss of harvest due to climate change or other anthropogenic activities. For example– Fasal Bima.
  3. NABARD can refinance contract farming contracts both inside and outside of Agricultural economics zones (AEZ).
  4. Government should act as a third party or factor between the parties to solve any crisis that appears.
  5. Have appropriate legislation to ensure farmer rights can be enforced.
  6. In India, contract farming is still done according to the Indian Contract Act of 1872 while the little amendment was made under the forms act 2018 and now in 2020.
  7. Article 39 A of DPSP of state to provide free Legal Aid to the poor. the state needs to set up a Tribunal in every district for arbitration.

Role of Bihar–

  1. The government abolished the APMC act in 2006, allowing the farmer’s freedom to sell their product to PACs or private firms.
  2. Department of Agriculture, Bihar is very keen to promote contract farming in the state.
  3. Contract farming has a huge potential in Bihar, due to its fertile land, and Soil health.
  4. Bihar has 561 tags along with the Bihar Government and business projects like organic Bihar, setting up food processing units can be the game changer.

Thus, contract farming is need of how becomes more Reliance after the pandemic when our farmers need Input and credit for farming. through contract farming, we can ensure a rise in their income but a proper legal channel should also be created to support them in case of exploitation as we have seen recently in the Gujarat farmers’ PepsiCo case.

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