Preface

This study is aimed towards accomplishing one major objective study of Corporate Sectors into
Agribusiness.
Indian food-processing sector is undergoing rapid transformation. As a country moves on the
path of development, agricultural sector evolves from traditional subsistence level farming to
commercial agriculture producing high value and processed products. Strong macro-economic
fundamentals and the changing socio-economic scene are driving what was once atraditional, small-
scale processed food production system into a modern industry aimed at catering to the evolving tastes
and needs of discerning consumers. There is high potential demand in the domestic as well as export
market. On the supply side, with vast arable land and agro-climatic diversity, India has the potential to
be a food basket of the world. With this interaction of demand and supply forces the food processing
sector has the potential to be the driver of economic growth and enhance rural incomes. Corporates
have started investing in the value chain and are getting closer to the farmer and the farmer is now
getting access to the value chain farther away from him.

The study is necessary for the partial fulfillment of M.B.A. 2nd semester curriculum and it
provides an opportunity to the students to touch with the current issues.

Vijaya Mishra
 ACKNOWLEDGEMENT

Any job in this world, however, trivial or tough can not be accomplished without the assistance of
other. I would hereby, take the opportunity to express my indebtness to people who have helped me to
accomplish the task.
At the very outset, I wish sincerely thanks to The Head of the department Mr. M.S. Pillai of JECRC
Business School, for providing me the opportunity to study on an contemporary issue for M.B.A.
degree.
I also wish to mention my special thanks to Mrs. Rashmi Sharma who immensely helped me in my
efforts and undertook the responsibility to guide me.

(Vijaya Mishra)

Introduction

Consider the signs. More Indian retail stores are now displaying Zain’s fruit juices from the
Sultanate of Oman, candies from as far apart as Argentina and Indonesia, a variety of Thai food and
drinks have arrived in our neighborhood grocery, Saurashtra’s farmers of sesame seed and chilies are
laughing all the way to the bank this year after commodity prices doubled and India has become the
world’s largest producer of mint (pudina) which we extract (very competitively) to make menthol in
Uttar Pradesh towns like Budaun and Sambhal. These signs prove that agribusiness is very much
happening in India.
At last the seeds of change have been sown and agriculture is changing to agribusiness.
Corporate have started investing in the value chain and are getting closer to the farmer and the farmer
is now getting access to the value chain farther away from him.
Besides Agriculture Sector contributes to more than 20% of the GDP and around 60% of the
working population still work in agriculture and related activities.

What is Corporate Farming?

Corporate Farming is a term that describes the business of agriculture, specifically, what is seen
by some as the practices of would be mega corporations involved in food production on a very large
scale. It is a modern food industry issue, and encompasses not only the farm itself, but also the entire
chain of entire agricultural-related business, including seed supply, agrichemicals, food processing ,
machinery, storage, transport, distribution,marketing,advertising and retail sales.

Initiative of Corporate Farming

The Government of India’s National Agriculture Policy envisages that “private sector
participation will be promoted through contract farming and land leasing arrangements to allow
accelerated technology transfer, capital inflow and assured market for crop production, especially of
oilseeds, cotton and horticultural crops”.

ADVANTAGES FOR FARMERS

The prime advantage of a contractual agreement for farmers is that the sponsor will normally
undertake to purchase all produce grown, within specified quality and quantity parameters.
Contracts can also provide farmers with access to a wide range of managerial, technical and
extension services that otherwise may be unobtainable. Farmers can use the contract agreement as
collateral to arrange credit with a commercial bank in order to fund inputs. Thus, the main
potential advantages for farmers are:

 provision of inputs and production services;

 access to credit;
 introduction of appropriate technology;
 skill transfer;
 guaranteed and fixed pricing structures; and
 access to reliable markets.

Provision of inputs and production services

Many contractual arrangements involve considerable production support in addition to the
supply of basic inputs such as seed and fertilizer. Sponsors may also provide land preparation, field
cultivation and harvesting as well as free training and extension. This is primarily to ensure that proper
crop husbandry practices are followed in order to achieve projected yields and required qualities. It is
often difficult for small-scale farmers outside the contract-farming context to gain access to inputs.
Contract farming can help to overcome many of these problems through bulk ordering by management.

Access to credit
The majority of smallholder producers experience difficulties in obtaining credit for production
inputs. Contract farming usually allows farmers access to some form of credit to finance production
inputs. In most cases it is the sponsors who advance credit through their managers. However,
arrangements can be made with commercial banks or government agencies through crop liens that are
guaranteed by the sponsor, i.e. the contract serves as collateral. When substantial investments
are required of farmers, such as packing or grading sheds, tobacco barns or heavy machinery, banks
will not normally advance credit without guarantees from the sponsor.
Introduction of Appropriate technology
New techniques are often required to upgrade agricultural commodities for markets that demand high
quality standards. New production techniques are often necessary to increase productivity as well as to
ensure that the commodity meets market demands. However, small-scale farmers are frequently
reluctant to adopt new technologies because of the possible risks and costs involved. They are more
likely to accept new practices when they can rely on external resources for material and technological
inputs. Nevertheless, the introduction of new technology will not be successful unless it is initiated
within a well- managed and structured farming operation. Private agribusiness will usually offer
technology more diligently than government agricultural extension services because it has a direct
economic interest in improving farmers’ production.

Skill transfer
The skills the farmer learns through contract farming may include record keeping, the efficient
use of farm resources, improved methods of applying chemicals and fertilizers, a knowledge of the
importance of quality and the characteristics and demands of export markets.

Guaranteed and fixed pricing structures

The returns farmers receive for their crops on the open market depend on the prevailing market
prices as well as on their ability to negotiate with buyers. This can create considerable uncertainty
which, to a certain extent, contract farming can overcome. Frequently, sponsors indicate in advance the
price(s) to be paid and these are specified in the agreement. On the other hand, some contracts are not
based on fixed prices but are related to the market prices at the time of delivery. In these instances, the
contracted farmer is clearly dependent on market volatility.

Access to reliable markets

Small-scale farmers are often constrained in what they can produce by limited marketing
opportunities, which often makes diversification into new crops very difficult. Farmers will not
cultivate unless they know they can sell their crop, and traders or processors will not invest in ventures
unless they are assured that the required commodities can be consistently produced. Contract farming
offers a potential solution to this situation by providing market guarantees to the farmers and assuring
supply to the purchasers. Even where there are existing outlets for the same crops, contract farming
can offer significant advantages to farmers. They do not have to search for and negotiate with local and
international buyers.

PROBLEMS FACED BY FARMERS

 For farmers, the potential problems associated with contract farming include:

 increased risk;

 unsuitable technology and crop incompatibility;

 manipulation of quotas and quality specifications;

 corruption;

 domination by monopolies; and

 indebtedness and overreliance on advances.

Increased risk
Farmers entering new contract farming ventures should be prepared to balance the prospect of
higher returns with the possibility of greater risk. Such risk is more likely when the agribusiness
venture is introducing a new crop to the area. There may be production risks, particularly where prior
field tests are inadequate, resulting in lower-than-expected yields for the farmers. Market risks may
occur when the company’s forecasts of market size or price levels are not accurate. Considerable
problems can result if farmers perceive that the company is unwilling to share any of the risk, even if
partly responsible for the losses.

Unsuitable technology and crop incompatibility

The introduction of a new crop to be grown under conditions rigorously controlled by the
sponsor can cause disruption to the existing farming system. For example, the managers may identify
land traditionally reserved for food crops as the most suitable for the contracted crop. Harvesting of the
contracted crop may fall at the same time as the harvesting of food crops, thus causing competition for
scarce labour resources. Particular problems may be experienced when contract farming is related to
resettlement programmes. Two factors should be considered before innovations are introduced to any
agricultural environment. The first is the possible adverse effect on the social life of the community.
The second factor is the practicality of introducing innovations or adaptations. The introduction of
sophisticated machines (e.g. for transplanting) may result in a loss of local employment and
overcapitalization of the contracted farmer. Furthermore, in field activities such as transplanting and
weed control, mechanical methods often produce less effective results than do traditional cultivation
methods. Field extension services must always ensure that the contracted crop fits in with the farmer’s
total cropping regime, particularly in the areas of pest control and field rotation practices.

Manipulation of quotas and quality specifications

Inefficient management can lead to production exceeding original targets. Sponsors may have
unrealistic expectations of the market for their product or the market may collapse unexpectedly owing
to transport problems, civil unrest, change in government policy or the arrival of a competitor.
Few contracts specify penalties in such circumstances. In some situations management may be tempted
to manipulate quality standards in order to reduce purchases while appearing to honor the contract.
Such practices will cause sponsor-farmer confrontation, especially if farmers have no method to dispute
grading irregularities. All contract farming ventures should have forums where farmers can raise
concerns and grievances relating to such issues.

Corruption
Problems occur when staff responsible for issuing contracts and buying crops exploits their
position. Such practices result in a collapse of trust and communication between the contracted parties
and soon undermine any contract. Management needs to ensure that corruption in any form does not
Occur.

Indebtedness and over reliance on advances

One of the major attractions of contract farming for farmers is the availability of credit provided
either directly by the company or through a third party. However, farmers can face considerable
indebtedness if they are confronted with production problems, if the company provides poor technical
advice, if there are significant changes in market conditions, or if the company fails to honor the
contract. This is of particular concern with long-term investments, either for tree crops or for on-farm
processing facilities. If advances are uncontrolled, the indebtedness of farmers can increase to
uneconomic levels.

ADVANTAGES FOR SPONSORS

Companies and government agencies have a number of options to obtain raw materials for their
processing and marketing activities. The benefits of contract farming are best examined in the light of
the other alternatives, namely spot-market purchases and large-scale estates. The main potential
advantages for sponsors can be seen as:

 political acceptability;

 overcoming land constraints;

 production reliability and shared risk;

 quality consistency

 promotion of farm inputs.

Political acceptability
It can be more politically expedient for a sponsor to involve farmers in production rather than to
operate plantations. Many governments are reluctant to have large plantations and some are actively
involved in closing down such estates and redistributing their land. Contract farming, particularly when
the farmer is not a tenant of the sponsor, is less likely to be subject to political criticism.

Overcoming land constraints

Most large tracts of suitable land are now either traditionally owned, costly to purchase or
unavailable for commercial development. Moreover, even if it were possible for companies to purchase
l and at an affordable price, it would rarely be possible to purchase large enough parcels of land to offer
the necessary economies of scale achieved by estate agriculture. Contract farming, therefore, offers
access to crop production from land that would not otherwise be available to a company, with the
additional advantage that it does not have to purchase it.

Production reliability and shared risk

The failure to supply agreed contracts could seriously jeopardize future sales. Plantation
agriculture and contract farming both offer reasonable supply reliability. Sponsors of contract farming,
even with the best management, always run the risk that farmers will fail to honour agreements. On the
other hand, plantation agriculture always runs the risk of labour disputes. Working with contracted
farmers enables sponsors to share the risk of production failure due to poor weather, disease, etc. The
farmer takes the risk of loss of production while the company absorbs losses associated with reduced
or non-existent throughput for the processing facility. Where production problems are widespread and
no fault of the farmers, sponsors will often defer repayment of production advances to the following
season. The use of crop insurance may be possible.

Quality consistency
Markets for fresh and processed agricultural produce require consistent quality standards.
Moreover, these markets are moving increasingly to a situation where the supplier must also conform to
regulatory controls regarding production techniques, particularly the use of pesticides. For fresh
produce there is an growing requirement for “traceability”, i.e. suppliers to major markets increasingly
need to be confident of identifying the source of production if problems related to food safety arise.

Promotion of farm inputs

An example of an unusual but, nevertheless, interesting benefit for sponsors comes from the
Philippines. A feed milling company experienced difficulties in marketing its feed, which was more
expensive than that produced by competing companies. To solve this problem it developed rearing
schemes for pigs and poultry under contract in order to provide a market outlet for its feeds and to
demonstrate their performance to other farmers living near the contracted farmers.

PROBLEMS FACED BY SPONSORS

The main disadvantages faced by contract farming developers are:

 land availability constraints;

 social and cultural constraints;
 farmer discontent;
 extra-contractual marketing; and
 input diversion.

Land availability constraints

 Farmers must have suitable land on which to cultivate their contracted crops. Problems can
arise when farmers have minimal or no security of tenure as there is a danger of the sponsor’s
investment being wasted as a result of farmer- landlord disputes. Difficulties are also common when
sponsors lease land to farmers. Such arrangements normally have eviction clauses included as part
of the conditions.

Social and cultural constraints

Problems can arise when management chooses farmers who are unable to comply with strict
timetables and regulations because of social obligations. Promoting agriculture through contracts is also
a cultural issue. In communities where custom and tradition play an important role, difficulties may
arise when farming innovations are introduced. Before introducing new cropping schedules, sponsors
must consider the social attitudes and the traditional farming practices of the community and assess
how a new crop could be introduced. Customary beliefs and religious issues are also important factors.

Farmer discontent
A number of situations can lead to farmer dissatisfaction. Discriminatory buying, late payments,
inefficient extension services, poor agronomic advice, unreliable transportation for crops, a mid-season
change in pricing or management’s rudeness to farmers will all normally generate dissent. If not
readily addressed, such circumstances will cause hostility towards the sponsors that may result in
farmers withdrawing from projects.

Extra-contractual marketing
The sale of produce by farmers to a third party, outside the conditions of a contract, can be a
major problem. Extra-contractual sales are always possible and are not easily controlled when an
alternative market exists. . The cooperative’s advances to the farmers included all necessary production
inputs. Unfortunately members often sold their vegetables to traders at higher prices than the
cooperative had contracted. The outside buyers offered cash to farmers as opposed to the prolonged and
difficult collection of payments negotiated through the cooperative. Sponsors themselves can
sometimes be a cause of extra-contractual practices.

Input diversion
 A frequent problem is that farmers are tempted to use inputs supplied under contract for
purposes other than those for which they were intended. They may choose to use the inputs on their
other cash and subsistence crops or even to sell them. Clearly this is not acceptable to the sponsor, as
the contracted crop’s yields will be reduced and the quality affected. Steps to overcome such problems
include improved monitoring by extension staff, farmer training and the issuing of realistic quantities of
inputs. However, the knowledge that a contract has the advantages of technical inputs, cash advances
and a guaranteed market usually makes the majority of farmers conform to the agreement. Unless
a project is very poorly managed, input diversion is usually an annoyance rather a serious problem.

OPPORTUNITIES IN INDIA
Opportunities to do business with Indian Agriculture are vast. The area in which the potential
exists are Fruits which include Mango, Papaya, Pineapple, Guava, Pomegranate, Lime, Sweet orange,
Banana, Grape, Sapota etc. Vegetables which include Carrot, Cabbage, Cauliflower, Beans, Okra,
Peppers, Tomato, Bell peppers, Gherkins, Onion, Peas etc. Flowers which include Rose, Coronations,
Gerbera etc. Processed Fruits and Vegetables includes Fruit pulp, concentrates, flavors, extracts, frozen
fruits, frozen vegetables, pickled products, assorted products. Spices including Black pepper, Red
pepper, Garlic, Tamarind, Ginger, Basel leaves, Rosemary, Oregano etc. Dairy products include Milk,
Milk powder, Butter, Ghee, Cottage cheese etc. Medicinal and Aromatic plants, Essential oils etc.
Organic products including Fruits, Vegetables, Food grains, Mushrooms, Medicinal & Aromatic plants
etc .Aqua products including Fish, Shrimp, Crab, Assorted, Value added products etc. Poultry & Meat
products, Mushrooms.

FACTORS ENHANCING AGRIBUSINESS OPPORTUNITIES

The following factors contribute to agribusiness opportunities

1. Strong agriculture
2. State support
3. Multi product environment
4. Vibrant economy Product availability throughout the year
5. Strong domestic market
6. Land area not a constraint
7. Products for global markets
8. Wealth of human resources
9. Presence of global MNCs
10. Exportable surplus
11. Processing capability

Current Scenario

 With the advancement in technology and awareness,the trend of food consumption is changing
towards high nutritional and hygienic foods . This is also wide gap between demand and supply.
Food crisis is being observed now a days which is likely to persist in Future.
 In this scenario,a higher growth rate of agriculture is needed so that the domestic sector is needs
could be fulfilled.

Solution For the scenario

The Scope is now in vertical expansion through farm productivity levels which can be
accelerated through corporate farming. There is need to make quality seeds and fertilizers available at a
competitive cost; improved pest/weed management; transfer of agriculture related technology and
providing technical knowledge to farmers together with requisite funds needed by them and
introducing well planned mechanism.

Contract Farming Ventures -A few successful cases in India

PEPSI

PepsiCo was a pioneer in the concept of contract farming under which the company transfers
agricultural best practices and technology and procures the produce at a guaranteed price. To support
the initiative, PepsiCo set up a 27-acre research and demonstration farm in Punjab to conduct farm
trials of new varieties of tomato, potato and other crops. The PepsiCo model of contract farming,
measured in terms of new options for farmers, productivity increases, and the introduction of modern
technology, has been an unparalleled success. The company focused on developing region- and desired
produce-specific research, and extensive extension services. It was thus successful in bringing about a
drastic change in the Punjab farmers' production system towards its objective of ensuring supply of
right produce at the right time in required quantities to its processing plant. Encouraged by the
sweeping success of contract farming in tomato in several districts of Punjab, PepsiCo has been
successfully emulating the model in food grains (Basmati rice), spices (chillies) and oilseeds
(groundnut) as well, apart from other vegetable crops like potato.During 2002-03 crop year, farmers
from Jalandhar, Amritsar, Hoshiarpur and Sangrur districts of Punjab, and parts of Western Uttar
Pradesh were contracted for Basmati rice cultivation. The season's acreage for the crop stood at 800
hectares .The company has partnered with more than 10,000 farmers working in over 10,000 acres
across Punjab, U.P., Karnataka, Jharkand West Bengal, Kashmir and Maharashtra for the supply of
potatoes. PepsiCo India has also partnered with 1,200 farmers in Rajasthan to cultivate barley in a tie
up with the United Breweries Group.

Key Elements of Pepsi company Success

 Core R&D team

 Unique partnership with local agencies including a public sector enterprises

 Execution of Technology transfer through well-trained extension personnel

ITCś e-chaupal

ITC’s Agri-Business Division, one of India’s largest exporters of agricultural commodities, has
conceived e-Choupal as a more efficient supply chain aimed at delivering value to its customers around
the world on a sustainable basis.
The e-Choupal model has been specifically designed to tackle the challenges posed by the
unique features of Indian agriculture, characterised by fragmented farms, weak infrastructure and the
involvement of numerous intermediaries, among others.
As India’s ‘kissan’ Company, ITC has taken care to involve farmers in the designing and
management of the entire ‘e-Choupal’ initiative. The active participation of farmers in this rural
initiative has created a sense of ownership in the project among the farmers. They see the ‘e-Choupal’
as the new age cooperative for all practical purposes.
Another path-breaking initiative – the ‘Choupal Pradarshan Khet’, brings the benefits of
agricultural best practices to small and marginal farmers. Backed by intensive research and knowledge,
this initiative provides Agri-extension services which are qualitatively superior and involves pro-active
handholding of farmers to ensure productivity gains. The services are customised to meet local
conditions, ensure timely availability of farm inputs including credit, and provide a cluster of farmer
schools for capturing indigenous knowledge.

BHARTI

Indian telecom giant Bharti, has moved into the global fruit and vegetable market through a
joint venture with a unit of UK finance group Rothschild. Field fresh foods incorporated in September
2004, is an equal parProblems can arise when management chooses farmers who are unable to comply
with strict timetables and regulations because of social obligations. Promoting agriculture through
contracts is also a cultural issue. In communities where custom and tradition play an important role,
difficultitnership joint venture between Bharati enterprises, and ELRo Holdings India ltd, an
investment company of the Rothschild family. The business model is to link Indian fields to the world
market, by providing quality fresh produce to the markets world wide through contract farming. It is
leasing large tracts of land in Punjab and Rajasthan and has developed an arrangement with a group of
farmers in Uttaranchal as well. FieldFresh has 78 farms with 4,200 acres on lease in Punjab producing
Beans, snow peas, carrots, okra, baby corn and other vegetables for export to Europe and the Middle
East. The leased arrangement is increasing the income of farmers significantly. The lease rate in Punjab
is anywhere between Rs. 12,000- Rs. 15,000 a year, which the farmer earns over and above his annual
income.

RELIANCE

Reliance industries is one of the India's largest industrial groups. Reliance industries got involved in
cropping and sale of medicinal and herbal plants, through its Reliance life sciences, its biotech venture
from 2001. it has developed a 200 core herbal garden in Navasari, Gujurat, where it grows plants like
ahwagandha, patchouli, geranium and lemon grass. Reliance Life is extracting aromatic oils from
Patchouli, Geranium and Lemon Grass under the brand names ReliCare Pa, ReliCare Ge and ReliCare
Le respectively. The essential oils from these plants are anti-bacterial and anti-fungal in nature.
Reliance is entering food processing and export of fruits and vegetables through contract farming and
establishing chain of cold stores. These stores will be located in Punjab.

BILT
Paper industry depends on the agriculture sector for the availability of its raw material. For its paper
unit in Jeypore, Orissa, BILT had to get wood from distances ranging between 500-1,000 Kilometers
resulting in high freight costs and delays. In the year 2000, BILT started farm forestry for its raw
material. In this farm forestry the company got in to buy back arrangement with marginal farmers to
grow eucalyptus for which it provided seedlings. In this social forestry initiative over 9,000 farmers are
involved.

DSCL

DCM Shiram Consolidated ( DSCL) has put in place a relationship model for ensuring supply of
sugarcane for its sugar production business. With improved inputs, better technology and modern farm
practices, the company achieved a sugar recovery of 10.4 percent, the fourth highest in the country, for
the financial year 2004-2005. DSCL is also employing information technology tools for dissemination
of information to enable farmers to increase their productivity through better cropping practices. The
improved sugarcane production is leading to increased incomes for farmers in Uttar Pradesh in the last
7-8 years. "Hariyali Kisaan Bazaar" - a rural business centre, is a pioneering micro level effort, which
is creating a far-reaching positive impact in bringing a qualitative change and revolutionizing the
farming sector in India. It is also an example of how well meaning corporates can contribute to
development of agriculture by building sustainable business models.

DCM Shriram Consolidated Ltd. (DSCL), capitalising its over 35 years of experience in the agri-input
markets & first hand knowledge of Indian farmers, is setting up a chain of centres aimed at providing
end-to-end ground level support to the Indian farmer & thereby improving his "profitability" &
"productivity".

Future Plans
Hariyali Kisaan Bazaar has plans to rapidly scale up the operations & create a national
footprint covering all the major agricultural markets of the country. This would mean catering to
cultivable land of over 30 million acres and touching the lives of over 10 million farmers.

GGCL
Thapar Group's Global Green Company is helping farmers in Andhra Pradesh and Karnataka to grow
gherkins. The company markets 30,000 tonnes of gherkins and has a contract farming arrangement
with 12,000 farmers. The business model has enabled the company to earn substantial hard currency
from international market. Over 95 percent of GGCL's products are exported to 23 countries.

MAHINDRA

M&M's Shubh Labh network is spread over eight states with 36 outlets. Only three centers are run by
M&M and the rest are franchisees. The company retails agri-inputs, including M&M brands through
Shubh Labh. It also undertakes contract farming in over a lakh acre. In the year 2003, it grew oilseeds
and cereals and in the year 2004, it grows horticultural products, aromatic plants and flowers. It also
offers borrowing support to farmers through the Mahindra Krishi Vihar, a platform for banks to provide
loans to farmers with minimum documentation, quick sanctions, and attractive interest rates. For banks
it is a good way to make their rural lending safer without too much overhead.

TATA CHEMICALS

The company undertakes contract farming in 15,000 acres of land. It grows paddy and vegetable seeds
in Uttar Pradesh and Punjab and fruits in Karnataka and Maharashtra. The produce is sold to retail
chain or exports.

CHAMBAL FERTILISERS

In the year 2002 Chambel Fertilisers entered the food processing by taking over a food processing unit
in Haryana. The unit processed and freezes fresh vegetables and markets them under Ever Fresh Brand.

Banks Support to Agribusiness

There are various banks which have come up for the support to the agribusiness. They provide loans to
farmers at less rates and sometimes these loans are provided through the guarantee of the
sponsors.Here are the examples from various Banks which helps in agribusiness thus leading to rural
development.

State Bank Of India

 State Bank Of India caters to the needs of agriculturists and landless agricultural labourers
through a network of 7400 rural and semi-urban branches. Apart from the branches, there are 427
Agricultural Development Branches (ADBs) which also cater to agriculturists
To give special focus to agriculture lending Bank has set up agri business unit. Bank has
also agri specialists in various disciplines to handle projects/ guide farmers in their agri ventures.
Advances are given for very small activity covering poorest of the poor to hitech activities involving
large fund outlays.

Bank of Baroda
With the objective of developing rural economy through promotion of agriculture, trade,
commerce, industry and extending credit facilities particularly to small and marginal farmers,
agricultural labourers and small entrepreneurs, Bank of Baroda, over the years, has reached out to
larger part of rural India. We extend loans for agricultural activities and a host of services for farmers
well tuned to the rural market, and aim to make a Self Reliant Rural India.

NABARD
Recognizing the potential and benefits of contract farming arrangements in the
agriculture sector, NABARD took the important initiative of supporting such arrangements by the
banking sector and developed a special refinance package for contract farming arrangements (within
and outside AEZs) aimed at promoting increased production of commercial crops and creation of
marketing avenues for the farmers.

YES Bank
AGRIBUSINESS RURAL & SOCIAL BANKING (ARSB):
ARSB develops innovative financial models, which leverage the outreach of various
stakeholders in the agri value chain, to overcome the 'last mile challenges' in the agri and rural sector. It
also works closely with insurance and re-insurance companies to facilitate the development and
distribution of need-based insurance products for the agri-sector. As a Social Banking initiative, the
team provides financial services to the social sector and to socio-economically disadvantaged sections
of society.

Bottlenecks and Criticisms

 In all the existing (currently working) models of contract ,farmers’ participation remains limited
to production in the fields seeds, inputs, technology packages and technical guidance through regular
supervision are usually provided by the contracting company. Critics in the industry are of the opinion
that the results are very promising in early years. Farmers benefit from improved technology and
higher productivity, quality and production. The contract price does not appear to matter much in the
early years.
Once the farmers are confident of being able to deploy new technology, problems start cropping
up. If the market price is more advantageous than the contract price, farmers renege on the contract.
Other criticisms leveled against contract farming in India include less generation of employment,
labour-saving farm practices, low level of commitment of corporate over rural development, lack of
transparency and communication etc. Enforceability of the agreement, and standardization and
operationalisation of contract farming agreements are the major bottlenecks plaguing contract- farming
ventures in India.

To Sum up....
 As the corporate sector generally undertakes large-scale commercial farming with the use of
modern and capital intensive technology, they are able to enhance labor and land productivity.
The corporate sector promotes good agricultural and best management practices along with
environment-friendly efforts at their estates that will ensure not only the high quality of their
agricultural produce but also promote sustainable development for the industry.

The corporate involvement in agri-business at all levels in the food chain will not only provide
much needed assured markets to the farmers but will also bring the latest know how to the farmers.

It will also lead to better earning opportunities for the farmers through higher yield, higher
prices for produce on one hand and this will also create direct and indirect employment opportunities
for the farmers who are finding it difficult to be part of services led growth.

To establish an agrarian economy that ensures food and nutrition security to a population of
over a billion, raw material for its expanding industrial base, surpluses from exports,and a fair and
equitable rewarding system for the farming community,ćommitment driven ćontract farming is no
doubt a viable alternative farming model, which provides assured and reliable input service to farmers
and desired farm produce to the contracting firms. Several Indian and multinational companies have
already begun such initiative in india and have demonstrated repeated success. The successful cases
should encourage rest of the producing and the consuming enterprises to emulate them for mutual
benefit in specific and Indian agriculture in general.

Bibliography
1. www.indianmba.com
2. Report by Food and agriculture Organisation
3. Spice-A magazine
4. www.slideshare.net