The
continuing crisis in Indian agriculture and the resulting distress driving some
farmers to the extreme step of taking their own lives tugs the conscious of
many. In their anguish they proffer many solutions. One such solution to
consolidate the holdings and allow the corporate to own or lease in the land to
take advantage of the scale by using better technology and linkages to market.
However, the
corporate in India may join the “bleeding heart” politician and shed copious
tears about the plight of the farmers but would not venture into corporate
farming to alleviate their misery. Corporate entities would like to deal with
the farmers either through current market mechanism or by way of contract
farming as it confers them several advantages. The objective of any firm while
procuring the raw materials is to get them in right quality and quantity and on
time with least cost. So long as this objective is met through existing market
mechanism there is no reason for the firm to look for alternative means of
sourcing the raw materials. If the requirement of the firm is idiosyncratic in
nature and there is market failure, that is the market is not able to supply
the required material in time with least cost on a sustainable basis then the
firm may try to have better control over supply. Still the firm would prefer
contract farming over integrating backward into production to ensure adequate
supply.
Independent
family farms offer enormous advantage to the firms compared to corporate
farming. Failure of crop due to vagaries of the monsoon, pest and diseases etc
are inherent to agricultural operation. Under family farming these production
risks remain with the farmers. Under corporate farming these risks would have
to be borne by the firm. Variation in quality of output is normal in
agriculture and could be minimized to some extent but cannot be eliminated.
Under the family farming the firm pays only for the quantity of quality
products supplied. That is, it pays for the products which meet quality
parameters and rejects the rest whereas in corporate farming the cost has to be
incurred for the entire produce by the firm.
Agriculture
production is seasonal in nature. Farmers in many parts of the country produce
two or more crops in a year in the given piece of land. By following crop
rotation they try to optimize their land and other resources. However, under
corporate farming especially for short term crops the land and other resources
may be idle for better part of the year after a crop cycle adding to overheads
thus adversely impacting the cost of production of the crop.
In the family
farm, the farmer and his family are residual claimants to the income from the
crops, that is, they get whatever is left after paying for the factors of
production. However, in corporate farming they become part of factors of
production and are entitled for wages and other benefits adding to the cost of
production.
The crisis of
the agrarian sector warrants much more serious analysis. A detailed mapping of
the resources of each block in the country would give more insights into the
problem and throw up probable solutions.
In some blocks farmers might be encouraged to take off farm activities
and make farming part time in other places the potential for animal husbandry
may have to be exploited and in yet another producers companies or cooperatives
must be encouraged not to only to have better bargaining power but also to reap
scale economics in procuring inputs and marketing outputs. Unless such an
attempt is made the Procrustean idea of corporate farming for the agrarian
crisis may make interesting reading nothing else.
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